Unpaid internships have become an avenue for students and recent graduates to gain some practical work experience. Nonetheless, while this opportunity can enhance an intern’s educational and career opportunities, it begs serious questions about legal rights, protection, and employer obligation. In the U.S., unpaid interns occupy a grey area in the law, with their rights being somewhat different from those of paid employees.
Unpaid internships under federal law
The Fair Labor Standards Act (FLSA), the principal federal law that governs wages and hours, generally requires employers to pay at least the minimum wage for any services performed for them. However, there is an exception for unpaid internships depending on the reasoning: an intern may not qualify as an “employee” whenever the internship primarily benefits the intern rather than the employer.
The U.S. Department of Labor (DOL) has developed a test with six criteria for when an unpaid internship is lawful:
- The internship is similar to training.
- The internship primarily benefits the intern rather than the employer.
- The intern works under close supervision of a paid employee.
- The employer provides no benefit and may suffer a loss of productivity.
- The intern is not guaranteed a job at the conclusion of the internship.
- Both parties understand that no payment will be made.
Such interns are trainees and not employees, and thus not entitled to minimum wage payment. If not, they should be paid for their hours worked since misclassification of interns can have severe legal consequences.
Legal protection for unpaid interns
Even if unpaid interns are not classified as employees for wage law purposes, they are protected by a number of employment laws. The federal anti-discrimination laws, for example, prohibit harassment and discrimination against interns on the basis of race, sex, religion, or other protected categories. A few states, such as Oregon and Connecticut, have passed laws specifically protecting unpaid interns from, including protection from harassment.
Unpaid interns are generally not entitled to receive workers’ compensation benefits or unemployment insurance benefits, nor will any contributions be made for Social Security on their behalf. There is no requirement for employers to deduct tax for an unpaid position, as no remuneration is made. However, interns are entitled to all employer policies and can be dismissed for justifiable or warranted causes, just like any employee.
State law applicability and increased protection
States can impose stricter requirements for unpaid internships. Some state laws require that unpaid internships be part of a formal educational program or award academic credit. Other laws have wage orders that narrow the circumstances under which unpaid internships are permitted.
Interns who are concerned about misclassification or unfair treatment should familiarize themselves with their own state labor laws and will want to consult with an employment attorney to evaluate any possible claims or protections.
The primary beneficiary test: Who benefits most?
The Primary Beneficiary Test has emerged from case law and attempts to ascertain which of the two parties-giving or receiving the internship actually receives the most benefit. Amongst the factors considered are:
- Educational nature of the internship.
- The intern’s understanding that he/she will not be guaranteed a job or paid.
- To what extent the intern is trained and receives help versus displacing others from regular work.
- Length and structure of the internship.
- Amount of skill or training involved.
This test exists to ensure that unpaid internships are genuinely about the education of the intern and not about free labor, which is illegal.
Practical tips for interns and employers
Interns should be well aware that an unpaid internship must meet the following three conditions: It must disclose specific tasks, achievements, and educational benefits. When assigned tasks that should fall to paid employees, interns should question whether the wage and labor laws are being adhered to. Furthermore, it is prudent to keep records detailing hours worked and job duties performed.
Internship employers must be careful to structure their internship programs in ways that comply with DOL and FLSA criteria. Doing so will help them avoid potential legal trouble:
- Internships should be strongly educational.
- Avoid assigning productive work that displaces employees.
- Clearly communicate expectations pertaining to payment and prospects in employment.
- Interns should be closely monitored to ensure that the experience is constructive and educational.
Push for paid internships and more protection
There is a growing opinion among advocacy organizations, including the National Association of Colleges and Employers (NACE), that all internships should be paid for fairness and access reasons. The groups argue that unpaid internships create a barrier for those who can’t afford to work for free, and thus federal laws should be passed to remedy the disparity. Until then, clarity in the law remains essential.
Unpaid internships remain in a legal grey area, which is often overtly contested. While they can offer real training for interns, the U.S. legal framework ensures some protections and standards will exist to prevent abusive practices. Both interns and employers must be aware, in order that these rights and obligations can be realized, and ultimately, that the internship will represent a real educational opportunity, as opposed to unpaid labor.
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