Internships: To Pay or Not to Pay?

With summer approaching, many college students are looking for internships to get experience in their career fields and build their resumés.  Accordingly, they will often accept an opportunity to work for no pay.  And therein lies a potential problem for employers.  Anytime you have “unpaid labor,” you risk drawing the attention of the regulators.

That’s not to say you can’t have unpaid internships.  But you need to make sure you are compliant with the law, which generally requires a minimum level of pay for work performed but still allows for unpaid internships if they are really the learning experiences they are supposed to be. 

The U.S. Department of Labor has a six-part test to help employers determine that their internships are educational and not just employment relationships in disguise. 

• The internship is similar to training that would be given in an educational environment (think “clinical training”).
• The internship is for the benefit of the intern.  Best practice:  the internship is aligned with coursework or academic credit and is coordinated through or approved by the school, although this alone does not create an “unpaid” internship.
• The intern doesn't displace regular employees and works under close supervision.
• The employer doesn't gain an immediate advantage from the intern's activities, and operations may be impeded by the intern's activities.
• The intern isn't guaranteed a job at the end of the program.
• The employer and the intern each understand that the internship is unpaid.

Unfortunately, no single factor carries all the weight, and a couple of them are rather murky.  But, in general, these factors highlight the importance of the experience being focused on learning and not on the advancement of the employer’s operations.  So if the work that the intern is doing is the same as a regular employee would do under similar conditions, then it’s going to be difficult to justify that it’s a bona fide educational internship.

Remembering that the purpose of the Department of Labor’s standards is to ensure employers don’t skirt minimum wage and overtime requirements by classifying individuals as interns, we suggest that if you have any doubts, then pay your interns at least minimum wage and limit their hours.

Next week, we will look at another area of concern with respect to hiring young people in the summer:  child labor laws.