“Intern” might sound like the answer to your prayers—what’s not to like about an eager, capable person that you don’t have to pay, right? Stop right there!
It’s summertime, and the interns are coming. And the very word “intern” seems to suggest that they don’t have to be paid, but there are actually fairly few situations in which internships can be unpaid.
We turned to HR.BLR.com® for some guidance in this area. We found that in the for-profit private sector, internships will most often be viewed as employment by the U.S. Department of Labor (DOL), unless the test described below is met.
The Six-Factor Test for Unpaid Internships
According to the DOL, all of the following six factors must be met to establish that an employment relationship does not exist between an intern and the company that sponsors him or her:
- 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.
If all six conditions are met, no employment relationship exists, and the participant is not entitled to wages under the Fair Labor Standards Act (FLSA).
Interns who do not meet all of these tests qualify as employees rather than trainees and typically must be paid at least the minimum wage and overtime compensation for hours worked over 40 in a workweek.
In general, the more an internship program is structured around a classroom or academic experience—as opposed to the employer’s actual operations—the more likely it is that the internship will be viewed as an extension of the individual’s educational experience. (This often occurs where a college or university exercises oversight over the internship program and provides educational credit.) The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely it is that the intern will be viewed as receiving training—not employment. Under these circumstances, the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent on the work of the intern.
On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), even though they may receive some benefits in the form of a new skill or improved work habits, an employment relationship may still exist because the employer also benefits from the interns’ work.
An unpaid internship should be of a fixed duration that is established before the outset of the internship. In addition, consider the following:
- If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific periods, these interns must be paid at least the minimum wage and overtime.
- If the employer would have hired additional employees or would have required existing staff to work additional hours had the interns not performed the work, the interns will be viewed as employees.
- Conversely, if the employer is providing job-shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, and the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide educational experience.
- If the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship rather than training.
In tomorrow’s Advisor, we will discuss internships that lead to employment.