Is an internship agreement also an employment agreement? When properly arranged it isn’t. However, the internship agreement does have similar characteristics of an employment agreement which sometimes (unintentionally) make it an employment agreement as well. In this article, we would like to give you an update taking into account the most recent case law on the matter.
Employment Agreement
According to the law, an employment agreement exists when the following three conditions are met: i) one party performs work for the benefit of the other party, ii) receives wages for it, and iii) a relationship of authority exists between the two parties.
Internship Agreement
The internship agreement is not regulated by law. In an internship agreement it is advisable to stipulate at least the following:
- Duration of the internship;
- Specific internship activities that the intern will perform in order to expand his or her own knowledge and skills and gain work experience (here it is important to include that the purpose of the internship is for the intern to gain experience as part of his/her studies);
- Any arrangements for an internship compensation that covers possible expenses;
- Regulations regarding leave and absence;
- Conditions for the termination of internship.
If the internship agreement also deals with subjects of the employment agreement, such as the relationship of authority, salary or productive work, the dividing line between these two agreements may become blurred. Although parties may think they are entering into an internship agreement, based on the actual performance, the internship agreement may still be considered an employment agreement.
Consequences qualifying employment agreement: beware!
If the internship agreement is considered an employment agreement, there are significant consequences. Namely, the employee is then entitled to vacation days, vacation pay, pay during sick leave and the employee enjoys dismissal protection. The employer is obliged to withhold payroll taxes and pay national and employee insurance contributions. Also, the Minimum Wage Act is then in effect. Since January 1, 2024, this law has changed, and the legal minimum hourly wage for employees aged 21 and older is €13.27 per hour (see also our recent blog on this subject). In addition, the Netherlands Labour Authority can impose a fine on the employer if the internship agreement is qualified as an employment agreement.
Assessment standard
Case law has formulated a standard in order to assess the qualification of the internship agreement. Crucial is whether the intern’s work is predominantly in the interest of the training he or she is taking. If such is the case, the internship agreement cannot be qualified an employment agreement because the condition that “one party undertakes to perform work for the other” is not met. Based on case law there are several circumstances that may be relevant when assessing this standard. The most important are listed below:
- Learning activities; the activities performed by the intern(s) must be instructive in relation to training. The educational aspect and personal development should be at the forefront of the activities performed.
- Supervision; interns should be supervised and assessed structurally. Through assessment forms the employer can demonstrate this.
- Substitutability; it is not intended that an intern(s) are called upon to replace another employee, for example in the event of illness or pregnancy.
- Compensation; an intern receives an expense allowance for work performed, expressly not a salary.
Tips
Finally, to prevent an internship agreement being classified as an employment agreement, we would like to provide some practical tips. Prioritize the learning effect and learning objectives during the internship. Ensure that the intern’s activities are primarily focused on increasing his/her knowledge within the context of the training. Therefore, only enter into an internship agreement with an intern who is actively pursuing an education and can prove this with registration at an educational institution. In addition, when determining the compensation for the intern, it is important to ensure that it is limited and serves only as an expense allowance.
