When Don’t You Have to Pay Interns? DOL Clarifies

Small Wages

The U.S. Fair Labor Standards Act of 1938 (FLSA) requires employees to be paid at least the federal minimum wage for all hours worked, unless they fall under an exception. Unpaid interns do not have their own exception. This led the U.S. Labor Department (DOL) to issue guidelines to for-profit private sector employers.

Related FLSA Exceptions

The FLSA makes a special exception under limited circumstances for individuals who volunteer to perform services for a state or local government agency and for individuals who volunteer for humanitarian purposes for private non-profit food banks.

There is also a recognized exception for individuals who volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations.

There are certain circumstances under which individuals may lawfully participate in “for-profit” private sector internships or training programs without being paid. The DOL will view unpaid internships as lawful if:

  • They are part of an educational training program.
  • They do not replace paid employees.
  • The company does not gain immediate advantage from an intern’s work.
  • The work experience benefits the intern.

Criteria for Lawful Unpaid Internships

Determining whether an internship or training program meets this test depends upon the facts and circumstances of each intern program.

The DOL set out six specific criteria to be applied:

  1. 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
  2. The internship experience is for the benefit of the intern.
  3. The intern does not displace regular employees, but works under close supervision of existing staff.
  4. The employer providing the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded.
  5. The intern is not necessarily entitled to a job at the conclusion of the internship.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.

What to Watch out for

If interns are engaged in the employer’s operations or are performing productive work (such as filing, photocopying, or assisting customers)—even though they may be receiving some benefits in the form of a new skill—this will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefited from the interns’ work.

If the employer would have hired additional employees or required existing staff to work additional hours but for the interns performing the work, then the interns will be seen as employees and entitled compensation under the FLSA.

Unpaid internships generally should not be used as a trial or training period for individuals seeking employment at the conclusion of the internship period, or they will fall under the FLSA’s minimum wage requirements.

Industry Focus?

There is no specific industry focus for the concern over unpaid interns, although media organizations have recently been in the litigation limelight. This may change as the plaintiffs’ bar becomes more organized in bringing this particular form of FLSA class action.

For example, imagine:

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All information and material in this post is believed to be accurate. Nonetheless, it should not be considered legal advice. All fact patterns are potentially different and you should seek advice from a qualified legal professional specific to your particular situation.

About Ann Longmore

Ann is Executive Vice President of Willis' Executive Risks practice. Based in New York, she has been with the compa…
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