Summer Internships: To Pay or Not to Pay

May 31, 2007

The Human Resource Blog has a great post on the benefits of hiring a summer intern. At the risk of throwing the legal wet blanket on internship programs, employers need to be cautious when it comes to unpaid interns. The FLSA provides minimum wage and overtime protection to those employed within the meaning of the Act. FLSA section 3(g) states that to “employ” means to “suffer or permit to work.” The Supreme Court in Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947), identified six factors to evaluate whether a trainee, intern, extern, apprentice, graduate assistant, or similar individual is to be considered an employee. If all of the following six factors are met, then an employment relationship does not exist and compensation is not due:

  1. The training is similar to what would be given in a vocational school or academic educational instruction;
  2. The training is for the benefit of the trainees or students;
  3. The trainees or students do not displace regular employees, but work under their close observation;
  4. The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion the employer’s operations may actually be impeded;
  5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

See Wage and Hour Opinion Letter May 17, 2004; Wage & Hour Opinion Letter April 6, 2006.  Many college websites have educational pieces on these facts.

Employers can enhance their compliance positions by entering into written agreements with interns in which the six factors mentioned above are acknowledged. Alternatively, the employer can pay the intern at a rate in excess of the minimum wage and overtime for hours exceeding 40 in any workweek.