Internship or Employment Contract: Where Is the Line?

More and more students and young professionals complete an internship at an organization before accepting their first permanent job. An internship is attractive for both parties: the intern gains practical experience, and the organization gets to know potential future staff.

In practice, however, things regularly go wrong, because the line between an internship and regular employment, in other words the internship or employment contract, is not always carefully monitored. This can have major consequences, even retroactively.

The legal framework: when is there an employment contract

Under Dutch law, an internship is not a separate contract type defined in the Civil Code. Whether a legal relationship is truly an internship or in reality an employment contract is therefore assessed on the basis of Article 7:610 of the Dutch Civil Code (BW).

That article provides: “An employment contract is the agreement whereby one party, the employee, undertakes to work in the service of the other party, the employer, for wages during a certain period of time.”

The qualification takes place in two steps. First, the Haviltex standard is used to establish which rights and obligations the parties actually agreed upon.

It is then assessed whether that content meets the statutory description of an employment contract. The parties’ intention when entering into the agreement is not decisive in this respect.

In addition, Article 7:610a BW may play a role. That article contains a legal presumption of an employment contract when someone performs work for another party for remuneration during three consecutive months, weekly or for at least twenty hours per month. That presumption can be rebutted by the organization, but it shifts the burden of proof.

The distinguishing criterion: the learning element

For internships, case law identifies the learning element as the distinguishing criterion. What matters is whether performing the work is predominantly in the interest of the training the intern is following.

If the work is primarily aimed at expanding the intern’s knowledge and experience, partly with a view to completing the training, that fits an internship.

When the primary purpose of the work performance shifts to an active contribution to achieving the organization’s business objective, it can no longer be maintained that there is an internship agreement.

That does not mean that a single circumstance is decisive on its own. Recent case law shows that the weighing is nuanced: a tripartite agreement between the intern, the educational institution, and the organization, a limited internship allowance, and the performance of work that is in itself also productive, are not automatically sufficient for reclassification. In a case in which the alleged independent production work was not sufficiently substantiated in concrete terms, and the communication instead showed guidance and substantive feedback, the agreement remained an internship. The court therefore looks at the whole of the facts and circumstances, not at a single feature.

Signals that increase the risk of reclassification

A number of factual circumstances increase the risk that a court, the Dutch Employee Insurance Agency (UWV), or the Tax Authorities will no longer qualify the legal relationship as an internship but as an employment contract.

The intern structurally performs regular production work that would otherwise be done by employees. The learning plan, guidance, and connection with the training have effectively become marginal, or no learning plan or internship report is kept anymore. The intern is fully integrated into the schedule as a regular worker and is not primarily in a learning situation. The organization is mainly interested in the intern’s output, not in the training objective. The internship lasts considerably longer than usual or is repeatedly extended without a clear educational reason.

Not every productive element and not every imperfect supervision automatically turns an internship into an employment contract. The line lies at the centre of gravity of the relationship: does the learning objective prevail, or does the productive contribution to the organization prevail.

Points of attention when carrying out an internship

A number of matters deserve special attention, because the risk of reclassification manifests itself most strongly here, and because parts of employment law are mandatory law from which employees cannot be deprived of protection once there is an employment contract.

If an intern is structurally used as a replacement for regular staff, the qualification as an internship is jeopardized, and an employment contract may in fact arise on the basis of Article 7:610 BW, possibly supported by the legal presumption of Article 7:610a BW.

A precise standard applies to the minimum wage: not every intern is automatically entitled to the minimum wage. That right only arises once there is legally an employment relationship. The Minimum Wage and Minimum Holiday Allowance Act explicitly links the minimum wage to work performed “in employment.” A low or symbolic internship allowance therefore does not prevent a claim to the minimum wage if the relationship in reality turns out to be an employment contract.

For organizations working with interns, it is therefore advisable to periodically assess whether the actual performance of the internship still matches the training’s learning objective.

This can help prevent problems with the qualification.

In the field of working conditions, the organization bears an extensive duty of care once work is performed, including for interns. The Working Conditions Act (Arbowet) obliges the employer to ensure the safety and health of employees in respect of all aspects related to the work, with additional obligations regarding risk inventory and evaluation, and information and instruction. For young interns, there is an additional obligation of expert supervision.

If an internship in fact becomes an employment contract, the ordinary rules on pay during illness and dismissal protection also apply. In the event of illness, there is in principle an entitlement to at least 70 percent of wages for 104 weeks, provided that at least the applicable statutory minimum wage is due during the first 52 weeks. For termination of the employment contract, the rules on reasonable grounds for dismissal, prohibitions on notice, and the required consent or dissolution then apply, with the possibility of annulment or fair compensation if the organization fails to comply with these rules.

Consequences of reclassification

When an internship is retroactively qualified as an employment contract, the normal employment law rights arise retroactively to the moment when the criteria of Article 7:610 BW were actually met.

This concerns in any case back pay, with a possible statutory increase for late payment, and the aforementioned protection in case of illness and dismissal.

For organizations working with interns, it is therefore advisable to periodically assess whether the actual performance of the internship still matches the training’s learning objective, and to document this through learning plans, progress interviews, and internship evaluations. Interns who doubt their position can seek advice about their rights and, if necessary, have the reclassification of their agreement assessed.

Do you have questions about the qualification of an internship or employment contract, or are you facing this issue yourself? Feel free to contact Law & More. Our employment law attorneys are happy to think along with you.

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