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Are unpaid internships legal?

| Jan 24, 2019 | Employment Law

Students seeking experience, an attractive addition to their resume or even unique academic credits may seek an internship that provides little or no wages. While internships have benefits, their potential for misuse and employment law violations are obvious. However, the United States Department of Labor issued guidelines this month governing internships.

For-profit employers must comply with wage and hour laws contained in the federal Fair Labor Standards Act (FLSA). An employee is entitled to at least the federal minimum wage and overtime wages.

But, an economic reality test on the intern-employer relationship, developed from court rulings, is used to determine whether a worker is an intern or employee. This test considers whether the intern or employer is the beneficiary of their relationship.

The economic reality test is comprised of seven elements. First, it considers whether the intern and employer clearly understand that there is no compensation for the position. Any expressed or implied promise of payment means that the worker is an employee entitled to wages.

Other factors include whether the internship has instruction that is similar to educational courses, such as clinical and hands-on training. And, whether it is connected to education program through coursework or academic credit.

A related factor is whether its duration is linked to a college or educational institution academic time period like a semester. Another time period that is evaluated is whether the internship’s duration coincides with the time that the intern receives beneficial instruction.

The remaining elements are whether the intern’s work adds to and does not take the place of the work of paid employees while the intern receives significant educational benefits. Finally, whether the intern and employer understand that there is no guarantee of a job when the internship ends.

Each specific situation must be specifically analyzed to determine whether it constitutes a valid internship under FLSA. No single element of the primary beneficiary test determines whether there is an internship and it must be evaluated in a flexible manner that is adaptable to a situation.

In addition to FLSA, Michigan law governs internships and other employment matters. Workers who are considering an internship or any employee who believes they did not receive their earned wages should seek legal assistance to protect their rights under these laws.