Will Internships Start 'Paying Off' In More Ways Than One?


The traditional image evoked by the word “intern” is of the person in the office building who buys the coffee, picks up the dry cleaning and does all of the daily menial tasks for the company higher-ups who don’t have time to do it themselves. However, as most millennials can attest, those days are long gone.

Today, most internships have participants engaging in the everyday workings of their company or organization. From entering data to doing basic research, interns make small, but important, contributions. The question then becomes whether those contributions warrant treatment comparable to any other employee, including a paycheck.

Unpaid Interns Under the FLSA

The Department of Labor, Wage and Hour Division’s Fact Sheet 71, which provides the primary source of guidance for unpaid internship programs under the Fair Labor Standards Act, has identified six factors, each of which must be met for an intern to be lawfully unpaid. While each factor is officially considered to be of equal importance, some are more easily “checked off” than others through the use of strong documentation. The most commonly known factors to employers tend to be that the intern is not entitled to a job following the internship and the understanding that no compensation will be paid.

The main distinguishing factor between providing “vocational training” under the FLSA and treating someone as an entry-level employee examines the benefit the employer is receiving from the individual relative to the benefit the individual is receiving through the internship program.

“When we think of ‘training’ it is the trainee that is principally benefiting from the activity; with an employee, it is the employer that is presumably and primarily benefiting from the activity,” explained David Warner, a partner at Centre Law & Consulting, LLC in Tysons Corner, Va. “With the requirements that the internship provide ‘no immediate benefit’ to the employer and be similar to training provided in an educational environment, there is a straight-faced argument to be made that compliant unpaid intern programs are, by necessity, either useless (as far as the employer is concerned) or purely educational.”

Evolution of Unpaid Internship Programs

According to Warner, unpaid interns are viewed more like an “endangered species” as opposed to entry-level employees. “The tension is simply that, under the DOL’s guidance, if the intern is in fact performing tasks like an entry-level employee where their work is of value to the employer, by definition that individual cannot be an unpaid intern,” said Warner, who represents employers in various types of labor law litigation, including wage and hour issues.

In the private, for-profit sector, unpaid internships that are compliant with the Department of Labor’s guidance concerning such programs have essentially disappeared while the use of unpaid internships remains extremely prevalent in the public sector.

Meanwhile, non-profit organizations often point to a footnote in the DOL’s guidance suggesting that such programs at non-profits may be permissible. However, close reading of the guidance reveals that the DOL’s statement in that regard is expressly limited to non-profit charitable organizations. “On its face it arguably does not apply to trade associations and other industry/interest non-profit groups that are not charities,” Warner said.

Legal Quagmire for Employers

Employers who don’t know that the DOL’s guidance exists or who don’t understand its implications may find themselves in legal trouble under the FLSA because of their internship programs. “Many of us got our professional start in an unpaid internship, and it can come as a surprise to learn that what was once a routine step on the career ladder has been regulated virtually out of existence,” Warner said.

He added that unpaid intern programs “are implemented by well-meaning companies looking to provide opportunities to individuals early in their career, while at the same time – truth be told – serving as a testing ground for future hires.”

The problem, according to Warner, is that having “good intentions” is notably lacking from the DOL’s six factors, and well-meaning employers are as liable for violations of the FLSA as the not-so-well-meaning.

Recent Trends and Legal Developments

There have been moves by several states, including most recently Maryland, to extend state workplace anti-discrimination protections to unpaid interns as well as paid employees.

While these laws address the general working environment for unpaid interns, the FLSA generally governs the wage arrangements between an employer and an employee and provides for a complete exemption from its requirements for certain workers such as unpaid trainees and interns.

“This exception has already been an area of increased scrutiny in recent years showing a focus by the DOL and the courts to more narrowly define which workers may properly be considered not ‘employees’ and, thus, unpaid,” explained Warner.

While this trend certainly grants unpaid interns more rights and protections in the workplace, Warner does not see it as a movement towards equating interns with employees. “Instead of trying to increase the scope of the existing law, the state focus has been to recognize that these workers are not ‘employees,’ but should nonetheless be entitled to certain protections,” he said. “I would expect that the focus at both the federal and state levels will continue to be towards increased protection of interns, whether it be providing for fair wages, if warranted, or fair/non-discriminatory working conditions.”

For all of your Fair Labor Standards Act information needs, track the latest federal court case updates, and get expert analysis from respected practitioners and Bloomberg BNA's legal editors with a free trial to the FLSA Litigation Tracker , available on the Labor & Employment Law Resource Center.