Must Interns Be Paid?

Whether an employer must pay an intern for their work depends on the experience they will receive. Although the Fair Labor Standards Act requires employers to pay at least the minimum wage to employees, the U.S. Department of Labor (DOL) has developed six criteria for identifying which learners/trainees may be unpaid. Note that the DOL’s use of “learner/trainee” is equivalent to the commonly used term of “intern.”

The six criteria are:

1. The training, although it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.
2. The training is for the benefit of the students.
3. The students do not displace regular employees, but work under the close observation of a regular employee or supervisor.
4. The employer provides the training and derives no immediate advantage from the activities of students, and, on occasion, the operations may actually be impeded by the training.
5. The students are not necessarily entitled to a job at the conclusion of the training period.
6. The employer and the student understand that the student is not entitled to wages for the time spent in training.

These criteria are discussed in detail by Rochelle Kaplan in Legal
Issues Surrounding Internships:

Of those criteria, three are very straightforward. Interns cannot displace regular employees. They are not guaranteed a job at the end of the internship. And they are aware that they are not entitled to wages during the internship. In many cases, employers pay a stipend to students for meals and lodging or provide tuition assistance. Stipends and tuition assistance are not considered payment of wages for the purpose of determining whether a student is an employee. Likewise, the fact that an employer may ultimately hire the student does not make the intern an employee as long as the employer did not promise the student a job prior to or during the internship.

A bit trickier are the criteria regarding training. For one, interns must receive training from the company even if it impedes operations, for example, by taking time away from work to provide the training. Two, the training must be similar to that provided by a vocational school. That is, the intern must get hands-on experience with equipment and processes used in the company. And three, the training must primarily benefit the student, not the company. Since the intern would be learning work skills and procedures that are relevant to his or her field, wouldn’t that be benefiting the employer? Several court rulings, while not addressing the criteria head on, seem to suggest that as long as the internship is a prescribed part of the curriculum, is part of the school’s educational process, and is predominately for the benefit of the student, the fact that the employer receives some benefit from the student’s services does not make the student an employee for purposes of wage and hour law.

Not all six factors have to be present for a student to be considered a trainee; rather the experience should ultimately look more like a training and learning experience than a job.

Note that Kaplan seems to believe that an internship with a for-profit corporation or other organization may be unpaid even if the employer accrues some benefit from the work of the intern. That flies in the face of the Department of Labor’s regulations which clearly state that for an unpaid internship to be legal the employer “derives no immediate advantage from the activities of students, and, on occasion, the operations may actually be impeded by the training.” In other words, the employer cannot benefit from the internship at all in the short-term and actually may be harmed. This isn’t a balancing act where you look at the benefits to the intern and determine that it is okay for the internship to be unpaid because the intern benefited. The benefit to the intern isn’t the primary issue. The benefit to the employer is the issue.

One of my favorite television shows is The Colbert Report, hosted by Comedy Central’s Emmy and Peabody Award-winning Stephen Colbert. On Tuesday, February 28th his guest was Economic Policy Institute (EPI) vice president Ross Eisenbrey. They discussed the proliferation of unpaid interns in the workforce as well as the law and economics of unpaid internships:

EPI has been a crucial voice highlighting the inadequate regulation of student internships and has detailed why it is wrong, particularly with respect to for-profit employers not paying interns for their work. In short, the EPI has convincingly made the point that unpaid internships are:

• Illegal for for-profit organizations;
• Don’t fairly reward hard work;
• Block economic mobility; and
• Leave young workers exposed to exploitation.

Isn’t it about time that corporations stop exploiting young adults and others who are so desperate to get work experience that they’re willing to work for free? If these corporations can’t afford to pay their interns even the minimum wage, then those corporations shouldn’t hire interns.