America’s high school and college students will soon be finishing another school year, and employers across the country are gearing up to welcome many of these young adults as interns for the summer. Interns are staples in many organizations and often provide valuable benefit to a business. As employers strive to keep costs down, including that of labor, many use unpaid summer help where possible. Many student interns are happy to have the chance to learn on the job and will agree, if not volunteer, to work for free.

Before welcoming that unpaid intern, employers should evaluate the company’s internship program through the lens of the Department of Labor (DOL). The DOL’s Wage and Hour Division has published Fact Sheet #71, which offers guidance, particularly to “for-profit” companies, as to whether an intern should be considered an “employee” and, therefore, must be paid minimum wage and overtime under the Fair Labor Standards Act (FLSA). The document summarizes how an employer may lawfully treat an intern as an unpaid position according to federal law.

Elements of an Unpaid Internship Program

The general rule is that an intern should be treated as an employee and compensated at the minimum wage for all hours worked and be eligible for overtime. To be excluded from the requirement to pay minimum wage and overtime under the FLSA, an internship program must meet the following six requirements:

1.    The internship must be similar to training given in an educational environment.

• The internship program should be structured around a classroom or academic experience, which frequently happens when there is college/university oversight and academic credit.
• The internship should provide skills applicable in multiple employment settings rather than skills particular to just the employer’s operations.

2.    The experience must benefit the intern.

3.    An intern must work under the supervision of existing staff and must not displace regular employees.

• Consider whether the employer would have hired additional workers or staff but for the presence of the intern. If so, this is more likely to be a situation in which the intern would be treated as an employee.
• A job shadowing program allowing the intern to learn certain functions under the supervision of regular employees is more likely to be considered a “bona fide education experience.”
• Providing the same training to an intern that a regular member of the employer’s workforce receives suggests an employment relationship.

4.    The employer must not derive immediate advantage from intern activities and, in fact, operations may be impeded.

• Work performed by an intern cannot be billed to the business’s clients/customers.

5.    The intern must not automatically be entitled to a job at the end of the internship.

6.    Both employer and intern must understand that the intern is not entitled to wages.

To maintain an unpaid internship program, employers should consider doing the following:
 

• Implement a program or other guidance detailing the substance of any internship program. Often, an employer will allow a friend’s daughter or son to have an internship during the summer. Ensure the organization is prepared to offer the sort of educational experience contemplated by Fact Sheet #71 and federal law.
• Establish the length of the internship prior to the start of the internship.
• Have both the employer and employee sign an acknowledgment that the internship is unpaid.
• Become familiar with the requirements necessary for the student to receive academic credit for unpaid internship work.
• Have an attorney review the company’s unpaid internship program to ensure compliance with federal statutes and regulations regarding unpaid internships and other employment laws.