Summer Internships: To Pay or Not to Pay?

Q.  My company is thinking about hiring a summer intern. Is there a requirement that we pay the intern, or can we hire him or her on a voluntary basis?

A.  Now that the weather is getting warmer, many companies are looking at their workforce needs during the summer months. Summer internships provide an excellent way for interns to get much needed “real world” job experience, while helping employers by adding another set of hands to complete projects that have not been completed during the rest of the year.

But must the employer pay for this assistance?

In most instances, the intern must be paid at least minimum wage and overtime for time worked above 40 hours in a workweek. Thus, payment of a small stipend, that does not meet minimum wage requirements, will not be enough.  The Fair Labor Standards Act defines the term “employ” very broadly as including anyone who is “suffered or permitted to work.”  Internships in the “for-profit” private sector will most often be viewed as employment.

There is an exception, however, for interns who receive training for their own educational benefit, if the training meets certain criteria. Courts looks to the following six-part test to determine whether an internship can be voluntary:

  1.  The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, the intern is not considered to be “working,” and the Wage Act’s minimum wage and overtime provisions do not apply.

Thus, if the internship program is structured around a classroom or academic experience (such as when the intern receives college credit for the program), as opposed to the employer’s actual operations, then it is more likely that the internship will be viewed as an extension of the individual’s educational experience.

Likewise, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience and payment is not necessary.

Conversely, if the intern displaces a regular employee and is expected to perform productive work, then the internship is considered to be “employment” and must meet minimum wage and overtime requirements.

Be aware that the test for determining whether an internship is volunteer work is interpreted quite narrowly.  Before hiring that summer intern, think through the above test carefully to see if the internship qualifies for the exception.  Most interns must be paid for their time.

Furthermore, while some employers try to get around the minimum wage laws by hiring their intern as an independent contractor, that relationship can be subject to scrutiny if the relationship is not classified correctly. As a general rule, if the employer expects the intern to work at the job site and provides supervision, the intern will be considered to be an employee and not an independent contractor.

– Tracey E. Diamond