Internships and the Fair Labor Standards Act

The U.S. Department of Labor’s Wage and Hour Division recently released a fact sheet containing information to help determine whether interns must be paid at least the minimum wage and overtime under the Fair Labor Standards Act (FLSA) for any services they provide to “for-profit” private sector employers.

The FLSA broadly defines the term “employ” as to mean to “suffer or permit to work.” Individuals who are non-exempt but are allowed to work must be compensated by the employer for any service they provide. An internship for a “for-profit employer” will be considered employment unless the intern meets the test for a trainee. Interns who qualify as employees rather than trainees will be paid at least the minimum wage and overtime, for all services they provide the employer.

The fact sheet acknowledges that there are instances in which individuals who participate in private sector internships may do so without receiving compensation. The Supreme Court held that “suffer or permit to work” cannot be “interpreted so as to make a person whose work serves only his or her interest an employee of another who provides aid or instruction.” This exception would apply to interns who receive training for educational reasons. The fact sheet lists the following six criteria which would lead to a finding that an internship would meet the exclusion to compensation:

1) The internship, even though it includes actual operation of the facilities of the employer, is similar to training which 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 existing staff;
4) The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may be 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 fact sheet states that if all of these factors are met, then an employment relationship does not exist under the FLSA, and the intern would not be entitled to compensation and overtime. The fact sheet reiterates that this exclusion is very limited, and the FLSA defines employment very broadly.

The fact sheet adds that the more an internship is structured around a classroom or academic experience, the more likely the internship will be viewed as an extension of that person’s educational experience. In the same way, the more an internship is focused on an employer’s operations and the intern is performing productive work, the more the internship will be seen as one that offers the employer a benefit, demanding the intern be compensated.

The fact sheet includes information explaining that any intern who is used as a substitute for a regular employee should be offered at least minimum wage in compensation and paid overtime accordingly. The fact sheet also discourages the use of unpaid trial internships. An employer should not place an unpaid intern in a trial position in which they would be under the expectation of being hired in the future. In such instances the intern should be seen as an employee and offered compensation for the services performed.