Employers who have hired summer interns should keep in mind that the U.S. Department of Labor (DOL) has stated that private sector internships are most often considered “employment” subject to the federal Fair Labor Standards Act’s (FLSA) minimum wage and overtime rules.

The Test for Unpaid Interns

There are some circumstances under which individuals who participate in for-profit private sector internships or training programs may do so without compensation. The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances. The DOL uses the following six criteria that must be applied when making this determination:

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, an employment relationship likely does not exist under federal law, and the FLSA’s minimum wage and overtime provisions do not apply to the intern. This exclusion is narrow, because the FLSA’s definition of “employ” is very broad.

Note: Be sure to check your state wage and hour laws for applicable requirements. When both the FLSA and a state law apply, the employee is entitled to the most favorable provisions of each law.

Our Employee Pay section within the  Client Resource Center HR Library features information on other common federal wage issues.