Are Your Unpaid Interns Really Interns?

Kegler Brown E-mployment Alert

Many employers have internship programs in the summer months. Occasionally these interns volunteer their services to the organization. Assume this scenario: Sarah, a college student, is home on her summer break. She interns for a design company to help spruce up her resume for after she graduates. Sarah is told that she will not be compensated for her time. While working, Sarah will do the same things as the full-time employees at the company. In fact, she was told by the owner that if she did well during her internship, there would be a position for her with the company after she graduates.

No problem, right? Wrong.

The Fair Labor Standards Act (FLSA) defines employment very broadly, as "to suffer or permit to work." On the other hand, the Supreme Court has held that the term "suffer or permit to work" cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction. In order to deal with the inherent tension between the two statements, the Department of Labor has created a six-factor test to determine if an individual qualifies as an unpaid intern.

The six factors are:

  • 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.

In order to qualify as an unpaid intern, thereby avoiding coverage under the FLSA and avoiding the minimum wage and overtime requirements, an individual must meet all six of the factors set forth above. Below are some helpful tips to analyze whether your summer intern is really an intern.

  • The more an internship program is structured around a classroom or academic experience, especially if the student is receiving educational credit for the internship, the more likely the internship will be viewed as an extension of the individual’s educational experience and thus meet the first factor of the test.
  • Typically, the intern cannot displace an actual employee and instead must be job shadowing in such a way that allows the intern to learn certain functions under the supervision of the regular employees.
  • The internship is more likely to be viewed as educational if it provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation.
  • Unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period.

In the hypothetical above, Sarah is probably not an intern for the purposes of the FLSA. She’s displacing a worker, doing work that (presumably) benefits the employer, and there is at least a hint of a promise of a job opportunity after her internship.