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Is Your Unpaid Internship Legal? 10 Important Things to Know

July 22nd, 2015 Christopher Davis

Unpaid internships have become an increasingly popular way for students and aspiring professionals to get their feet wet in a given industry. However, as more interns join the workforce, the risk of abuse by employers has become more evident. Be forewarned! Internships must meet certain criteria in order to qualify as lawfully “unpaid”—otherwise, interns are entitled to minimum wage and overtime pay as required by the Fair Labor Standards Act (FLSA). Interns should be aware of the new test established by the Second Circuit Court of Appeals this year, which determines whether an unpaid internship is legal:

  1. The intern and employer clearly understand that there is no expectation of compensation. 

Unpaid internships must be mutually agreed upon. The terms of the agreement should be made clear and settled in advance of the start of the internship.  Any promise of compensation, express or implied, suggests that the intern is an employee – and vice versa.

  1. The internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions, AND/OR

3. The internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

Is your internship educational, or does it consist mainly of menial tasks? Someone has to do those coffee runs, but the scope of your work also must extend to tasks of real value. If your internship does not provide academic credit or meaningful professional experience, then legally, you should be paid.

  1. The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

Does the internship logically fit the profile of an enriching academic experience, or does it impede upon other academic commitments? Are you required to do work during hours when you would normally have class or other school-related obligations? Does your employer offer you accommodations for other activities related to your academic program?

  1. The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

Does your internship have a schedule that you are comfortable with, and that you feel benefits you with regard to your professional future? Are you expected to keep working for the company indefinitely, even though you are no longer learning anything new? Are you doing preparatory work or completing menial tasks outside of normal business hours?

  1. The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

Are you doing the same work as a full-time employee, without any of the benefits? Are you being given sufficient guidance and training or are you left alone to complete busy work? Are you doing very specific work that could not or would not typically be completed by an employee already at the company? Can you, and the company, clearly articulate what educational benefits you are being provided? 

  1. The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.   

Is the internship serving as a “stepping stone” to a formal employment relationship? If so, it’s possible that the intern is already performing the tasks of an employee.

According to the Second Circuit’s July 2015 ruling, the extent to which the above factors are met determines whether an unpaid internship is legal.  While none of the seven factors will alone determine whether or not an intern should be paid or unpaid, and while the list is not exhaustive, knowing the factors will help internship applicants in determining whether or not they should be paid, and how much.  If the unpaid internship meets the requirements sufficiently, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern. However, if it becomes clear that the unpaid internship does not fit the above guidelines, interns are entitled to the employee benefits guaranteed by the FLSA, including minimum wage compensation, overtime pay, workman’s compensation benefits, and unemployment benefits.

Aside from the legal test itself, there are a few more things that interns—especially prospective interns—should be aware of:

  1. The leading consideration in unpaid intern cases is what the Second Circuit Court refers to as the primary beneficiary test, which examines “whether the intern or the employer is the primary beneficiary of the relationship.”

The primary beneficiary test asks, “Who is getting the greater benefit from this relationship?” A few guidelines to keep in mind are the following: Do you feel as though you’re getting something educational out of the work you’re doing, or do you sense that you’re being taken advantage of? Are the benefits that you’re receiving comparable to those that your employer is getting by taking you on as an intern? Ideally, the benefits you are receiving should measurably outweigh those that your employer is receiving, making you the definitive “primary beneficiary” of the internship. 

  1. The Second Circuit Court defines “the relationship between the internship and the intern’s formal education” as “a central feature of the modern internship.”

In two cases brought by unpaid interns working for the Hearst Corp. and Fox Entertainment Group Inc., the Court paid special attention to the role of formal education within unpaid internships. The more directly an unpaid internship relates to one’s education—e.g. by awarding academic credit or fulfilling degree requirements—the more likely it is that the internship is legal. Be wary of accepting unpaid internships that don’t seem to have any direct connection to your education. While they can still be “educational,” it’s far less likely that they will adequately fulfill the requirements to be legally unpaid.

  1. Always keep in mind that the primary goal of an internship is to prepare young professionals for a future within a given career field.

Regardless of whether an internship is paid, employers should dedicate resources towards ensuring that the intern is gaining meaningful experience from his or her work. But particularly for unpaid interns, employers are obligated to provide the mentoring and guidance necessary to ensure that the internship is truly educational. If an intern’s work more directly benefits the employer, or if the employer is not expending time, effort, or resources on the intern’s experience, it is likely that the intern should be paid as an employee.  At the end of the day, you are your own best advocate in determining whether a potential internship is fair.