Department of Labor Issues Guidelines on Unpaid Internships

The United States Department of Labor’s Wage and Hour Division (“WHD”) released guidelines on the use of unpaid interns by employers in the private sector. Typically, an employment relationship will be created unless an internship can meet the six criteria laid out by the WHD.

First, the internship must be similar to training the intern would receive in an educational environment. Second, the internship experience must be for the benefit of the intern and not the employer. Third, the intern must not displace the employer’s regular employees. Fourth, the employer must not derive an immediate advantage from the intern’s activities. Fifth, the intern should not necessarily be entitled to a job when the internship concludes. And, Sixth, both the employer and intern must have an understanding that no wages will be paid during the internship. If an employer can meet all six factors, the internship will be valid and no employment relationship will be found to exist. This is critical, because where the relationship is found to lack the foregoing requirements, an employer could be liable for minimum wage and overtime violations.
The WHD also provided guidance on the types of activities that are both permitted and not permitted in an internship setting. Typically, an internship for educational or training purposes will not create an employment relationship. An internship that is structured around an educational experience, primarily known as an internship for credit, will not create an employment relationship. When an intern receives training for skills that can be used in other employment settings, such activity will not create an employment relationship. Also job shadowing, or activities requiring close and constant supervision, will not create an employment relationship. If the intern, however, is performing the productive work of the employer (e.g., filing, performing clerical work, etc.), substituting for, or augmenting the regular workforce, or requires the same level of supervision as the employer’s workforce, such activities would create an employment relationship.
With the current state of the economy, and historically high unemployment levels, employers are offering more internship opportunities with their businesses. The WHD plans to continue to review the need for guidance in this area to ensure employers follow the WHD’s criteria for unpaid internships.
The New York Department of Labor likewise scrutinizes internships to make sure that they are not just unpaid jobs. New York law requires that employees be paid the minimum wage for hours worked, as well as overtime for hours worked in excess of 40 in a given workweek.

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