It's Intern Season - How to Compensate Interns

Summer is almost here, which means internship season is fast approaching and with so many interns eager for work, it can be tempting to allow such individuals to 'volunteer' at your place of business or to pay less tha n the minimum wage. In fact, you may be surprised to learn that internships are most often considered 'employment' subject to the federal minimum wage and overtime rules. The U.S. Department of Labor (DOL) uses certain criteria in determining whether an internship may be compensable employment under federal law, keep reading to be sure you are staying in compliance this summer!

Fair Labor Standards Act Under the federal Fair Labor Standards Act (FLSA), interns in the for-profit private sector who qualify as employees typically must be paid at least $7.25 per hour, and not less than one and one-half times the regular rate of pay after 40 hours of work in a workweek.

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

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 Department of Labor uses the following six criteria which 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.)

Get our fact sheet and guide on how to hire interns now, it will provide you with everything you need to know about hiring interns.