Navigating the Rules of Unpaid Internships

It is the time of year when companies may be approached by students looking to acquire some experience in the workplace. An internship can be an attractive option for both the student and the employer, but there are a few things to be aware of when instituting such a program, especially if it is an unpaid position.

Collins & Lacy, P.C. intern Alex Williams wanted to spend part of his summer sharpening his marketing skills. “I really wanted a summer job, but I didn’t want to do menial work.  I wanted to make a real contribution.”
Williams is a rising sophomore at Texas Christian University majoring in Communication Studies. When he returned home to South Carolina for the summer, he approached Collins & Lacy about the possibility of an unpaid internship in the firm’s marketing department. “I thought that maybe an internship would be a good option. I knew I wouldn’t get paid, but I wanted to get my feet wet in the workplace and gain some experience for the future,” said Williams.
Collins & Lacy was happy to let Williams on the team; however, the firm had to be careful about the stipulations of his unpaid internship. The Department of Labor (DOL) has made the rules and regulations regarding internships very clear, and businesses that use internships as a form of unpaid labor may be targeted for review.  According to the National Association of Colleges and Employers, “an internship should be a form of learning that integrates knowledge and theory learned in the classroom with practical application and skills development in a professional setting.”
The DOL Wage and Hour Division has published a set of guidelines to assist employers and interns entitled “Fact Sheet No. 71: Internship Programs Under the Fair Labor Standards Act.”  The information found in Fact Sheet No. 71 is designed to help companies determine if their intern must be paid minimum wage and overtime in accordance with the Fair Labor Standards Act (FLSA).  The DOL identified six factors that must be taken into account when a company is determining if someone qualifies as an intern or an employee:
  1. 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;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer who provides the training derives no immediate advantage from the activities of the intern; and on occasion his operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If all these elements listed above are met, an employment relationship does not exist under the FLSA, and minimum wage and overtime provisions do not apply. To adhere to the DOL guidelines for unpaid internships, Collins & Lacy suggests the following steps be taken:
  1. It is strongly recommended the potential intern not be a former employee. Your intentions may be honorable and the employee may be willing to work for free, but the appearance of a former employee working as an intern could be too great for the DOL to overlook.
  2. Create an internship program with written criteria, including the opportunity for the intern to observe and participate in all aspects of the company. Putting an intern in the mailroom for the summer would not classify as an internship.
  3. When approached by an intern who is looking for experience to further their studies, request that the student apply for educational credit. Ask the intern to get permission from a faculty member who will require the student to report back to them at the end of the internship. This will further highlight the internship was for educational purposes;
  4. Have the intern sign an internship agreement that shows he/she realizes he will not receive pay.  The agreement should also state that the company is receiving no immediate advantage from the activities of the intern, the employer and the intern understand the intern is not necessarily entitled to a job at the conclusion of the internship and the internship is for the benefit of the intern ; and
  5. Do not allow a supervisor or manager to utilize an intern in place of a missing employee. This will be viewed as structured work and more likely to be considered an employee entitled to wages for the time spent.
  6. Finally, consult your local employment attorney with questions regarding internship programs.
Following the DOL guidelines and the above suggestions on how to implement them may protect businesses offering unpaid internships from any legal ramifications. Moreover, if done correctly, an internship can be an exciting and rewarding experience for both the company and intern.
“My time at Collins & Lacy has proved to be very rewarding,” said Alex Williams. “The internship really has helped me develop some of my existing skills and encounter new ones that I didn’t even know I had.  I think it has set me up well for the job market.”
This article was co-authored by Employment Practice Group Chair Christian Boesl and Collins & Lacy marketing intern Alex Williams. If you have any questions, contact Christian at or 803-256-0660.
Collins & Lacy Intern Alex Williams
Intern Alex Williams is the Collins & Lacy Marketing team’s newest member.  Alex is a high school graduate of Heathwood Hall Episcopal School in Columbia.  Both his parents are graduates of Georgia Southern University, and though he grew up a loyal Gamecock fan, Alex is currently a sophomore Horned Frog at TexasChristianUniversity located in Fort Worth.  He is also a die-hard Atlanta Braves fan.  He is majoring in Communication Studies and also studying Writing and Psychology of Leadership for his minors.  Alex has worked for a valet company in the Vista, Southern Valet, and for the plumbing and heating and air company, Gateway Supply.
About Collins & Lacy, P.C.

Collins & Lacy is a statewide business defense firm in South Carolina that delivers legal representation for our clients through solid preparation, execution, and client-oriented service aimed at success. Located in the State’s capital city of Columbia, the firm represents local, regional and national clients in the areas of construction; hospitality/retail and entertainment law; insurance/bad faith; products liability; professional liability; commercial transportation; privacy, data management, and cybersecurity; mediation; criminal defense; and governmental affairs/issue advocacy.