Why Employers Sometimes Break The Law When They Fail To Pay Their Interns

Written by: Natalie Klyashtorny

With the summer upon us, many college students and, in this economy, recent college graduates will be seeking internships.

About 50% of summer internships are unpaid. However, many employers are unaware that an unpaid internship may be considered illegal if the internship program does not meet certain criteria.

The United States Department of Labor lists the following 6 criteria with which an unpaid internship must comply with in order to pass legal scrutiny:

  1. The internship 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, the employer’s operations may actually be impeded;
  5. The intern is not necessarily entitled to employment 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 all of the factors listed above are met, an employment relationship does not exist under the Fair Labor Standards Act.

The ultimate issue is which party benefits the most from the internship. In a nutshell, if the intern receives more value from the internship than the employer obtains from having an unpaid intern, then the internship can be unpaid. If, for instance, the intern receives academic credit for the internship, likewise, such an internship would be acceptable. However, if the intern’s work gives “immediate advantage” to the employer, courts have ruled that an intern should then be paid, at least, at the rate of minimum wage and would potentially qualify for overtime.