Internships and Trainee Programs: When the Worker Must Be Paid

An internship at a for-profit business can be unpaid only if the intern, not the employer, is the primary beneficiary of the arrangement. That is the federal test, and if it comes out the other way the intern is an employee who must receive at least the minimum wage and overtime under the Fair Labor Standards Act. Academic credit helps but does not settle it. Neither does an agreement signed at the start saying the position is unpaid.

The question federal law actually asks

The FLSA defines "employ" broadly — to suffer or permit to work — in 29 U.S.C. § 203. That definition is wide enough to capture almost anyone doing productive work, which is why an exception had to be carved out at all. The Supreme Court did so in Walling v. Portland Terminal Co. (1947), holding that trainees in a railroad's brakeman course were not employees because the training served their own interests and the railroad received no immediate advantage.

Modern doctrine grew from that case. In Glatt v. Fox Searchlight Pictures (2015), the Second Circuit rejected rigid checklists in favor of asking which party is the primary beneficiary of the relationship, using a flexible list of considerations. Other federal appellate courts adopted the same approach, and in 2018 the Department of Labor abandoned its earlier all-or-nothing six-factor test and aligned its enforcement position with the primary-beneficiary framework. The current federal position is summarized in the Wage and Hour Division's fact sheet library.

Note: The test is applied to the economic reality of the arrangement, not to what the parties called it. An "internship" that consists of doing the work of a departed employee is employment whatever the offer letter says.

The seven considerations, weighed together

• Whether both sides clearly understand there is no expectation of compensation. An express or implied promise of pay points strongly toward employment.
• Whether the experience provides training similar to what an educational environment would give, including hands-on and clinical instruction.
• Whether it is tied to a formal education program through integrated coursework or academic credit.
• Whether it accommodates the intern's academic calendar and commitments.
• Whether its duration is limited to the period in which it provides beneficial learning, rather than continuing because the work is useful.
• Whether the intern's work complements rather than displaces the work of paid employees, while providing significant educational benefit.
• Whether both sides understand the internship carries no entitlement to a paid job at the end.

No factor is decisive and the list is not exhaustive. A program can fail on one point and still be lawful; it can satisfy several and still fail if the overall picture is a business getting free labor. Two factors do most of the work in practice: displacement and duration. A ten-week structured program with supervised projects that no employee would otherwise do looks very different from a six-month placement covering a vacant role.

Watch out: A trial shift or "working interview" for a paid position is almost always compensable. So is orientation and training time for an employee, unless it is outside normal hours, genuinely voluntary, unrelated to the job, and involves no productive work — all four at once.

Volunteers, apprentices and clinical placements

The volunteer route is often misunderstood. An individual may genuinely volunteer for a public agency or a religious, charitable or non-profit organization for civic or humanitarian reasons without becoming an employee. A for-profit business cannot accept volunteer labor on the same basis, and a non-profit cannot have its own employees "volunteer" for the type of work they are paid to do.

What an unpaid intern does not get

Classification decides more than pay. If an intern is not an employee, several protections may not attach at all under federal law, and this is where students are most often caught out.

Federal anti-discrimination statutes generally protect employees and applicants. An unpaid intern who is harassed may not be able to bring a Title VII claim, because there is no employment relationship — although a paid internship, or an internship that is really employment, will be covered. The EEOC's guidance library explains the coverage requirements.

A number of states closed that gap directly. New York, California, Oregon, Illinois, Connecticut and the District of Columbia are among the jurisdictions that extended harassment and discrimination protections to unpaid interns by statute. Workers' compensation is another gap: coverage of unpaid interns varies by state, and an injury during an unpaid placement may fall outside the system described in our guide to workers' compensation claims and return to work. Any host organization should confirm whether its policy covers interns before the first day.

States that apply a stricter test

The primary-beneficiary framework is the federal floor. States are free to be more protective of workers, and several are.

Some states never adopted the federal shift in 2018 and continue to apply a more demanding multi-factor test, under which failing any single element makes the intern an employee. New York uses an expanded list of criteria for for-profit internships. State minimum wage rates also exceed the federal rate in most of the country, so an arrangement that becomes employment is measured against the state figure, not the federal one — check the state labor agency for the current rate rather than assuming.

The result is that a program lawful under federal analysis can still be unlawful in the state where the intern sits, which matters increasingly for remote placements. Employers running programs across several states should apply the strictest applicable test rather than the federal one. Enforcement on the federal side is handled by the Wage and Hour Division, which can recover back wages and overtime for misclassified interns.

Common questions

Does academic credit make an unpaid internship lawful?

No, though it helps. Credit and integration with coursework are two of the considerations, and they weigh in the employer's favor. They do not outweigh a placement whose real content is doing the ordinary work of the business. Some schools grant credit for almost anything a student arranges, which is exactly why regulators treat credit as evidence rather than as an answer.

Can I sign away my right to be paid?

Not effectively. Rights under the federal wage statute cannot be waived by private agreement, so a signed acknowledgment that a position is unpaid does not resolve the classification question. The agreement is relevant to one factor — whether both sides understood there was no expectation of pay — but it cannot convert employment into something else. The same is true of a release signed at the end of a placement.

We are a non-profit. Can our interns be unpaid automatically?

Not automatically. The volunteer analysis available to non-profits is narrower than it looks: it contemplates people giving time for civic, charitable or humanitarian reasons, not students filling operational roles on a schedule. Where the placement functions as a job with fixed hours, duties and supervision, the primary-beneficiary analysis is the right frame. Confirm the position with the Wage and Hour Division rather than relying on organisational status alone.

What can an intern recover if the classification was wrong?

Unpaid minimum wage and overtime for the hours worked, generally reaching back two years, or three where the violation was wilful, plus liquidated damages in an equal amount in many cases. State claims may reach further back and carry additional penalties. Records of hours actually worked are the practical constraint, which is why an intern who suspects misclassification should keep a contemporaneous log.

Designing or assessing a program

1. Write the learning objectives first. If the program cannot be described as a curriculum, it is probably a job.
2. Fix the dates to the academic calendar. A defined start and end tied to a term is one of the strongest indicators in the employer's favor.
3. Map the work against the org chart. Any task that would otherwise be assigned to a paid employee is a displacement problem.
4. Name a supervisor with a teaching role. Shadowing, review sessions and feedback are the difference between training and staffing.
5. Check the state rule for every location. Apply the strictest test where interns sit in more than one state.
6. Confirm insurance and injury coverage. Ask whether the compensation policy reaches unpaid interns before anyone starts.

The safest option remains paying interns at the applicable minimum wage, which removes the classification question entirely and brings the placement inside the protections that come with employment. Employers taking that route should apply the same recruiting rules they use elsewhere, including the constraints in our explainer on salary history bans and compensation questions, and should keep intern-specific terms out of general staff policy for the reasons in our guide to employee handbooks. Where interns work in tipped roles, the separate rules in our explainer on tip pooling and service charges apply from the first shift.