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How Internships Work

The Great Debate: Paid vs. Unpaid

The debate over paid versus unpaid internships has been brewing for years, and not just in the United States. FABRICE COFFRINI/AFP/Getty Images
The debate over paid versus unpaid internships has been brewing for years, and not just in the United States. FABRICE COFFRINI/AFP/Getty Images


According to the NACE 2016 Internship & Co-op Survey Report, the average hourly wage for interns at the undergraduate level hasn't changed much in the past seven years, hovering around $17.69.

But, as many a long-suffering intern knows, not all internships are paid. That's despite the fact that according to the Fair Labor Standards Act (FLSA), interns in the "for-profit" private sector almost always qualify as employees rather than trainees and typically must be paid at least minimum wage and overtime [source: WHD].

The U.S. Department of Labor has a six-factor test that requires the following criteria to be met for an unpaid internship:

  1. The internship is similar to training that 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 that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded.
  5. The intern is not necessarily entitled to a job at the end of the internship.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship [source: WHD].

But, after a nearly five-year battle in the courts brought on by two interns — Eric Glatt and Alex Footman who sued Fox Searchlight Pictures in 2011 for violating federal and New York state minimum wage laws — the DOL's six factor test is on shaky ground. The judge in the case, which made it all the way to the Second Circuit Court of Appeals, essentially tossed out the test out for being outdated for the times and replaced it with another set of rules that rely less on whether employers "derive no immediate advantage" from the work provided by the interns [source: Zara].

The new test evaluates different factors, such as whether:

  1. The intern and the employer understand that there is no expectation of compensation during the internship and no job guarantee thereafter.
  2. The internship provides similar training to that given in an educational environment—like clinical training.
  3. The internship is tied to the intern's formal education program through integrated coursework or academic credit.
  4. The internship is aligned with the academic calendar.
  5. The intern's work complements — rather than displaces — paid employees' work and provides significant educational benefits to the intern [source: Nagele-Piazza].

Despite the Second Circuit Court's new primary beneficiary test for unpaid intern status, the DOL's test is still used in most states.

"Most unpaid or low-stipend internships at for-profit companies are against the law — not just in the U.S. but around the world," says Ross Perlin, author of the book "Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy." "Yet in a very short period, the practice of virtually requiring unpaid work to get ahead has become normalized in so many industries."

TV producer Newman says the interns she employed were always paid the minimum wage, but that wasn't always the case. "As times have changed, the rules have as well," she says, "and [interns] are treated as employees during the duration of their internship that would be six to nine months."

Smith says most internships for high schoolers may still generally be voluntary because interns are usually compensated based on their experience. But unpaid or not, the internships still give these students invaluable opportunities. "[They are] exposed to and gain experience in a field of interest, whether molecular biology, big data analysis or law," Smith says. "What those internships lack in payment, they make up for in hands-on experience — how to operate a high-tech microscope or other lab equipment, how to work with a professional team, how to present ideas in a group setting."

While some fields may necessitate internships for the sake of education and experience, author Perlin strongly believes payment should almost always be prioritized. "There are very few circumstances in which anyone, whether a student or not, should be working unpaid," he says. "Essentially, it needs to be either a bona fide training program at a for-profit company or a true volunteer situation at a non-profit."

Based on her own experience, Shapiro agrees that fair compensation should be an essential component in the internship decision-making process. "Internships are critical and should very much be paid," Shapiro says. "You're doing real work. Being an intern gave me valuable networking opportunities, a chance to see what the corporate and tech world had to offer, and 100 percent contributed to me having a job upon graduation. I finished college in 2008 — a notoriously poor year for job-hunting — and I had a Yahoo badge before I had flipped my tassel."