“Can Academic Credit Replace a Paycheck?” 3 Common Misperceptions About Unpaid Internships

by LaDonna M. Lusher and Christina Isnardi

It’s that time of year again—the time when thousands of aspiring young professionals take a shot at their dreams by working full-time at a summer internship, many of them unpaid. It is the time when students often end up paying to work by investing money in academic credit, commuting costs and office attire for a potentially invaluable professional opportunity. This practice has occurred for years, and is often advised, but are these unpaid internships legal?

Whether for-profit companies are legally obligated to pay their interns depends on whether the interns are considered to be “employees” or “trainees” under the Fair Labor Standards Act.1 The United States Department of Labor (“USDOL”) has set forth six criteria to guide employers on circumstances that may justify an unpaid internship:

  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.2

With these guidelines in mind, here are three common misperceptions about unpaid internships.

MISPERCEPTION #1: If an intern receives academic credit for the internship, the employer does not have to pay the intern

FACT: Receiving academic credit does not automatically exempt interns from receiving payment. Under the USDOL guidelines, an unpaid internship must offer training that is similar to a classroom setting. A student in class often observes, listens, and takes notes. Similarly, an unpaid intern receiving academic credit should be offered the opportunity to observe, listen, and take notes in a somewhat structured educational setting within the workplace. If the unpaid intern does work to benefit his employer (i.e., compiling PowerPoint presentations, analyzing reports, running errands), the intern is doing the work of an employee and should probably receive payment. This is also true if an intern is primarily performing work along with learning.

MISPERCEPTION#2: If the intern receives a stipend, the employer does not have to pay the intern a minimum hourly wage.

FACT: Some unpaid internships offer modest stipends to compensate interns for their travel expenses or meals. Usually these stipends take the form of a flat dollar amount paid per day or per week. While employers may consider stipends to be a form of compensation for the intern, the employer must still pay the intern a minimum hourly wage if the intern is performing work that benefits the employer.

MISPERCEPTION #3: If an intern contractually agrees to an unpaid position, the employer does not have to pay the intern.

FACT:  Although working unpaid can be acceptable in the public sector, working unpaid in the private sector is subject to different criteria. According to the Fair Labor Standards Act, “employees may not volunteer services to for-profit private sector employers.”3 Therefore, if an intern at a for-profit company is performing work that benefits the employer (such as filing papers, conducting research, or managing projects), any contract or verbal agreement to not pay the intern is invalid and unenforceable, because the intern is likely an employee and should be paid. The fact that the intern agreed to work for free does not matter because the intern is performing compensable work that benefits the employer.  (See guideline #4 in the USDOL six factor test.)

The bottom line is this: if an intern at a for-profit company is doing work that benefits  his or her employer—from coffee-fetching to project management—it is likely that the intern should be paid.  Interns and employers who are participating in internship programs this summer should keep these guidelines in mind as they work collaboratively towards helping interns achieve their dreams, and realize that the work interns perform is likely compensable.

1. See 29 U.S.C. § 203(g).
2. See USDOL Fact Sheet #71:  Internship Programs Under the Fair Labor Standards Act (2010).
3. See 29 U.S.C. § 203.