Interns

Many students, recent graduates, and people considering a career change are interested in working as a paid or unpaid intern to gain practical and hands-on vocational experience. In return, companies are generally excited about the idea of utilizing “free” or “cheap” labor from such candidates. However, implementing an internship program is much more complicated than simply agreeing to let an individual work for free. 

Paid interns should be treated as employees of the company. Therefore, the company should ensure compliance with applicable laws and regulations such as child labor, discrimination (including age discrimination), and the Fair Labor Standards Act (FLSA). As a general principle, private sector employers are required under the FLSA to pay employees for their work.

While there is technically no exemption under the FLSA for interns, the Department of Labor (DOL) has recognized that there are times when an unpaid internship is permissible because it serves the best interest of the intern. It may be acceptable for the internship to be unpaid in such cases.

To assess whether the intern’s best interests are served, the DOL applies the “primary beneficiary” test, which courts have used to determine an intern’s employment status. DOL guidance establishes that if the individual (as opposed to the employer) is the “primary beneficiary” of their work, they do not have to be paid under the FLSA. The “primary beneficiary” test consists of the following seven factors:  

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
   
   
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions. 
    
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.  
   
   
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.  
   
   
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.  
   
   
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
   
   
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship. 

The “primary beneficiary” test is flexible, and no one factor is determinative. Each analysis is conducted on a case-by-case basis.

Employers should pay close attention to whether their unpaid internship programs primarily benefit the employer or the worker. In recent years, courts, agencies, and plaintiffs’ attorneys have closely scrutinized whether unpaid interns are properly classified, and misclassification mistakes have proven costly. If the employer is confident the intern is truly the “primary beneficiary” of their work, the intern may be considered and treated as an unpaid volunteer.