Are Unpaid Internships Legal?

Unpaid internships are amongst the more controversial ways to get work experience in the US and there are some good reasons for this.

Most unpaid interns are doing the same amount of work as full-time employees at certain companies but are paying nothing and sometimes even having to fork out money themselves just to be unpaid interns.

Yes, some companies can charge interns amounts around $1000 just to get the experience that comes with being an intern. 

More and more people each day are coming forward and protesting the exploitative nature of unpaid internships and due to this, unpaid internships have declined across the United States, but even though they are declining, a recent NACE survey has shown that 40% of college students who are doing an internship along their studies are still not being paid.

Many people label unpaid internships as opportunities while others label them as exploitation, but although they are controversial, there must be some reason why they are still legal?

In this article, we will explore the world of unpaid internships, why they are legal, and on what grounds do they become illegal.

Laws Surrounding Unpaid Internships

In 1938, the United States government passed the Fair Labor Standards Act or the FLSA. This act states that if you work for a for-profit company or a non-profit company that generates $500,000 or more in business revenue annually then you must be paid for your work.

However, the FLSA does not consider interns to be employees and therefore, legally don’t have to be paid if certain criteria are met. The one criterion of any legal internship is that the intern must be the primary beneficiary of the internship arrangement.

However, there is a degree of subjectivity when you are determining who the primary beneficiary is in any given scenario. This can lead to employment disputes, so it is important to know exactly what this degree of subjectivity is. 

To help navigate this subjectivity, the United States Department of Labor created the primary beneficiary test to make sure that the intern is benefiting more from the internship arrangement than the company is when they are part of an unpaid internship.

We have outlined this test below to make sure that you know if you are the primary beneficiary of an unpaid internship at a for-profit organization or company. 

Primary Beneficiary 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.

These parameters should ensure that the intern is the one benefiting most from the internship even if it is unpaid.

If any of these parameters are not met and it is deemed that the employer is the primary beneficiary of the internship, then the intern has the legal requirement to be paid both minimum wage and overtime pay if necessary under the FLSA. 

It must be noted that the primary beneficiary test has been described by the United States courts as a flexible test, meaning that no factor on this test is determinative and can be interpreted within reason in many ways.

Therefore, it is dependent on the unique circumstances of each internship case whether they fall under the primary beneficiary and therefore as an employee under the FLSA laws.

Harassment Protection 

Being entitled to pay under the FLSA if employed isn’t the only right that you have if you prove that you are not the primary beneficiary of an internship.

The vast majority of US States provide unpaid interns with no legal protection from sexual harassment or discrimination.

Title VII of the 1964 Civil Rights Act protects any employees from sexual harassment and discrimination, however, because they are not considered employees under the FLSA, unpaid workers and trainees will not be included under this act.

Although some states have started to modify their laws to include unpaid employees and trainees under this protection, the majority of states have not. 

Unpaid interns often refrain from reporting any instances of sexual harassment or discrimination because they know they are not covered by this act, and in most states, they themselves could face some reparations if they pursue a complaint further.

This falls under a gender issue also, three-quarters of all unpaid interns are women, and are therefore disproportionately affected by sexual harassment in the workplace and are constantly being exploited without any laws or legislation in place to protect them. 

Should I Pursue An Unpaid Internship?

Whether or not you should pursue an unpaid internship is dependent on your situation, they can be beneficial in some cases to gain experience in a field that interests you, and some unpaid internships will only last a few weeks and give you an edge in getting into a certain industry.

However, it is important to know exactly what you are applying for when you apply for an unpaid internship, keep in mind the primary beneficiary test, and make sure that your employer is familiar with the parameters that this test puts in place.

It is also important to be wary of the lack of legislation about the protection of unpaid interns.

Jamie Willis
Career Specialist at BecomeopediaHi, my name is Jamie Willis, and I have been helping students find their perfect internships and education paths for the last ten years. It is a passion of mine, and there really is nothing better than seeing students of mine succeed with further studies.

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