Springtime every year, employers begin thinking about hiring summer interns. And the age old question is faced—what do we do about summer intern pay? Do we even have to pay our interns? Particularly in times when employers have decreased their hiring numbers, summer interns are an attractive option at little or no pay. Interns cost much less than new hires and employers don’t have to provide interns with benefits.

Internships in the for-profit, private sector will most often be viewed as employment by the federal Department of Labor (DOL), unless the test described below is met. Interns who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over 40 in a workweek.

6 Factor Test for Intern Pay

According to the DOL, if all of the following six factors are met, an employment relationship does not exist between an intern and the company that sponsors the participant:

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 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 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.

If no employment relationship exists, the participants are not subject to the FLSA, and no intern pay is due.

Is Intern Training, Working or Both?

In general, 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 (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).

The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training. Under these circumstances, the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent on the work of the intern.

On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), even though they may receive some benefits in the form of a new skill or improved work habits, an employment relationship may still exist because the employer also benefits from the interns’ work. In such a case, intern pay is required.

If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific periods, these interns must be paid at least the minimum wage and overtime. If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, the interns will be viewed as employees.

Conversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees and the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide educational experience. If the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship, rather than training.

An unpaid internship should be of a fixed duration, established before the outset of the internship. Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period. If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.

More Resources on Interns:

• ‘Black Swan’ Wage and Hour Suit: Review Unpaid Internship Rules
• Intern Poll Results: Paid or Unpaid?
• Checklist for Unpaid Internship Programs

Susan E. Prince, J.D., is a Legal Editor for BLR’s human resources and employment law publications. Ms. Prince has over 10 years of experience as an attorney and writer in the field of human resources and has published numerous articles on a variety of human resources and employment topics, including compensation, benefits, workers’ compensation, discrimination, work/life issues, termination, and military leave. Ms. Prince also served as an expert on several audio conferences discussing the 2004 changes to the federal regulations under the Fair Labor Standards Act. Before starting her career in publishing, Ms. Prince practiced law for several years in the insurance industry and served as president of a retail sales business. Ms. Prince received her law degree from Vermont Law School.