Can Our Company Have Unpaid Interns?

Find out when employers must pay their interns.

Does your company have an internship program? In competitive industries, or during economic downturns, some employers have taken to hiring unpaid interns. This gives new workers a chance to learn the ropes and get some experience, while the company gets free labor and an opportunity to scout the best potential hires. It's a win for everyone, right?

Not quite. The basic premise of federal labor laws is that workers should be paid for their labor. As a result, the rules around unpaid internships are fairly restrictive. Private employers can offer unpaid internships only when the experience is truly educational and primarily benefits the intern. Otherwise, employers must treat their interns like employees and comply with all of the same wage and hour laws.

What Is an Intern?

An intern is a type of temporary worker, usually a student or person who is new to the field, who takes an internship position to learn what the job is like and get some hands-on experience. Internships are common in both the public and private sectors. However, while federal laws typically allow government and nonprofit employers to have unpaid interns, the rules are very different for private, for-profit employers.

For an internship to be unpaid, it must meet certain requirements under the law. Labeling a worker as an “unpaid intern”—even with the worker’s consent—is not enough for employers to avoid their wage and hour obligations. In general, an unpaid internship must be primarily for the benefit of the intern. If an intern spends the majority of his or her time running errands, contributing to work product, or dealing with customers, he or she will probably be seen as an employee. On the other hand, the more time and effort that the company puts into training and supervising workers for educational purposes (that is, without expecting them to become employees), the more likely it is to be an internship.

The Department of Labor's Balancing Test

The federal Department of Labor weighs seven factors to determine whether an internship primarily benefits the intern and therefore may be unpaid:

  • The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  • The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL conducts a fact-specific analysis and weighs all of the factors above in order to reach a decision. If the internship is primarily for the benefit of the employer, it must treat the worker as an employee and pay at least minimum wage.

Reviewing Your Policies

Before hiring that summer intern, you may want to review your internship program and consider what the intern will do on a daily basis. Misclassifying employees as interns can lead to large wage claims, especially if you hire interns on a regular basis. Interns who are misclassified are entitled to receive unpaid minimum wage, overtime, and other wages and benefits that they were denied.

Talk to a Lawyer

Need a lawyer? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
NEED PROFESSIONAL HELP ?

Talk to an Employment Rights attorney.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you