An internship is a temporary, structured position designed to provide vocational training and professional experience. Whether an employer must pay an intern is determined by specific legal criteria, not the job title. Federal laws establish a baseline for worker compensation, and the answer depends heavily on the nature of the work performed. Employers must navigate these laws to legally offer unpaid opportunities.
The Legal Default: Are Interns Employees?
The Fair Labor Standards Act (FLSA) governs minimum wage and overtime pay for private sector workers. This law establishes the fundamental rule that if an individual works for a for-profit employer, they are presumed to be an employee entitled to at least the federal minimum wage and applicable overtime pay. The burden of proof rests squarely on the employer to demonstrate that an individual is not an employee under the FLSA.
Labeling a position as an “internship” attempts to classify the individual as a trainee, not a conventional employee. If the arrangement fails to meet the legal requirements for a true training program, the individual is legally an employee entitled to full wage protections.
When Unpaid Internships Are Permitted
An exception to the default payment rule exists for for-profit employers only if the intern, rather than the employer, is the primary beneficiary of the relationship. The Department of Labor (DOL) uses the “Primary Beneficiary Test” to make this determination. This test is a flexible analysis of the overall economic reality of the arrangement, using a set of seven non-exhaustive factors. No single factor is decisive in the evaluation.
Key Factors of the Primary Beneficiary Test
The Primary Beneficiary Test evaluates the following elements:
The intern and employer clearly understand there is no expectation of compensation.
The training provided is similar to what the intern would receive in a formal educational environment.
The internship is tied to the intern’s formal education through integrated coursework or academic credit.
The program accommodates the intern’s academic commitments, corresponding to the academic calendar.
The duration of the internship is limited to the period in which the intern receives beneficial learning.
The intern’s work complements, rather than displaces, the work of paid employees.
Both parties understand that the internship does not entitle the intern to a paid job afterward.
Applying the Test to Daily Tasks
The practical application of the Primary Beneficiary Test centers on the daily tasks and the benefit derived from the intern’s work. If the intern is primarily performing routine work that directly supports the business operations, such as answering phones, filing, or managing social media without significant supervision, the employer is likely the primary beneficiary and must pay the intern. An employer cannot use an unpaid intern to displace a regular, paid employee who would otherwise be performing the same tasks.
Conversely, the arrangement supports an unpaid status if the work is purely educational, heavily supervised, and focused on the intern’s learning objectives. A program where the intern spends most of their time observing, shadowing, and completing structured training modules suggests the intern is the primary beneficiary. The flexibility of the test means that a court may consider evidence beyond the seven listed factors to evaluate the economic reality of the relationship.
What Interns Are Actually Paid
Many employers offer compensation even when an unpaid arrangement is legally permissible. Shifting from legal minimums to market realities, the average hourly wage for interns varies significantly by industry and location. Interns in fields like computer science, engineering, and actuarial science typically command the highest average hourly wages.
Payment structures often extend beyond standard hourly wages, sometimes taking the form of a stipend, which is a lump-sum payment provided for the duration of the internship. While some companies offer competitive pay rates, others, particularly non-profit or arts organizations, may rely more on unpaid roles or stipends. College credit can also substitute for direct financial payment in an unpaid program, but only if the internship meets the educational criteria of the Primary Beneficiary Test.
Penalties for Violating Compensation Rules
Employers who misclassify an intern as an unpaid trainee when they should have been paid as an employee face serious financial consequences. The Department of Labor (DOL) or the aggrieved intern can bring suit for unpaid wages, referred to as back pay. In many cases, employers are also liable for liquidated damages, an amount often equal to the back pay owed, effectively doubling the financial penalty.
Beyond the wages owed, the employer may face civil monetary penalties, especially in instances of repeated or willful violations of the FLSA. Misclassification can also lead to fines for unpaid payroll taxes and legal fees. Class-action lawsuits, where multiple interns sue the employer together, can further increase the financial exposure and cause significant reputational damage.