Summer Interns: Paid or Unpaid?

Every summer, many employers take on “interns” and ask whether the intern must be paid.

Interns, trainees and students are employees and must be paid minimum wage and overtime according to the requirements of the federal Fair Labor Standards Act unless all of the following apply:

    1.   The training, even though it includes actual operation of the facilities of an employer, is similar to training that would be given in an educational environment.

2.   The training is primarily for the benefit of the intern, student or trainees.

3.   The interns, students or trainees do not displace regular employees, but work under their close observation.

4.   The employer that provides the training derives no immediate advantage from the activities of the students/interns and on occasion the employer’s operations may actually be impeded.

5.   The students or trainees are not necessarily entitled to a job at the conclusion of the training period.

6.   The students or interns understand that they are not entitled to wages for time spent training. It is best to confirm this in writing.

If all these factors apply to the situation, the intern is notowed minimum wage or overtime under the FLSA.

Payment of a stipend, but not wages, to an intern does not create an employment relationship so long as the stipend does not exceed the reasonable “approximation of the expenses incurred.”

The internship should be of a fixed duration, established prior to the outset of the internship.  Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period.

In general, the more an internship program is structured to resemble a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).  The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training.  Under these circumstances the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent upon the work of the intern.  On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers) on a regular and recurring basis, then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.

Employers with interns in multiple states should also confirm whether the applicable state law might have different rules on whether an intern must be treated as an employee for minimum wage, overtime and meal and rest period requirements.