As a Labor and Employment attorney, I’m often asked if an organization must pay interns or if unpaid internships are still permissible. This decision may seem easy enough, but like most things in life, there are no easy decisions. The U.S. Department of Labor regulates internships to ensure that workers are fairly compensated, and frequently, interns are paid at least the minimum wage. While internships are often viewed as unpaid labor, internships are actually a temporary or short-term opportunity for a student or new employee to learn and obtain real-world, hands-on experience.

How do you decide if you have to pay your interns? The Department of Labor has a multi-factor test to determine when unpaid workers are allowed. This test is called the “primary beneficiary” test. In short, the Courts evaluate who the primary beneficiary is of the relationship between the employee and the employer. If the “primary beneficiary is the employer, the employee must be compensated.  There are seven factors that the Courts typically analyze when applying this test. Those factors are:

1. The extent to which the intern and employer understand that there is no expectation of compensation. If you have something in writing that expressly states that no compensation will be provided in exchange for the intern’s time while interning at the private business, then you should have sufficient evidence to overcome any assertion made by the intern that there has been a promise for compensation.

2. Whether the internship provides training similar to training provided in an educational environment. So long as the intern is obtaining diverse on hands training and given opportunities to participate in learning experiences, then this factor should be satisfied.

3. The extent that the internship is tied to the intern’s formal education program or integrated into obtaining academic credit. Offering opportunities through an educational institution helps to fulfill this factor.

4. The extent that the internship accommodates the intern’s school calendar. The more flexible and accommodating to an intern’s schedule each semester, quarter, etc., the better that the organization fulfills this factor.

5. The duration of the internship. Internships generally have a beginning and ending date and are not perpetual. The idea is that the internship is to provide a beneficial learning experience to the intern so that they may advance in their personal career.

6. The extent to which the intern’s work complements work accomplished by paid employees as opposed to replacing paid employees. For example, interns likely work limited hours and do not replace full-time staff within the company.

7. The extent that both the intern and the employer understand that the intern is not guaranteed a paid employment position following the completion of their internship. While you may decide to hire former interns who go on and graduate from physical therapy school, for example, they are not hired at the same level as when they served as the intern.

The Department of Labor's seven standards might assist you in understanding how to classify interns and employees; however, this list is not exhaustive and legal challenges may still occur even when these standards are applied.

Such was the case in Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015). In that case, former student registered nurse anesthetists sued Wolford College, along with the supervisor of a clinical-placement program that was required to obtain an advanced academic degree and professional certification and licensure in the field, alleging that failure to pay minimum and overtime wages in violation of the Fair Labor Standards Act (FLSA) while working as interns in the program. The school submitted to the Court that it was adhering to the Department of Labor’s standards in evaluating whether to treat the nurses as interns. The United States District Court for the Middle District of Florida rejected that standard and felt the need to prevent the “potential for some employer to maximize their benefits at the unfair expense and abuse of student interns.” Id. at 1210. This case reflects that there is sometimes a disagreement between the Courts and the Department of Labor on how unpaid internships should be evaluated since this Court rejected the Department of Labor’s standards.

There is an inherent risk to employers when offering unpaid internships. Offering minimum wage compensation alleviates the risk of defending against a Fair Labor Standards Act (“FLSA”) allegation.

Please schedule a conference with one of our Labor and Employment attorneys at Shuffield, Lowman & Wilson, P.A. to address your internship hiring and compensation need