By Kirstin Kennedy, Staff Writer
Unpaid internships are common for college and post-graduate students in the United States.[1] So common, in fact, that nearly one half of all internships offered by employers across the country are unpaid, according to a 2016 study.[2] Arguably, the concept of an unpaid internship is mutually beneficial to employers and prospective interns alike – the student gains on-the-job experience and the employer benefits from free labor and a youthful perspective in its market.[3] Many colleges and universities seem to agree, as internship experience or experiential learning is often a requisite to graduation.[4]
For students, the logic is simple: take the unpaid position or someone else will.[5] With acceptance of an unpaid position comes the hope that hard work on the part of the student will result in a bona fide job offer from the employer.[6] In fact, according to a 2015 survey conducted by the National Association of Colleges and Employers (“NACE”), the point of the majority of internships offered by employers in the United States is to recruit employees.[7] The study found that 70 percent of employers state that the “primary purpose” of offering internships is to convert the student intern into a full-fledged employee.[8] In reality, in 2015, only about 52 percent of interns were hired to full-time employees as a result of their internship.[9]
The issue begs questions of both fairness and legality. Much of employment and compensation law is governed by the Fair Labor Standards Act of 1938 (“FLSA”).[10] The Act, among other things, established a mandatory minimum wage for workers and requirements for overtime payment for employees who work more than 40 hours in a given week.[11] Fundamentally, however, the FLSA establishes that employees must be paid for their work for an employer.[12] According to the Act, “[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce.”[13]
The idea that employees must be paid for their work conflicts with the concept of an unpaid internship, especially when the internship is with a for-profit entity.[14] According to the United States Department of Labor, courts have interpreted the validity of unpaid internships and the FLSA by using a seven-factor tests known as the “primary beneficiary test.”[15] The test aims to determine whether the student intern is actually an employee under the FLSA by looking to which party is the “primary beneficiary” of the internship relationship.[16] While not one factor of the seven typically used in the analysis is particularly determinative, courts have weighted the factors in individual and fact-based analyses, according to the Department of Labor.[17]
The first factor considers the intern’s expectation of compensation and understanding of the voluntariness of the position.[18] Any discussion or promise of payment in “express or implied” terms serves as evidence of employment rather than internship.[19] The second factor examines the nature of the intern’s work, considering whether or not it relates to educational training.[20] Further, the intern’s receipt of academic credit weighs in favor of a non-employee status.[21] Courts will also consider whether the employer accommodated the intern’s academic schedule and whether the internship was connected to the “academic calendar,” such as being offered only during the summer months or for a limited period of time.[22] Further, the court will question whether the intern “complements” the work of the business as opposed to existing in place of what would otherwise be a paid position.[23] The final factor considers whether the intern and employer both understand that the position comes without the promise of a full-time job at the conclusion of the program.[24]
Essentially, the determination comes down to whether or not the intern is an actual employee.[25] If so, the student intern must receive compensation for work conducted during the internship, according to the FLSA.[26] If not, the student intern must receive benefit in the form of academic credit, experiential learning, or on-the-job training.[27]
[1] https://www.theguardian.com/world/2016/mar/15/just-saying-no-us-interns-challenge-employers-over-exploitation
[2] Id.
[3] Id.
[4] https://www.chronicle.com/article/What-s-Wrong-With-Required/242727
[5] https://fortune.com/2018/07/08/unpaid-internships-twitter-debate/
[6] https://www.theguardian.com/world/2016/mar/15/just-saying-no-us-interns-challenge-employers-over-exploitation
[7] Id.
[8] Id.
[9] Id.
[10]29 U.S.C.A. 206 § (West).
[11] Id.
[12] Id.
[13] Id.
[14] https://www.dol.gov/whd/regs/compliance/whdfs71.htm
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id.
[25] Id.
[26] Id.
[27] Id.
