Fair Labor Standards Act: Exercise Caution with Unpaid Internships

May 17, 2013 by James Walcheske

It’s that time of year again when students are looking for experience in summer positions and you’ve got a hankering for cheap labor.  If you’re thinking about not paying an “unpaid” intern, make sure you do it right or you’ll be spending some quality time dealing with the fallout from the Fair Labor Standards Act.

The Fair Labor Standards Act (FLSA) generally requires that individuals who are “suffered or permitted” to work must be compensated for that work at a wage that is at least $7.25 per hour (minimum wage).  Further, assuming the individual is a non-exempt employee, the individual must be paid overtime for any and all time worked over 40 hours per week.

Great, so what does this have to do with unpaid interns you ask?  First, relax.  Second, calling an individual an unpaid intern doesn’t mean that the person is not a regular employee requiring wages for time worked.

To actually qualify as an unpaid intern, the following six criteria must be met:

1. The internship, even though it includes actual operation of the facilities of the employer, 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.
5. The intern is not necessarily entitled to a job at the conclusion of the internship.
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If the internship meets all six criteria, then it is exempt from the employee-employee relationship, aka, you don’t have to pay the intern.

So, if you intend to create an unpaid internship, you need to be careful about what activities the intern is performing.  The more “educational” the internship is, the greater the chance that it is exempt from the employment relationship.  The more the intern performs tasks that regular employees would perform, such as filing, assisting customers, performing research, and the like, the greater the chance that the intern has to be paid in conformance with the requirements of the FLSA. 

Have you ever been an “unpaid intern?”  Do you think you really were an employee?  Tell us about it!