Find an updated post on this topic, published May 7, 2018, here.
Many employers allow students to intern in their workplaces so that the students can gain exposure to real world work, learn about a particular industry or career, or earn credit hours towards their degree requirements. However, if these interns are unpaid, employers risk liability for failure to pay minimum wage and overtime under the Fair Labor Standards Act (FLSA). Employers that enter into these arrangements, often made with the intent of helping students and being good corporate citizens, without careful consideration risk lawsuits from former interns, including class actions, and United States Department of Labor (DOL) investigations and other enforcement activities.
As we reported in a previous post on this topic, in the last few years, the DOL has focused significant attention on unpaid internships, particularly in circumstances where the interns are treated like employees but not paid any compensation or benefits. According to the DOL’s published guidance on internship programs, all of the following criteria must be met for an intern working at a private, for-profit employer to be properly unpaid:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Even the most well-intended employers may be tempted to use interns to accomplish some limited tasks. However, if unpaid interns are asked to do work that could be, should be, or is typically performed by paid employees (like filing, performing other clerical work, or assisting customers, for example), then the internship is less like an educational experience for the intern and more like an employment relationship for the benefit of the employer, which requires that the intern be compensated.
An unpaid internship must be similar to a job shadowing experience and be an extension of the intern’s education. The arrangement must be of a limited duration, the length of which is determined at the outset, and should not serve as a trial period for determining if the intern is suitable for employment at the end of the internship. The intern must be under the close and constant supervision of regular employees rather than be a substitute for regular workers. If the intern does anything other than “no or minimal work,” then the DOL guidance mandates that the intern be paid minimum wage and overtime as required by the FLSA.
Unpaid internships can be generate significant liability for employers but, with careful consideration and implementation of the DOL’s guidelines, the risks associated with these arrangements can be reduced or even eliminated.