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Can I Hire an Unpaid Intern?

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Unpaid intern

The use of unpaid interns has come under fire in recent years, with many people arguing that the practice violates labor laws. However, if the internship is voluntary and the intern does not expect payment, you may be able to legally hire an unpaid intern. This article will explain the difference between an employee and an unpaid intern and how to protect yourself from potential pitfalls. If you’re not sure whether you can hire an unpaid intern, read on.

Unpaid internships are permissible if the intern is the primary beneficiary

The Fair Labor Standards Act lists seven factors on Fact Sheet #71 to assist employers in determining if their worker qualifies as an unpaid intern or an employee:

  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.

Similar to the IRS’s test for contractor status, the FLSA’s primary beneficiary test does not have a singular determining factor, but rather asks the employer to examine each case separately.  The FLSA also has exemptions for people who volunteer for government agencies, humanitarian purposes, religious organizations, or charitable organizations.

Employers may offer employment at the end of the internship

Employees receive a salary or hourly wage, can be offered benefits, and are expected to remain with the employer for an indefinite period of time. The intern, on the other hand, has no expectation of being hired beyond the internship and is usually hired for a fixed period of time with a set end date. Interns should be aware that their internship is temporary, should not be paid, and are not offered benefits.

In some cases, the employer may offer to hire the intern at the end of the internship. This is usually done on a formal basis, with the intern being given an offer of employment. The decision to hire an intern is usually based on the intern’s performance during the internship. If the employer is happy with the intern’s work, they may offer them a permanent position.  There should be no predetermined arrangement for an offer of employment at the conclusion of the internship though, as this would violate factor #7 on the primary beneficiary test.

Violating the Primary Beneficiary Test

In order to legally hire an unpaid intern, the employer must be certain that the intern is the primary beneficiary.  The intern should benefit by obtaining educational or vocational benefits beyond what a regular employee would receive.  Sometimes this means that the intern might even receive college credits, but at a minimum, the intern should be receiving on-the-job training that will help them obtain a position in the field in the future.

The employer should not be using unpaid interns to substitute for regular employees or to try to keep labor costs down.  If an employer misclassifies an employee as an unpaid intern, they will be violating federal laws including, but not limited to, minimum wage and overtime.  The employer may also be violating state laws as well.  When in doubt, err on the side of caution – pay the intern at least minimum wage and provide them with the protections afforded to other non-exempt employees.



Christina Hageny

Christina Hageny

President - Valor Payroll Solutions

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