Interns…Is it Legal Not to Pay Them?

Intern article photo
For centuries, business owners have been working with interns (or apprentices) as a way to train the next generation of workers and to inexpensively complete needed tasks in their business. As an intern, a student or inexperienced worker can improve their abilities in their chosen professional field and expand their knowledge by working with and observing masters in that field.

The Fair Labor Standards Act

Many business owners hire interns on an unpaid basis. Depending on the circumstances, this may be legal. The federal Fair Labor Standards Act (FLSA) requires “for-profit” employers to pay employees a minimum wage, and overtime pay where applicable, for their work. Interns and students, however, may not be considered “employees” under the FLSA and, accordingly, compensation may not be required.

The Primary Beneficiary Test

In order to determine if the intern should be considered an “employee” for purposes of the FLSA, courts evaluate whether the intern or the employer is the “primary beneficiary” of the relationship using the seven factors below. These factors are weighed and balanced in light of the specific circumstances; no one factor is controlling, and courts may consider other relevant evidence to help make the determination.

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that in an educational environment, including the clinical and other hands-on training.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the time frame that it provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that there is no entitlement to a paid job when the internship ends.

In February 2019, in Velarde v. GW GJ, Inc., the 2nd Circuit Court of Appeals, which has jurisdiction over New York, Connecticut, and Vermont, confirmed this multi-factor test regarding the legality of hiring interns without pay. (This test was first set forth in Glatt v. Fox Searchlight Pictures, Inc. in 2016 in a well known case brought by interns on the movie production set of “Black Swan”.) Although the courts in other states are not bound by this decision, the test presents a good guideline for business owners to consider when hiring interns.

How Do You Decide?

Essentially, a business owner should keep in mind that having an unpaid intern perform routine tasks that, under other circumstances, would be done by a paid employee or which do not further the intern’s knowledge or education in a specific professional field, presents a risk. On the other hand, using an intern to perform work that is out of the normal course of business that also provides educational opportunities or school credit for the intern is generally a justifiable use of the intern’s unpaid labor.

If you are considering using interns this summer, or at any time during the year, click below to schedule a meeting so that we can ensure that your practices are legally compliant.

NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES.

By Wendy M. Anderson, Esq.
Law Office of Wendy Anderson, PLLC
480-825-4509
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