Work it Out Blog

Unpaid Intern or Employee? The Factors That Matter

May 12, 2016

As May draws to a close, employers may yet be looking for unpaid interns, eager to experience the real world, to join their summer ranks. In doing this, employers must be careful how they structure such an internship. An employer’s expectations for an intern may determine whether that intern must be paid at least minimum wage under the Fair Labor Standards Act (FLSA).

In recent years, unpaid internships have come under increasing scrutiny by the Department of Labor, and numerous employers have faced class action lawsuits from unpaid interns. While the United States Supreme Court has yet to decide on a definitive, black-letter test for whether an individual is an employee or an unpaid intern, the U.S. Department of Labor has established informal guidelines and factors to determine the issue.

The more of the following factors that apply to an intern’s situation, the more likely the intern is not an employee requiring mandatory minimum wage: 

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that 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 the 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; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The intent of the FLSA is to prevent employers from exploiting unpaid interns “by using their free labor without providing them with an appreciable benefit in education or experience.” Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 535 (2015).

By abiding by a few general rules of thumb, an employer with an unpaid intern may avoid the pitfalls of breaking federal labor law:

  • Lay down the expectations with potential interns from the start: set the start and end dates for the internship; express in writing and orally that the internship is unpaid; and describe exactly what types of work the intern will have the opportunity to perform.
  • Encourage interns to get school credit or grants for their internship.
  • Hold regular intern mentorship meetings to teach them and answer questions about the industry.
  • Avoid giving interns the coffee-filling, trash-emptying, photocopying, and filing jobs that a paid administrative assistant or facilities manager would typically handle. Interns want to be trained in the industry and have meaningful educational experiences. The more their internship is tailored to their educational interests—even if they are doing work that is redundant or not necessarily forwarding the business interests of the company—the more likely an employer will be justified in paying an individual with training instead of cash. 

Generally, the question any employer should ask when bringing on an intern is whether the intern or the employer is the primary beneficiary of the relationship, using the framework of factors provided above. The more the intern benefits from the relationship, the less likely the employer is required to pay the intern at least minimum wage under FLSA.

If you have questions about compensation for interns, contact Kirk L. Shaw or your Day Ketterer attorney at 330-455-0173 or email info@dayketterer.com.

The content of this blog is for informational purposes only and is not intended as legal advice for any purpose. This blog is not intended to present an exhaustive summary of all applicable laws, or to take the place of legal advice.  If you have any questions regarding the law, please contact us for assistance.