The following article was first published on Carmody Torrance Sandak & Hennessey LLP’s Labor and Employment Blog and is republished here with permission.

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It’s that time of year when many organizations make arrangements to hire summer interns.

Internships are mutually beneficial in that they provide organizations with the opportunity to get additional help during the summer and provide individuals with a great opportunity to gain experience or skills in a field or a particular industry.

In many cases, individuals are eager to accept an unpaid internship in exchange for the learning experience.

However, an individual’s willingness to accept an unpaid internship does not make the arrangement legally compliant.

Determining whether an intern should be paid is a legal matter and can be complicated.

The legal analysis differs between for-profit and non-profit entities and public bodies (eg, state, municipalities, etc.).

In short, for-profit entities are generally required to pay interns at least minimum wage and overtime pay for hours worked in excess of 40, while non-profit organizations and government agencies have a greater latitude to structure an unpaid internship.

For-profit organizations

Courts and the Federal Department of Labor use the “primary beneficiary test” to determine whether an intern is, in fact, an employee entitled to minimum wage and overtime pay under the Fair Labor Standards Act.

Courts and the DOL weigh seven factors to determine which party is the “primary beneficiary” of the relationship.

If the organization is the primary beneficiary, then an employment relationship exists and the intern is considered an employee, entitled to all FLSA protections.

The seven factors are:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of remuneration, 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 clinical training and other practical training provided by educational institutions.
3. The extent to which the internship is linked to the intern’s formal education program through integrated courses or receipt of academic credit.
4. The extent to which the internship adapts to the academic commitments of the intern by corresponding to the academic calendar.
5. The extent to which the duration of the internship is limited to the period during which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than replaces, 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 carried out without the right to gainful employment at the end of the internship.

Under this test, no single factor is determinative and unique circumstances must be considered.

Given the subjectivity and uncertainty as to how these factors might apply in a particular circumstance, many for-profit employers choose to pay their interns to avoid legal risk.

Non-profit organizations and public employers

Federal and Connecticut laws do not require nonprofits and public employers to pay people who are considered “volunteers.”

Therefore, an intern who is considered a volunteer is not entitled to minimum wage and overtime pay.

The federal DOL has stated that a volunteer will generally not be considered an employee if the individual:

• volunteers freely for public service, religious or humanitarian purposes, and without considering or receiving compensation (except that volunteers may receive expenses, reasonable benefits, nominal fees, or any combination thereof, for their service without losing their volunteer status);
• usually serves part-time; and
• does not displace regular employed workers or perform work that would otherwise be performed by regular employees.

The DOL emphasizes that paid employees of a nonprofit organization cannot volunteer to provide the same type of services to their nonprofit organization as those for which they are employed.

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About the Author: Nick Zaino is a partner and co-practice group leader of the Carmody Torrance Sandak & Hennessey LLP business services group. He specializes in labor and employment law.