“Every spring, as college students nationwide prepare for finals and pull all-nighters to wrap up their spring semesters, many simultaneously ramp up their search for the perfect internship,” says Laura Fortman, principal deputy administrator of the U.S. Department of Labor (DOL) Wage and Hour Division (WHD) in a blog. “The WHD understands that these “foot-in-the-door” opportunities can provide invaluable experience and have a great impact on future career paths.”
Fortman then explains when internships can be unpaid and when interns should be considered employees, i.e., “when must these programs pay not just in terms of experience, but in cold, hard cash?”
The WHD, along with college officials, parents, and students, is concerned that interns work under conditions that are in compliance with federal law, especially if, in fact, they are “employees,” Fortman says.
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The federal Fair Labor Standards Act, as interpreted by the U.S. Supreme Court, provides criteria for what is and is not legal regarding payment for internships, explains Fortman. Six criteria must be applied when determining if an internship can be unpaid:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training that 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.
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Fortman says, “It’s important that students familiarize themselves with those six requirements, and especially important that employers do so as well.”
Additionally, she says the following guidelines should be considered:
- Interns in the nonprofit and government sectors may not have to be paid. The WHD recognizes an exception to the employment relationship for individuals who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic, or humanitarian purposes to nonprofit organizations.
- In the for-profit world, the more an internship is used to benefit the employer and the employee performs productive work, the more likely it is that the intern is an employee and therefore entitled to be paid properly.
- The more a for-profit employer structures an unpaid internship program around a classroom or academic experience as opposed to the employer’s actual operations, the less likely the internship will be viewed as employment.
- Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the federal minimum wage and overtime compensation for hours worked beyond 40 in a workweek.
Fortman explains that the WHD has taken action to ensure interns receive minimum wage and overtime according to the law. In a 2013 investigation, the WHD found more than $37,000 in back wages due to 38 employees working as unpaid interns for a snowboard company in Waterbury, Vermont. Before that, a minor league baseball team in Tennessee paid more than $31,000 in back wages to 14 interns it had paid only $150 per week.
Guidance is available from the WHD in a Fact Sheet on Internships under the FLSA.