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Small Business Human Resources Workforce Development Your Questoins Answered Success Stories

April 2004 — Vol. 82, No. 3

YOUR QUESTIONS ANSWERED

Have a personnel-related or business tax question? Members can get free information from CBIA’s experts. The phone number is 860-244-1900.

Q: A local community college is seeking summer internship openings for its students. The school’s letter says that positions may be paid or unpaid. Does this mean we won’t have to pay interns who work at our company this summer?

A: Perhaps. Certain internships may be unpaid, as long as they don’t involve tasks typically found in paid-work assignments or involve situations that would be classified as “employment” under state and federal wage laws. For those situations, you must pay the intern at least the minimum wage or, in some cases, a subminimum training wage as approved by the Connecticut Department of Labor (DOL).

For a situation to qualify as an unpaid internship, the student intern/worker must be enrolled in a bona fide educational institution, ideally one with state certification. A school representative must approve the work experiences or tasks to be performed, which should to some extent be incorporated into the academic curriculum so the intern can receive course credit for the intern experience. Generally, such work experiences include activities that are not normally paid-work tasks, such as community service, career awareness and exploration activities, field trips, job shadowing, and other typically nonemployment activities.

Since an unpaid intern is not an employee, the student would not be covered under your workers’ compensation policy. You should check with the school or your insurance agent to verify that other liability insurance is in place.

One sure way to verify that a particular position may legally be set up as a nonpaying internship is to run it by the DOL’s wage and hour officials, who generally are very prompt and helpful in such matters.

If the internship must be a paid position, in which case the intern is an “employee,” all the regular employment law obligations apply. If the intern is working under an approved “School-to-Career” program, you won’t have to pay unemployment compensation taxes on the wages or provide any of the regular employee benefits, although some apprenticeship programs are subject to the unemployment laws.

Again, checking with the DOL will ensure that you and the student can reap the benefits of a valuable work experience, without risking damages or liability.

For more information about internships, including employer’s guides to internships in manufacturing and information technology, click here.

Q: How can I find out what my unemployment tax costs will be for 2004?

A: The state Labor Department (DOL) sends out notices in the first week of March each year advising employers what their unemployment tax rate will be for the current calendar year. Your tax rate is based on the ratio of unemployment benefits paid out to your former employees compared with your taxable payroll during the three-year period ending June 30, 2003. Unemployment tax rates range from 1.9% to 6.8%. These rates are applied to the first $15,000 (taxable wage base) of each employee’s wages. Besides specifying your current tax rate, the DOL notice contains the taxable payroll and benefit payments charged to your business for the applicable three-year period and shows the actual calculation yielding the tax rate. You should examine the data for accuracy. At any time during the year, you can verify your current tax rate by calling the DOL’s “Employer Telephone Tax Information System” at 860-566-1018.

Q: Another state’s tax department recently notified me that I needed to register to do business in their state. My only contact with customers in the state is through the Internet, other than selling some products to the state university. Is the Internet activity enough for me to have to register in the state?

A: Probably not, but the Internet may have nothing to do with why you have to register. It may be that it has to do with the fact that the state is your customer. Many states, including Connecticut, require companies that do business with state entities to register. If you are selling your goods or services to the state university, you may fall under a regulation that requires special registration in that state. Check with the state’s department of revenue services to see if there are any special requirements for doing business with their state.

 

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