All too often employers are stuck in a situation with a new employee who has overemphasized or fibbed about his or her qualifications for a position. To better choose candidates, many professions use working interviews to test a job applicant's knowledge, skills, and abilities prior to making an offer of employment. The interview consist of seeing how the applicant interacts with staff, clients, and patients and often involves participation in routine employment activities over several hours or days to evaluate the candidate. But are working interviews legal?
The quick answer is yes, but probably not the way you do it! The IRS and Department of Labor regulations start with the premise that if someone is doing work for your company they are classified as either an employee or independent contractor and must be compensated for his or her time. That compensation must be in line with labor laws, such as the minimum wage requirements and tax withholding. If the person is deemed an employee they must complete the pre-employment paperwork including an I-9, W-4, and be setup in payroll for tax withholding. The employer will be responsible for its payroll taxes and employer tax obligations on top of the time, expense, and headache that goes along with it. If a person is deemed an independent contractor, which may be unlikely given the factors explained in our article on who is a 1099 contractor, the employer would collect a W-9 and issue a 1099 at the end of the year (depending on the amount of compensation). Once again, a headache. Oh and do not think classifying the interviewee as a volunteer, intern, or extern would change anything. Misclassifying a worker could result in even higher penalties for non-compliance. Even if you hired them as a "temporary" employee the above tax implications would apply. Furthermore, failure to properly classify the worker means they will not be covered by worker's compensation insurance should they get hurt during the "working interview."
If you do not want to go through the steps of paying job applicants to test their skills then just set up a skills test. For example, a veterinary hospital may want to interview three potential associate veterinarians, but would otherwise have no way to gauge each candidate's surgical skills, laboratory efficacy, or bedside manner. To evaluate the candidates the hospital could set up fake lab samples to be read, use previously treated patient charts and lab results to test for diagnostic accuracy, have the applicant verbally walk a doctor through a surgery, or use an owner's dog or office pet for roleplaying an exam. Because the applicant is not performing work for the hospital, and the hospital sees no financial benefit from the testing, a skills test is viewed simply as part of the interview process to evaluate knowledge, skills, and abilities. Additionally, the interviewee should be covered by a general liability policy should something go awry while on the premises.
Of course, never rely on any interview procedure alone to evaluate an employee. Most employees are on their best behavior during the first 30 days of employment. A well-managed practice will have an employee handbook in place with probationary periods to evaluate newly hired employees over periods upwards of 90 days before providing benefits, such as sick days or even salary increases.