Over the past several years the use of internships as part of the recruitment process has increased tremendously. According to recent NACE surveys, employers report that internship programs are the best source of new full-time employees.
While internships come in many shapes and sizes, one of the common questions asked by employers developing internship programs is whether the employer must pay an intern for his/her work. The answer to this lies in an analysis of the on-the-job experience the individual will have in relationship to the standards set forth under the Fair Labor Standards Act, which requires employers to pay at least the minimum wage to employees.
Pursuant to this law, the U.S. Department of Labor (DOL) has developed six criteria for identifying a learner/trainee who may be unpaid. Neither the law nor the regulatory guidance uses the term "intern."
• The training, even though it includes actual operation of the employer's facilities, is similar to training that would be given in a vocational school.
• The training is for the benefit of the student.
• The student does not displace regular employees, but works under the close observation of a regular employee.
• The employer provides the training and derives no immediate advantage from the activities of the student. Occasionally, the operations may actually be impeded by the training.
• The student is not necessarily entitled to a job at the conclusion of the training period. The employer and the student understand that the student is not entitled to wages for the time spent training.
While not all six factors have to be present for an individual to be considered a trainee, the experience should ultimately look more like a training/learning experience than a job.
This raises the issue of the fourth criterion that the employer derives no benefit from the student's activities. This seems to fly in the face of contemporary practice. In the same way that a student working in a college laboratory is expected to become actively involved in the work at hand, an intern is expected to participate in the work of the company to make the experience educationally valid. Several DOL rulings, while not addressing the criteria head on, seem to suggest that as long as the internship is a prescribed part of the curriculum and is predominantly for the benefit of the student, the mere fact that the employer receives some benefit from the student's services does not make the student an employee for purposes of wage and hour law.