Many would-be employees (recent graduates and unemployed seasoned professionals alike) see unpaid internships as a way to build their resumes, gain experience, or get their proverbial foot in the door of a desired corporation. As a result, job seekers have increasingly turned their focus to unpaid internships.
While the term “intern” has long been synonymous with “unpaid labor,” in order for an internship to be lawfully excluded from the minimum wage and overtime requirements set forth in the Fair Labor Standards Act (FLSA), the internship must meet a stringent test. In its quest to enforce the FLSA, the U.S. Department of Labor (DOL) has identified six criteria to determine whether an unpaid internship meets the FLSA’s exception, and the internship exception will only apply if all of the following criteria are met:
1. The internship (even though it may include actual operation of the facilities of the employer) is similar to training which would be given in an educational environment. The DOL has explained that, if the internship is structured around a classroom or academic experience, as opposed to the employer’s operations, it is more likely that the internship would be considered an educational experience for the intern.
2. The experience is for the benefit of the intern. If the internship provides the intern with skills that can be used in other employment settings, as opposed to skills particular to the employer, then it is more likely that the internship will be viewed as being for the primary benefit of the intern. If, on the other hand, an intern is performing work (such as clerical work) that benefits the employer, the fact that the intern also receives some benefit from the work (such as learning a skill) will probably not be sufficient to meet the exception.
3. The intern does not displace regular employees, but works under close supervision of existing staff. If, without the intern’s assistance, the employer would have hired additional employees or required current employees to work longer hours, then the intern will likely be viewed as an employee. In addition, if the intern receives the same level of supervision as the existing workforce, then the intern is more likely to be considered an employee. On the
other hand, if the intern works under close supervision to learn certain skills but performs
minimal or no work, the internship would probably be viewed as an educational
experience rather than employment.
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.
5. The intern is not necessarily entitled to a job at the conclusion of the internship.
The parties should have an understanding that the internship will have a fixed duration.
The internship should not be a trial period to “test” the intern for future employment.
6. The employer and intern understand that the intern is not entitled to wages for the time
spent in the internship program.
DOL Fact Sheet #71, covers this issue in detail, and can be accessed by clicking here.
Employers that wish to create an unpaid internship program should formalize the internship
relationship in writing to show that each of the DOL’s six requirements is met. The writing should
be signed by the intern and should contain an acknowledgement that the internship is unpaid, is
for the intern’s educational benefit and will not necessarily result in a job offer. Many states have
analogous laws that may also apply, and should be considered by employers who are evaluating
their internship programs for compliance.
As always, please contact your Service Team or Relationship Manager with any questions.