Under federal law, every employee in America is entitled to a minimum wage, additional compensation for overtime and certain other benefits. An employment relationship will also have consequences for the employer relating to worker’s compensation, discrimination laws, employee benefits, state labor laws and unemployment insurance coverage. For these requirements not to apply, the employment relationship must fall under applicable legal exemptions.
In the case of Walling v. Portland Terminal Co., the US Supreme Court held that one such exemption to the federal requirements exists for people who work for their personal advantage rather than that of their employer. Such person may be considered a trainee instead of an employee for purposes of federal law. In this seminal court case, the Court looked to six factors in deciding whether a work program was for the intern’s own educational benefit or the advantage of their employer.
The US Department of Labor takes the position that for the exemption to apply, all of the factors listed below must be met.
6 Legal Requirements For Unpaid Internship Programs (from the Supreme Court Case):
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
- The internship experience is for the benefit of the intern.
- The intern does not displace regular employees, but works under close supervision of existing staff.
- The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.
- The intern is not necessarily entitled to a job at the conclusion of the internship.
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Unpaid Internships Should Be Illegall New York Times
U.S. Department of Labor Wage and Hour Division Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act (including the test for unpaid Interns listed below)
Be Smart About Student Internships (AIGA)
6 Legal Requirements For Unpaid Internship Programs Forbes.com