With summer approaching, many employers are looking to hire interns to increase staffing during a busy season or to build a pipeline for future full-time hiring. But employers need to be careful about making decisions to allow any work to go unpaid.
Quick Hits
- The federal Fair Labor Standards Act (FLSA) requires for-profit employers to pay all employees for all hours worked.
- Some interns and students are not considered employees if they meet the criteria of the “primary beneficiary” test.
- Some states have laws governing unpaid internships that are stricter than the FLSA.
Unpaid internships remain fairly common in certain industries, including restaurants, publishing, television and filmmaking, music, and fashion. This designation can create legal risk if the work primarily benefits the employer.
Under the FLSA, employers must pay interns in nonexempt positions at least the minimum wage and overtime pay, unless they meet specific criteria that show the internship primarily benefits the intern. Terminology is not wholly determinative; even if the position is called a “trainee,” “intern,” “extern,” “apprentice,” “graduate assistant,” “stagiaire,” or some other term, the same legal obligations will likely apply.
In addition, several states have wage-and-hour laws with more stringent standards than the FLSA with regard to unpaid internships.
Unlike internships in the for-profit private sector, which may require a more nuanced inquiry, unpaid internships in the public sector and for nonprofit, religious, civic, or humanitarian organizations are generally permissible under the FLSA.
Working With College Students
Some businesses offer unpaid internships to college students during the summer months. Federal regulators and courts use a “primary beneficiary” test to evaluate whether such an individual is an employee entitled to minimum wage and overtime under the FLSA. The test, described by courts as a flexible one, weighs these seven factors collectively:
- The internship provides training that is similar to what’s given by an educational institution.
- The internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The intern’s work complements, rather than displaces, the work of paid employees.
- The intern and the employer understand that there is no expectation of compensation.
- The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
No single factor is determinative in this test. An intern may be deemed an employee if he or she performs regular, repetitive, or substantive work that is typical for paid employees and provides an immediate labor advantage for the employer.
Next Steps
Employers may wish to have unpaid interns sign a written agreement, stating how the internship is for training, unpaid, and for a fixed duration. They may wish to maintain records showing the job duties the interns perform and when unpaid interns receive academic credit for their work.
If an unpaid intern is deemed an employee under the FLSA, the employer may be liable for back pay and damages, a consequence potentially more costly than simply paying wages for hours worked.
