Are You Required to Pay Your Summer Intern?

05.17.2022
Intern
HR & Safety

The following article was first posted on the Carmody Torrance Sandak & Hennessey LLP’s Labor and Employment blog and is reposted here with permission.


It’s that time of year when many organizations arrange to hire summer interns. 

Internships are mutually beneficial in that they provide organizations an opportunity to get extra help during the summer, and they provide individuals an excellent opportunity to gain experience or skills in a particular field or industry. 

In many cases, individuals are eager to accept an unpaid internship in exchange for the learning experience. 

However, an individual’s willingness to accept an unpaid internship does not make the arrangement legally compliant. 

The determination of whether an intern must be paid is a legal one and can be complicated.

The legal analysis differs between for profit and not-for-profit entities and public agencies (e.g., state, municipalities, etc.). 

In short, for-profit entities generally are required to pay interns at least minimum wage and overtime pay for hours worked over 40, whereas non-profit organizations and public agencies have greater latitude to structure an unpaid internship.

For-Profit Organizations

Courts and the federal Department of Labor use the “primary beneficiary test” to determine whether an intern is, in fact, an employee entitled to minimum wage and overtime pay under the Fair Labor Standards Act. 

Courts and the DOL evaluate seven factors to determine which party is the “primary beneficiary” of the relationship. 

If the organization is the primary beneficiary, then an employment relationship exists and the intern is considered an employee, entitled to all FLSA protections. 

The seven factors are:

  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 which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  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 period in which the internship 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 the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Under this test, no single factor is determinative, and the unique circumstances must be considered. 

Given the subjectivity and uncertainty with how these factors could be applied in a particular circumstance, many for-profit employers opt to pay their interns to avoid legal risk.

Non-Profit Organizations and Public Employers

Federal and Connecticut law do not require non-profit organizations and public employers to pay individuals who are considered “volunteers.”

Therefore, an intern who is considered a volunteer, is not entitled to minimum wage and overtime pay. 

The federal DOL has stated a volunteer generally will not be considered an employee if the individual:

  • volunteers freely for public service, religious or humanitarian objectives, and without contemplation or receipt of compensation (except volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers);
  • typically serves on a part-time basis; and
  • does not displace regular employed workers or perform work that would otherwise be performed by regular employees.

The DOL emphasizes that paid employees of a non-profit organization cannot volunteer to provide the same type of services to their non-profit organization that they are employed to provide.


About the author: Nick Zaino is a partner and co-practice group leader of the Carmody Torrance Sandak & Hennessey LLP business services group. He specializes in labor and employment law.

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