Preparing for Summer: Beware of the Unpaid Intern Trap

Before the summer internship seasons begins, you should understand your obligation as an employer toward the interns you take on. In particular, you should know when an unpaid internship is or is not lawful.

Background

One key issue is whether interns must be paid at least the minimum wage. Employers who treat interns as free labor likely are violating the Fair Labor Standards Act and analogous state laws. As shown by recent lawsuits against Harper’s Bazaar and the producers of the movie Black Swan, interns are aware of their wage and hour rights. Moreover, the Internet is awash with information for interns to read about their right to be paid.

It is important to remember that lawful unpaid internships are educational or training programs designed to provide students with professional experience in the furtherance of their education. The programs are academically oriented, and are for the benefits of the students. The Department of Labor (DOL) takes a very narrow view of whether individuals rendering services to an employer qualify as interns who need not be paid.

Six DOL Criteria for Unpaid Internships

The DOL has six criteria that must be satisfied for an intern to be unpaid, and each one must be satisfied:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in an educational institution (e.g., an extension or practical application of what is being taught in the classroom).
2. The training is for the benefit of the trainee (e.g., college credit, valuable experience, ability to observe the practical application of classroom instruction in the workplace).
3. The trainees do not displace regular employees, but work under close observation (e.g., the intern works a very limited number of hours per week, and the intern either performs work that normally would be outsourced or not otherwise performed by a regular employee or merely shadows another employee).
4. The employer who provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded (e.g., actual employees are diverted from their primary tasks to supervise, shadow or assist the intern or the intern is shadowing an employee but producing no useful work himself/herself).
5. The trainees are not necessarily entitled to a job at the completion of the training period.
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

Summary for Employers

As an employer, keep in mind that a lawful unpaid internship may be thought of as an extension of an intern’s education where the intern has the opportunity to apply the skills and knowledge he or she learned in the classroom to a real world environment. Your organization is providing a service to the individual intern rather than the intern providing a service to your organization.

The DOL has consistently applied these criteria in response to questions about the employment status of student interns. See DOL Op. Let. FLSA2006-12 (April 6, 2006); DOL Op. Let. FLSA2004-5NA (May 17, 2004); DOL Op. Let. (May 8, 1996); and DOL Op. Let. (July 11, 1995).

Interns who do not meet all of the above criteria are employees, and are entitled to be paid the minimum wage. Also, unless interns meet an overtime exemption, they must be paid overtime for all hours above 40 worked per week. Finally, interns may be entitled to benefits, such as insurance and paid vacations, unless they are expressly excluded by the employer’s benefit plans and policies.