Internship – Paid or Unpaid

By Stephanie Dorning, JD, Employment Law Counsel
Published March 28, 2023

With the end of the school year fast approaching, many students are beginning to look for summer employment, including internships. While internships are a valuable tool for providing on-the-job training and experience in both the public and private sectors, unpaid internships present a unique challenge.

Paid internships are generally treated as any other employment relationship, with the attendant minimum wage and overtime considerations. So long as paid interns receive at least minimum wage for all hours worked, as well as time and a half for hours in excess of 40 hours in a single workweek, there are no restrictions as to who can use interns as part of their workforce. However, unpaid internships¹ must meet a much higher standard, known as the “primary beneficiary test.” This test examines the “economic realities” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. The internship may remain unpaid only when the intern is determined to be the party gaining the most benefit from the relationship.

The following seven factors are used as part of the Primary Beneficiary Test:

1. The extent to which the intern and employer understand there is no expectation of compensation. There should be a clear understanding between both the employer and the intern that the experience is uncompensated.
2. The extent to which the internship provides training like that in an educational environment. The focus of the internship should be on the educational opportunities provided, rather than the benefit provided to the organization. Most unpaid internships place some burden on the employer, due to the educational and training requirements.
3. The extent the internship is tied to a formal educational program. An internship program that provides necessary job experience or is a required aspect of a degree program is far more likely to be a legitimate unpaid opportunity.
4. The extent to which the internship accommodates the intern’s academic commitments. An unpaid internship should always focus on the educational aspect, allowing interns to focus on academic commitments.
5. The extent to which the internship’s duration is limited by the intern’s beneficial learning period. In keeping with the strong academic/learning requirements of an unpaid internship, the internship should have a clearly defined beginning and end. It should not continue indefinitely and will usually follow the academic calendar.
6. Whether the intern’s work complements, rather than displaces, the work of paid employees. Employers may not use unpaid internships as a means of filling budget and labor shortfalls. Unpaid interns may perform meaningful work as part of their internship, but this work should be closely supervised by paid employees.
7. Whether the intern and employer both understand there is no expectation of a paid job at the end of the internship. While many organizations may choose to extend an offer of employment upon completion of the internship, this should not be guaranteed. Organizations offering unpaid internships should have a written acknowledgment of this policy, signed by both the intern and the employer.