When Are Unpaid Internships Legal & Right? Learn How Both Organization
& Student Can Benefit

Internships are great avenues toward a career – they give you experience, training and an impressive block of text on your resume. Are these benefits really worth free labor from the student’s perspective, and is the free labor legal? Here’s what you need to know.

According to the Fair Labor Standards Act (FLSA), there are six different circumstances under which individuals who participate in “for-profit” private sector internships or training programs will not be compensated. These include whether or not the internship experience “is for the benefit of the intern” and if the internship “is similar to training which would be given in an educational environment.”

Unpaid internships are legal under these standards, but at least one group is working to fight this: The Fair Pay Campaign. Co-founded by Mikey Franklin, this organization is working for legislation that would require payment for internships.

ULoop reporter Megan Weyrauch is a fourth-year student at The Ohio State University with a major in journalism, English and professional writing. She recently polled students about their feelings regarding unpaid internships. Here is a sampling of the responses:

“Paid or unpaid, internships are an invaluable way to gain practical real-world experience. It gives a taste of corporate life in your field of study and can open up a world of connections and future career opportunities. Practical experience also looks great on a resume! Getting paid is ideal though because we are contributing to the company with ideas and services, and let’s face it—we are all broke college students!” -Kyle Flenar, University of Cincinnati, third-year, aerospace engineering

“Unpaid internships are a good way to gain work experience and skills that you can use in the future; however, it may be hard to spend 40 hours a week at an unpaid internship when you have bills to pay. They look great on the resume, but for some people who have to work, they just may be impossible to live off of.” -Alycia Acquaviva, The Ohio State University, fourth-year, biology pre-med

“I feel like when an internship is unpaid, then both parties easily lose motivation. For us, it is not benefiting us financially, yet takes time and effort. For them, they really aren’t losing anything, yet getting extra help. No incentives to actually teach us anything.” -Jasmine Carson, The Ohio State University, fourth-year, marketing

“The problem with unpaid internships is that having an internship, say during the summer, would likely prevent me from working a part-time paid job that summer. And a lot of students (like me) depend on the money they make during the summer.” -Mike Rosso, The University at Buffalo, fourth-year, environmental design

“I think unpaid internships are criminal; you still have to pay for everything while ‘gaining experience’.” -Robby Breetz, The Ohio State University, fourth-year, electrical engineering

Many employers have interns, particularly in the summer months. Internships have become an integral part of business. Employers hiring college graduates for entry-level supervisory, managerial or professional positions pay significant attention to each applicant’s internships during college. As a result, students often compete for what they perceive as the best internships. Some professions and disciplines require individuals to have participated in certain internships as part of their education.

With limited exceptions, internships in the U.S. are viewed by both employers and interns, and often educational institutions, as mutually beneficial. As a result, many interns are not paid as employees according to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA), although employers often pay their interns a stipend intended to cover living and other day-to-day expenses. In most cases, neither the employer nor the intern views the internship as a traditional employment relationship.

Although internship programs have existed for years and provide important opportunities for both employers and interns, in recent years, the Wage & Hour Division of the U.S. Department of Labor (DOL) has begun to look more carefully at internships to determine whether, in the eyes of the DOL, particular interns must be paid, and otherwise treated as employees.

According to the DOL, an individual who meets all six of the following factors is properly considered an intern and not an employee:

1. The internship, even though it includes the individual participating in the actual operation of the employer’s business, is similar to training which 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 that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded by the intern.

5. The intern is not necessarily entitled to a job at the conclusion of the internship.

6. The employer and the intern have a mutual understanding (which need not be formal) that the intern is not entitled to wages for the time spent in the internship.

The more an internship program is structured around a classroom, academic or other formal learning experience, as opposed to the employer’s principal production operations, the more likely the DOL will view the internship as an extension or complement to an individual’s education, and therefore not an employment relationship.

The more the internship provides the individual with skills or experience that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the individual will be viewed as an intern and not an employee.

On the other hand, if interns are primarily engaged in performing productive work necessary for the employer’s business, then the fact that the individuals may be receiving the benefit of learning new skills or work habits will not necessarily keep the DOL from treating them as employees for purposes of the FLSA’s minimum wage and overtime rules. The DOL says the employer in this situation is receiving more benefits from the individuals’ work than the individuals are learning as interns.

The DOL will look at whether the employer is using interns to fill in for regular employees who are on vacation or otherwise away from work. Similarly, the DOL will consider whether the employer would have hired additional regular employees, or required its existing employees to work more hours, had the interns not performed the duties the employer assigned to them.

The same is true if the interns are supervised in the same way, and along with, regular employees. If, however, the employer is providing the interns with job shadowing opportunities so they can learn certain functions under the close and constant supervision of regular employees, and the interns perform only minimal productive work, the DOL is more likely to view this as an educational-based internship as opposed to employment.

According to the DOL, the internship should be for a fixed period defined at the beginning of the internship. Unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship.

If you need counsel on how to structure your organization’s internship programs, contact John Fischer at jwfischer@strausstroy.com or 513-621-2120.

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