Q. We would like to hire a few college interns over the summer, but with our tight budget, I don’t think we can pay them. What rules apply to unpaid internships?
A. Under the Fair Labor Standards Act (), an employee who is “suffered or permitted” to work must generally be compensated for their services.
The Department of Labor has recognized an exception to this rule for volunteers for state and local governments and nonprofit organizations. Therefore, unpaid internships in the public sector and for nonprofit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.
However, if your organization is a for-profit business, you must pay the intern at least the minimum wage and overtime, unless all the following tests are satisfied:
- 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.
- The internship experience is for the benefit of the intern.
- The intern does not displace regular employees, but works under close supervision of existing staff.
- 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.
- The intern is not necessarily entitled to a job at the conclusion of the internship.
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
A good rule of thumb for for-profit employers: If the employer is deriving an advantage or benefit from the work of the intern, the intern should be paid at least minimum wage.