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When Is It OK to Not Pay an Intern?

Is your unpaid summer internship illegal? A breakdown of the laws on working for free.

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June 20: This post has been clarified.

This week, a federal judge ruled that Fox Searchlight violated minimum wage laws for not paying two production interns. So what are those laws? Are unpaid internships ever OK?

Here are some answers to commonly asked questions about intern pay.

What laws determine when an intern should or should not be paid?

The Fair Labor Standards Act, or FLSA, regulates minimum wage and overtime for U.S. workers, including interns. The Department of Labor’s Wage and Hour Division is responsible for enforcing the law, and has a six-factor test to determine whether interns at private sector employers must be paid minimum wage.

According to the Department of Labor, an unpaid internship must meet all these criteria:

  • The internship is similar to training which would be given in an educational environment
  • It’s for the benefit of the intern
  • The intern doesn’t displace paid employees
  • The employer doesn’t benefit from work the intern is doing, “and on occasion its operations may actually be impeded.”
  • The intern isn’t promised a job at the end (unpaid “tryouts” aren’t allowed)
  • Both the intern and their boss understand its an unpaid position

So are unpaid internships ever OK?

Very rarely, for work done at for-profit companies. According to the Department of Labor's test, companies can’t derive an “immediate advantage” from an intern’s work. And in the private sector, work that doesn’t benefit the company is rare.

“It’s fair to say most private-sector employers who employ volunteers are violating the law,” said David Yamada, a professor of law at Suffolk University in Boston.

What if they provide a stipend or lunch money? Does that count?

Probably not, assuming it’s a private sector employee covered by the FLSA, according to Yamada. If an internship at a for-profit employer doesn’t meet the factors laid out in the six-point test, they most likely have to pay their interns minimum wage.

What about internships at nonprofits?

According to the Department of Labor, nonprofits have an additional exception for unpaid interns that "volunteer their time." The government's guidelines state that “unpaid internships in the public sector and for non-profit charitable organizations...are generally permissible.”

What about gigs with the government?

For most interns on Capitol Hill, it’s perfectly legal for them to be working for free. Congress conveniently exempted itself from the Fair Labor Standards Act, meaning they don’t have to pay their interns. (It’s just one of many workplace laws that Congress doesn’t have to follow.) Most federal-level internships, including the White House’s program, are also unpaid.

Does getting college credit mean it’s OK to not get paid?

Not really. Many companies attempt to use academic credit as legal justification for an unpaid internships. But this week’s “Black Swan” ruling suggests college credit is not a reason to not pay your interns, a move that, as Yamada put it, opens an “interesting door.”

From the judge’s decision:

 

“The law focuses on what employers are doing and if they’re offering a bona fide training program,” said Rachel Bien, an attorney who represented the plaintiffs in the Fox case.

If an intern feels they’re owed pay, what can they do?

They can either attempt to work it out with their employer, file a complaint with the Department of Labor, or sue.

Of course, many interns don’t act. The Department of Labor has said they only receive a handful of complaints per year. And in recent years, there have only been three major lawsuits alleging companies should have treated interns as employees.

When interns do bring a lawsuit, it often settles out of court. Employment lawyer Michael Tracy says that in his experience, interns that did complain were paid “quite quickly and quite well...That’s what keeps it going. You pay one or two interns that complain, and you keep 20 or 30 that don’t. That’s a good business model.”

According to Yamada, cases that settle out of court often involve a confidentiality clause that prevents the intern from talking about the settlement. Interns are rarely in a position to stick with a case through trial. “Few unpaid interns have the resources to wait five years for a case to resolve,” said Tracy. ”You need a moral crusader.” 

Clarification:  The Department of Labor's six-factor test grew out of a 1947 Supreme Court case, Walling v. Portland Terminal, in which the court ruled that trainees in a railroad’s program were not employees and thus didn’t have to be paid. Though the Department of Labor says all six criteria must be met, different court rulings have emphasized some more than others. The test provides guidelines, but the actual law is a bit murky.  

 

ProPublica is currently investigating internships in the United States that violate labor laws, such as the Fox Searchlight case. And we need your help. To contribute, you can:

Alessandro Machi

June 15, 2013, 2:45 a.m.

Thanks for the follow up research on internships. Since the government is basically exempt from the internship laws they require everyone else to follow, the least they can offer their interns is a daily food, transportation, and wardrobe stipend.

The moment an intern is required to be somewhere at a certain time, they should be getting some type of income from their venture, even if it less than minimum wage. I figure 50 dollars a day is fair, but not if taxes are taken out.

Also, this daily stipend levels the playing field for those who don’t come from wealthy family or whose family is already over extended financially.

I am thrilled that you are shining the light on this issue. Companies continue to take advantage of the bad job market and young people by ignoring federal wage laws and providing unpaid internships. The issue is particularly acute in media and advertising firms. What upsets me most is unpaid internships are not an option for kids unless their parents can subsidize them and without the work experience provided by these internships it is very difficult to compete in the job market. So, well-to-do kids pick up another advantage. It just isn’t a level playing field.

You might want to investigate the degree to which college placement offices promote these unpaid internships and, thereby, perpetuate the problem.

David E. Shellenberger

June 15, 2013, 3:27 p.m.

Interns should be paid when a contract provides for this. Freeing the labor market would benefit all of us except unions and other special interests. Freedom would particularly benefit interns seeking experience.

One has to wonder if playing college football (and other college sports) on an athletic scholarship is an internship towards playing Pro-ball.

I’ll point out again that the serious problem is the one not being looked at, which is the enormous number of internships that exist with the vague promise of “a foot in the door” to a glamorous industry, where “payment” isn’t in the form of money or experience, but the possibility of maybe catching a glimpse of some quasi-celebrity bigwig.

I wonder, in other words, how the numbers shake out after you eliminate the slave gofers picking up lattes for photographers.  Notice, by the way, that this is almost entirely what government internships are, and the government has neatly exempt itself from scrutiny.  What’s the Nixon line, when the President does it, it’s not illegal…?

Anyway, those are a very different world than, say, an engineering intern (what I see the most of in person), where you sit in on design meetings and get feedback on your work, which seems very likely to get you a job on graduation.

The former job, I wouldn’t suggest a college kid take, even for a decent salary.  The latter is going to pay for the time spent on the first job search (and often avoids a search altogether).

I’ve mentioned before that I feel like internships should be treated like what most schools call “project courses.”  The student finds an advisor and reports back regularly.  If the student isn’t learning anything worthwhile, make the company pay.  (Or vice-versa—have the company pay the school, and the money goes back to the company if the student got a lot out of it.)

The infrastructure is already there, and it motivates the employer to make it worth the kid’s time.

Of course, then you have law internships, where law school students essentially get “seduced” (expensive dinners, concerts, etc.) into joining up to work long hours for peanuts.  Those seem to be a class of their own, and I have to believe the students know what they’re in for, by now, if even I know about it…

But, again, I’m trying to find the motivation to just have companies pay, regardless.  It’s not like a student doesn’t pay to do much more work at school (Ken has a good point about sports, for example).  It’s not like a student’s time is worth much to the company, without the experience she’ll be getting at the internship.  And if a student needs money more than experience, there are unskilled jobs that plenty of college kids take for the same reason.

And there’s also very little discussion of what used to be “entry-level jobs,” which were designed for the kids out of school with no experience.  The intern game changes substantially if the lowest job requires five years of experience (and in software, it’s usually experience in something that’s only been around for a year or two, which I still find funny).

Thanks for writing about this.  It’s astonishing how easy it is to for companies to engage in wage theft and unpaid internships are a typical example of greedy exploitation at the expense of our social institutions and national morality. 

I believe it’s actually against the principle of law to settle a wage theft or illegal unpaid internship out of court using a nondisclosure agreement because it’s not just the employee being harmed it’s the community and the public.  I think they call it a crime against the state, so even if the wronged individual agrees to settle the civil portion of the wrongfull behavior, the state still has a stake in prosecuting the criminal element and is supposed to do so on behalf of it’s citizens.

to quote wikipedia.  .  .
In criminology, public-order crime is defined by Siegel (2004) as “...crime which involves acts that interfere with the operations of society and the ability of people to function efficiently”, i.e. it is behaviour that has been labelled criminal because it is contrary to shared norms, social values, and customs. Robertson (1989:123) maintains that a crime is nothing more than “...an act that contravenes a law.” , see http://en.wikipedia.org/wiki/Public-order_crime

I guess this aspect of the law to protect the public from corporate greed doesn’t get enforced for the obvious reasons of legal corruption in violation of the spirit of the law or letter of the law as needed to allow private greed and profit.  Abusing unpaid internships should be punished at a punitive level high enough to deter the illegal behavior.  Since it’s a crime against the state and society, legal action should be allowed to be initiated against a company by any party not just by an unpaid intern during a narrow time frame.  Also it’s the theft of thousands of dollars from the employee and should be punishable equal to the punishment action against an employee steeling thousands of dollars from a company.  Since it’s a large group of people in HR plus management individuals all working together to commit the crime it should be considered a form of organized crime and subject to racketeering laws.

Interns who did complain were paid “quite quickly and quite well”?  Who says that? Lawyers and HR and PR are the only ones who can comment or would have any information on the matter due to the Non-discolosure agreements the interns have to sign in an settlement.

- What corporate HR and PR call “paid well” is twice the amount they stole and when they say “paid quickly” they mean “it’s done in a rush just on time to head off a costly Department of Labor Investigation.” 

- Ask a career counselor what paid well means to an intern who is blackballed from the industry immediately after there 4 year specialized education?  A candidate who interned and blew the whistle is unemployable in the profession afterwards.  So “paid well” should be compensation for their education expenses, 4 years of their lives, and 10,000 less per year for the rest of their life in expected career earnings.  I doubt that is that what they mean when they say interns are “paid well” as a result of their decision to uphold the law and protect their rights.  They lose any change of a reliable good reference and have to defend against the insinuation they are a trouble maker to all future HR staff during interviews at the time in their life when a good reputatioin as a teem player is most important.

Everyone should be paid for the work they do, if you do not pay them you are a heartless bustard. you are no better than the slave drivers of the past. SHAME ON YOU!!

Alessandro Machi

July 8, 2013, 4:14 p.m.

Dan, what makes this a unique situation is its really a temp job for newbies and hundreds may want it.  One way to whittle down the field is too see who really wants it.

However, I think it is counter productive to not offer a 50 dollar a day per diem that covers transportation, wardrobe and meals.

This article is part of an ongoing investigation:
Internships

Internships

The number of internships in the United States has ballooned over the past few decades. But oversight and legal protection for unpaid interns hasn't kept up.

The Story So Far

The number of internships in the United States has ballooned over the past few decades. But oversight and legal protection for interns hasn’t kept up. We’re investigating companies that may be violating labor laws by employing unpaid workers, schools’ role in the issue and how it’s affecting American workers.

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