Internships and Wage and Hour Law

An internship can be a great opportunity to learn important skills, make important connections, and find an entry point into a particular trade, profession, or industry. Many organizations and companies offer unpaid internships, and many students are willing to sacrifice wages in exchange for the opportunities they expect the internship to provide. Just because an intern accepts this arrangement does not necessarily mean it complies with the law. To prevent unscrupulous employers from exploiting interns for free labor, both California and the Federal Government apply multi-factor tests that differentiate a “job” from an “internship.” Whether you are seeking an intern or seeking an internship, the experienced employment law team at Spencer Young Law can help you make sense of these tests and understand all of your rights and responsibilities.

In California, there is a strong presumption that time spent on the site of an employer, engaging in activities benefitting that employer, is time spent working and must be compensated. To overcome this presumption, it must be shown that that an intern’s activities are fundamentally different from that of an employee. The California standard has evolved over time, but generally, all of the following must be true for a paid internship to be legal:

1. The intern receives training similar to what a vocational school would offer.
2. The training benefits the intern.
3. Interns do not displace regular employees, but work under their close supervision.
4. The employer does not immediately benefit from the intern’s activities; if anything, the intern’s activities might burden the employer’s operations.
5. The intern is not promised a job at the end of the internship.
6. Both the intern and employer understand that the internship is uncompensated.

Example 1: Sylvia accepts an unpaid internship with a software company. She is trained by shadowing software engineers, who have been instructed by the company to answer any questions she has about their process. Here, Sylvia is not displacing any employees, and her training might actually slow down the work of the employees. Her presence is not inherently beneficial to the company, at least not immediately. But if the training benefits Sylvia and is similar to what would be offered at a vocational school, she likely does not need to be compensated.

Example 2: Chen accepts an unpaid internship at an auto dealership. He trains with the sales staff, observing their pitch to customers. After two weeks, he approaches walk-in customers himself, with the permission of management, to try his pitch on his own. Over the remainder of his internship, he sells 25 cars while “learning” the trade. Here, there is an immediate benefit to the employer. Chen is an employee, not an intern, and must be paid for his work.

Under federal law, Courts apply the 7-factor “Primary Beneficiary Test.” This determines whether the intern or the employer primarily benefits from the internship. The test considers:

1. The extent to which the intern and employer understand there is no compensation promised.
2. The extent to which training is similar to that which would be offered in an educational environment.
3. The extent to which the internship is connected to a formal academic program, including integrated coursework or academic credit.
4. The extent to which the internship accommodates the intern’s academic schedule.
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.

Example 3: Berry accepts an unpaid internship with a small non-profit animal shelter. Berry and the executive director agree that Berry will not be paid and is not being offered a job at the end of the internship. His training consists of observing the paid staff as they administer vaccines to the animals. Berry is enrolled in a veterinary science class at the local community college, but he does not receive any academic credits for this internship. The shelter schedule’s Berry’s shifts around his class schedule. This arrangement likely meets the federal requirements for an internship, even though it falls short on some of the factors.

Example 4: Irina accepts an unpaid internship with a bank. She is currently earning a bachelor’s degree in finance. The internship lasts 10 weeks during the summer. At the end of the 10 weeks, the bank manager tells Irina that her performance was impressive. The manager offers to extend Irina’s internship by 6 weeks, but insists on a set schedule that does not accommodate her classes. The manager explains that it is better to have more people around during the busy morning hours to help control the lines, which Irina sometimes does. Even if Irina is receiving beneficial training, this arrangement likely ceases to be an internship when Irina’s academic needs are disregarded.

If you are a student, an employee, or an employer, a dedicated employment attorney at Spencer Young Law can help you make sense of the rules on internships. Call Spencer Young Law today for a free consultation!