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Under what circumstances must we pay interns?

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in Compensation and Benefits,Human Resources

Q. My company would like to hire several college students as interns to work on special projects. Because the work has educational value, we are wondering if the internships can be unpaid. Can we do this?

A. It depends on the structure of the internship program, but probably not.  The U.S. Department of Labor (DOL) has indicated that interns must be treated like any employee for purposes of the Fair Labor Standards Act, meaning that they must be paid the minimum wage and overtime unless they qualify as an “exempt” employee. 

There is an exception to this general rule, however, if all of the following criteria are satisfied:

  1. The employer derives no immediate advantage from the intern’s work (in fact, on occasion the employer’s operations may actually be impeded).
  2. The internship is for the benefit of the student.
  3. The internship provides training that is similar to that which would be given at a vocational school.
  4. Interns do not displace regular employees.
  5. Interns are not necessarily entitled to a job at the conclusion of the internship.
  6. Interns understand that they are not entitled to wages for the internship. 

As a general matter, it is very difficult for a private employer to satisfy these criteria because employers generally derive some advantage from having an internship program.

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