peo company

Should You Be Paying Your Unpaid Interns?

Internships are considered to be an essential part of a student’s education and right of passage for college grads. The benefits are well-known: students participating in internship programs receive an invaluable educational experience and develop connections and relationships with professionals in their desired fields, giving them a leg up when they enter the workforce.

Businesses who have internship programs, in turn, are able to use the programs as recruiting and talent-development tools – students that successfully complete an internship often make great part-time or full-time employees. Interns also bring with them a kind of enthusiasm and energy that can help revitalize an organization’s existing workforce. An internship program also provides a great opportunity to strengthen a company’s reputation in the community.

So why have internships, a seemingly win-win relationship for both students and employers, been at the center of so much controversy over the past few years?

While no one is denying the intrinsic value of an internship, what employers, advocacy groups, educational institutions and lawmakers are debating is the value of the unpaid internship. In fact, more than 30 cases involving unpaid interns have been filed in the past four years. Specifically at issue is whether or not unpaid interns actually qualify as non-exempt employees and are thusly entitled to compensation and protections under the Fair Labor Standards Act (FLSA).

The DOL’s unpaid internship test

In 2010 the Wage and Hour Division of the US Department of Labor (DOL) published new guidance to be used when determining whether interns working for employers in the “for profit” private sector must be paid at least the minimum wage and overtime pay as outlined under the FLSA. These guidelines outlined a six-part test to determine whether or not interns qualify as employees.

  • The internship, despite including actual operation of the facilities of the employers, is similar to training that would be given in an educational environment.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees, but instead works under the close supervision of existing staff.
  • The employer derives no immediate advantage from the activities of the intern and, on occasion, the employer’s operations may actually be impeded.
  • The intern is not necessarily entitled to a job at the conclusion of the internship and the internship is for a fixed time period.
  • Both the employer and the intern understand that the intern is nor entitled to wages for the time spent in the internship.

If all six of the above criteria are met, then it is determined that an employment relationship does not exist under the FLSA, meaning an unpaid internship is legally permissible.

Best practices for employers establishing intern programs

In the same fact sheet that outlines the six-criteria test for unpaid intern programs, the DOL also offers this guidance to employers: “…the more an internship program is structured around 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.” If, however, the students in question are being used to as substitutes for regular workers, or to supplement its current workforce in such a way where they are performing productive work (i.e. filing, assisting customers, etc.), they should be paid at least the minimum wage, as well as any overtime compensation for hours worked in excess of 40 hours per workweek.

G&A Partners, a leading national professional organization (PEO) and human resources outsourcing provider, employs a team of HR experts who understand the ins and outs of human resources and employer-related laws. Learn how G&A’s highly trained staff can help your business become compliant with FLSA, HIPAA, PPACA, FMLA, COBRA and all of the hundreds of other federal, state and local laws regulating employers by calling 1-866-634-6713 or visiting to schedule a free business consultation.

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

Comments are closed.

Let's talk

Sales Questions

(866) 927-6203

Contact a Business Advisor
Customer Care

(866) 927-6203

Contact Customer Care