The U.S. Department of Labor (DOL) has increased efforts in investigating unpaid internships to determine if the work performed should be compensated.
Federal Wage and Labor Laws
Whether or not an employer must pay an intern depends upon the on-the-job experience that the individual will have in relation to the standard set forth under the Fair Labor Standards Act (FLSA), a federal law which establishes the minimum wages for work performed. Pursuant to the FLSA, the U.S. Department of Labor (DOL) has developed criteria from a 2015 2nd Court of Appeals decision for a 7 Prong Test regarding for-profit unpaid internships.
For-profit companies are able to offer unpaid internships if the following conditions are met:
- The intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, expressed or implied, suggests that the intern is an employee – and vise-versa.
- The internship provider must provide training that is similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The internship must be tied to the intern’s formal education program by integrating coursework or receipt of academic credit.
- The internship must accommodate the intern’s academic commitments by corresponding to the academic calendar at their university.
- The intern’s work must complement, rather than displace, the work of paid employees while also providing significant educational benefits to the intern
- The internship’s duration needs to be limited to the period in which the internship provides the intern with beneficial learning.
- The intern and the employer must both understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship
Non-Profit Unpaid Internships
In regards to non-profit organizations, the FLSA exempts certain people who volunteer to perform services for a state or local government agency or who volunteer for humanitarian purposes for non-profit food banks. WHD (Wage & Hour Division) also recognized an exception for individuals who volunteer their time, freely, without anticipation of compensation, for religious, charitable, civic or humanitarian purposes to non-profit organizations. Unpaid internships for public sector and non-profit charitable organizations, where intern volunteers without expectation of compensation, are generally permissible. Please see the Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act for more details.
An employer is not automatically exempt from paying an intern solely because the intern is receiving academic credit. However, formalizing the educational components of the internship can help meet the “educational environment” requirement in criteria number 1 of the DOL guidelines noted above.
Best practices to meet the DOL criteria
- Design the internship experience to primarily benefit the student, not the employer. The more the experience is structured around a classroom or academic experience, the more likely it will fulfill DOL criteria.
- Designate a formal mentor/supervisor for the internship experience and provide close supervision. Have the supervisor and intern outline learning objectives and have the intern keep a journal or complete assignments that summarize their learning experiences around the objectives. Design objectives so that the intern develops skills that can be used in multiple settings (i.e. transferable skills).
- Have a written, signed agreement that includes a job description and/or learning objectives that meet the DOL criteria, and that indicates a fixed start and end date for the internship. This can be covered by internship affiliation and learning agreements, which should be completed prior to the intern beginning the experience.
- Both the intern and employer should understand and agree that the intern is not entitled to wages. This parameter should be included in the written agreement.
Reported unpaid interns and volunteers at WSU may be covered by workers’ compensation insurance provided by the Department of Labor and Industries. In order to assure coverage, departments are responsible for complying with the provisions found in the Business Policies and Procedures Manual 60.81 – Volunteers.
Workers’ compensation for unpaid interns and volunteers may cover medical expenses but not wage replacement. In order to ensure an individual is reported, departments must submit a completed Volunteer Monthly Report to Human Resources Services by the 15th of the following the month of activity to report volunteer hours. The 2011 rate for covering an unpaid interns and volunteers is $0.0524 per volunteered hour.
Who to Contact
- For questions regarding the internship program at WSU, contact Judy Hopkins, Internship Coordinator (firstname.lastname@example.org), email@example.com, or in the ASCC at 509-335-6000.
- For questions regarding compliance with internship laws and policy, Human Resource Services, at 509-335-4521.
- For questions regarding the volunteer policy and workers compensation coverage, see the WSU Business Policies and Procedures Manual 60.81 or contact Human Resource Services, at 509-335-4521.