Internships: Paid vs Unpaid

This post provides an overview of the factors considered by the U.S. Department of Labor and the New York State Department of Labor to determine whether an internship with a "for-profit" company must be paid. 

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U.S. Department of Labor (U.S. DOL)

The U.S. DOL applies a "primary beneficiary test" to determine whether an intern is an employee and therefore must be paid.  The U.S. DOL looks at the following seven factors as part of the test:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

New York State Department of Labor (NYS DOL)

Under the NYS DOL standards, interns must be paid unless the following eleven criteria are met:

1. The training, even though it includes actual operation of the employer’s facilities, is similar to training provided in an educational program.
2. The training is for the benefit of the intern.
3. The intern does not displace regular employees, and works under close supervision.
4. The activities of trainees or students do not provide an immediate advantage to the employer.  On occasion, operations may actually be impeded.
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period and are free to take jobs elsewhere in the same field.
6. The trainees or students are notified, in writing, that they will not receive any wages and are not considered employees for minimum wage purposes.
7. Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity.
8. The trainees or students do not receive employee benefits.
9. The training is general, and qualifies trainees or students to work in any similar business.  It is not designed specifically for a job with the employer that offers the program.
10. The screening process for the internship program is not the same as for employment, and does not appear to be for that purpose.  The screening only uses criteria relevant for admission to an independent educational program.
11. Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

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