Navigating the Complexities of Unpaid Internships in the U.S.

Internships serve as an important bridge from college to career, widely used by companies across the United States. While many internships are paid, unpaid internships are problematic for many reasons. They represent a complex issue with legal, ethical, and economic dimensions. This article explores the legal landscape surrounding unpaid internships in the U.S., focusing on the criteria used to determine their legality, the inherent inequities they can create, and the ongoing debate about their role in the modern workforce.

The Legal Framework: Department of Labor Guidelines

The Department of Labor (DOL) plays a crucial role in determining whether interns should be considered employees entitled to the minimum wage, overtime, and other protections under the federal Fair Labor Standards Act (FLSA). The DOL has developed criteria that an employer must apply to determine whether an internship legally qualifies as work without compensation.

The "Primary Beneficiary" Test

In January, the Department of Labor (DOL) announced that it will use a "primary beneficiary" test to determine whether interns should be considered employees who are entitled to the minimum wage, overtime, and other protections of the federal Fair Labor Standards Act (FLSA). The primary beneficiary test looks at whether the employer or the employee is the primary beneficiary of the relationship. This test is central to determining the legality of unpaid internships at the federal level. With the primary beneficiary test, no single factor is determinative and the unique circumstances of each case must be weighed and balanced.

This approach involves examining several factors to ascertain who benefits most from the internship arrangement. The intern and the employer clearly understand that there is no expectation of compensation. Assuming the internship qualifies under all seven factors as unpaid, the FLSA does not recognize an employment relationship. Therefore, the intern no longer qualifies for minimum wage or overtime under the law.

Evolution from the Six-Part Test

Previously, the DOL used a six-part test. A key difference between the two tests is that all six-parts of the old test had to be satisfied for an internship to be unpaid. For example, the old test included a requirement that the employer derive no immediate advantage from the activities of the intern.

State and Local Variations

It's crucial to remember that federal regulations are not the only consideration. Not necessarily. Your state and local jurisdiction may use a different test. To be an unpaid intern, the intern must generally satisfy all applicable federal, state, and local tests.

The Option of Paid Internships

Even if an internship meets the criteria for being unpaid, employers always have the option to pay their interns. Yes, employers can still pay interns even if they satisfy all applicable tests for unpaid status. A paid internship can attract a more diverse internship pool and may result in more qualified candidates.

Ethical and Economic Concerns

Unpaid internships raise several ethical and economic concerns, particularly regarding equity and access to opportunities.

Inequities in Access and Opportunity

Participating in an unpaid internship is much harder, and often impossible, for students who cannot forgo a paycheck for a significant period. pay. As such, these students can access work experience, skill development, and networks that less privileged students cannot. The bifurcation of paid and unpaid internship opportunities causes a disparate impact on student outcomes and furthers systemic inequities. continuing generation students. These students then go on to receive more job offers and higher starting salaries, which perpetuates and exacerbates the disparate impact over time.

Disparate Impact on Student Outcomes

NACE research has found that students who take part in paid internships receive more job offers and garner higher starting salaries than those who participate in unpaid internships (NACE 2022 Student Survey, 2022). of four-year college students, paid interns averaged 1.61 job offers, while unpaid interns averaged 0.94 offers, and students with no internship experience just 0.77 offers. According to the same 2022 Student Survey, paid interns earned a median starting salary of $62,500 compared to unpaid interns who reported earning a median starting salary of $42,500.

Representation in Internships

Particularly troubling, NACE research has also found that all college students are not equitably represented in internships (Inequity in Internships, NACE, 2021). in paid internships. In 2022, NACE followed up on that initial analysis and the internship data from 187 employers demonstrated nearly identical inequities. of paid interns. Taken together, the research shows that white, male, and continuing generation students are disproportionally overrepresented in paid internships.

The Value of Intern Contributions

Not compensating interns communicates to them and their organizational colleagues that their contributions are somehow less valuable than the work of paid interns. to which unpaid internships directly contribute.

The Push for Paid Internships

To provide all participating internship students with equitable access to opportunities and career success, we advocate that all internships should be paid.

A Call to Policymakers

We advocate for legislation to eliminate unpaid internships and provide support for employers in converting unpaid internships to paid internships. Congress should pass legislation requiring internships to be paid. paid employees. Modern legislation is needed to resolve this inconsistency.

Addressing Employer Concerns

In addition to legislation, policy makers should provide increased financial and other support to smaller, for-profit, and nonprofit organizations for them to provide paid internships. reside largely with smaller for-profit companies and nonprofit organizations. This support could take the form, for example, of increased funding support for existing workforce and education legislation programs. community to use other funding available to financially support low-paid and unpaid internships. local chamber of commerce funding are available options for the funding needed to eliminate unpaid internships.

Read also: Are Unpaid Internships Legal?

The Federal Intern Protection Act

Until legislation exists requiring internships be paid, Congress should immediately pass the Federal Intern Protection Act to extend legal protections to unpaid interns in the federal government. legislation to prohibit discrimination against unpaid interns in the private sector as well. could serve as models for other states and the federal government.

Benefits of Paid Internships

Internships are vital in bridging the college experience to the world of work. productivity of the workforce. The economy and all its vital stakeholders will significantly benefit.

Recruiting and Retention

Internships are one of the most effective recruiting tools employers use to identify and hire early careers college graduates. investment (ROI) as a recruiting strategy, compared to career fairs, on-campus visits, on-campus panels, or other activities (NACE Quick Poll: Spring Recruiting and Career Services, 2022). is often the deciding factor when employers are evaluating two otherwise equivalent candidates (NACE Job Outlook: 2022, 2021). NACE’s annual survey of internship employers has consistently found that 50% to 60% of eligible interns convert to full-time employees.

Enhanced Employee Performance

Converted interns offer significant additional benefits for employers. employees are much quicker to onboard and train because they have already gone through many of those processes during their internship. after their first year on the job compared to 51.5% of non-intern employees (NACE 2023 Internship & Co-op Report, 2023).

Intern Rights and Protections

Remember that even if the intern isn't entitled to pay, they may be entitled to other employment protections. For example, some jurisdictions, including California, New York and Illinois, have enacted laws that expressly protect unpaid interns from discrimination and/or harassment even if they aren't considered employees under other employment laws.

Make sure you know your rights as an intern so you don’t get taken advantage of. While there are many amazing employers with wonderful internship opportunities, some are either unaware of the laws or willing to take advantage of students seeking work experience.

The Walling vs. Portland Terminal Company Precedent

The precedent for unpaid internships was set by the Supreme Court case of Walling vs. Portland Terminal Company, back in 1947. A railroad company would give prospective yard brakement training courses that would last 7-8 days. When the trainees would pass they course, they would become eligible for employment when needed (and in this case, were paid a retroactive allowance for their time during training). Trainees did not take the place of paid employees, nor did they expedite the railroad's business. In fact, accommodating them would slow it down, if anything. For those reasons and more, the United States Supreme Court ruled in 1947 such a trainee did not technically meet the definition of an "employee" as stated within the Fair Labor Standards Act Pp. 330 U. S.

Practical Considerations for Students

As students begin the internship search process, a few things must be considered. First, an internship should not serve the purpose of providing you with a paycheck. While many internships are unpaid, they still provide plenty of value. Future employers love to see internship experiences on resumes. Even if the internship experience is outside the career or field the student pursues after graduation, it still provides essential work experience that may not be gained through a part-time job.

Students should ask if internships can be counted as academic credit. The internship experience shouldn’t exist outside your higher education; it should be included. Internships can also be found through networking with your friends and family, which means asking them about opportunities they know of. Finally, you can find internships through your college’s Career Center. As you take on the internship search, you now know what to look for in an unpaid or paid internship experience. With these standards in hand, you can ask the right questions to determine where your internship falls on the scale and whether or not your potential employer is following the law.

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