Are Unpaid Internships Illegal?

FT Contributor
An intern looking annoyed that her internship is unpaid.

Unpaid internships are legal, but they do carry stringent labor laws to ensure that the position is ultimately benefiting the intern. The Department of Labor set forth a “primary beneficiary” rule that ensures the unpaid internship is supposed to be built for the benefit of the intern.

In other words, this test determines whether unpaid interns at for-profit employers are employees for purposes of the Fair Labor Standards Act.

While unpaid internships are legal, they must abide by certain rules. Learn more about unpaid internships and how you can determine whether an unpaid opportunity is a right choice for you.

Table of Contents

How Are Unpaid Internships Legal?

The Fair Labor Standards Act of 1938 (FLSA) is a document that details fair labor standards in the U.S. This document banned oppressive child labor and determined the minimum hourly wage, which at the time was 25 cents. It also limited the number of hours a person could work in a week.

Today, the primary beneficiary test dictates what makes an unpaid internship legal. If the internship meets the factors outlined in this test, the FLSA does not consider an intern an employee, making the internship completely legal. Therefore, the intern doesn’t qualify for wages, benefits, or other employment requirements as outlined by the law.

The lines between an employee and an intern may blur, but there are labor laws in place that protect students who are unpaid interns. Labor laws vary by state — check the laws in your state to be sure you are protected.

Primary Beneficiary Test

If you take on an internship, you may or may not qualify as an employee. The primary beneficiary test is used to determine whether an intern is an employee under the FLSA. The criteria are:

  • The internship is similar to what the student would learn in school.
  • The internship is for the benefit of the intern as tied to formal education.
  • The intern does not take the role of any other employee — instead, they work closely with existing staff.
  • The employer gets no immediate advantage out of hiring the intern.
  • The intern is not entitled to a job at the conclusion of the internship.
  • There is a mutual understanding that the intern is not entitled to wages.
  • The internship accommodates the intern’s academic commitments.

If the employer is the primary beneficiary of the internship, the intern is considered an employee and entitled to minimum wage.

Unpaid Internship Agreement

If you are offered an unpaid internship, you’ll have to sign an agreement outlining that the experience is purely for educational purposes. An unpaid internship agreement — sometimes referred to as a learning contract — is a document that outlines the purpose of an internship. The document should outline which aspects of the primary beneficiary test it complies with.

This document is important because it protects the intern and the company hiring the intern. The intern is protected from unfair labor laws and the company is ensuring that they are complying with the labor laws outlined for their state.

State Legislation and Unpaid Internships

Federal laws meant to protect interns are augmented by state laws and regulations. For example, New York’s state labor law states that interns aren’t required to perform productive work. California is another state with strict labor laws. Prior to hiring an intern in California, the company must submit a proposal to the Division of Labor Standards Enforcement.

Funding, Scholarships and Grants for Unpaid Internships

While many students or people new to a field use unpaid internships as an opportunity to build resumes, not all individuals have the financial access or support to take hold of these opportunities. For example, low-income students often have difficulty accessing high-quality internships that are unpaid because they need to earn a living. Therefore, economic inequality can stem from unpaid internships.

Furthermore, access to funding for unpaid internships is difficult to come by. Fortunately, many colleges have scholarships, grants, and funding in place to help low-income students take advantage of unpaid internships that interest them.

Check with your school to see if they offer a program like this. You can also look online for employer-specific scholarships, grants, and other types of funding that will make an unpaid internship a possibility.

Are Unpaid Internships Worth It?

Your individual circumstances will define whether an internship is worth it. Do your goals include:

  • Experience and exploration: Are you unsure of what you want to do after college?
  • Skill development: Are you interested in developing or furthering your skills in a particular career?
  • Leadership and communication: Are you looking to develop your leadership and communication skills in a professional setting?
  • Networking and establishing mentors: Do you want to connect with industry experts?
  • References and resume enhancements: Do you want to boost your resume with relevant experience?

If you’re looking for these benefits, an unpaid internship may be worth exploring. Note that you can gain the same benefits, as well as job experience, in paid internships.  While unpaid internships are a great opportunity to learn, they are not the only path to future jobs.

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