Business Alerts: It’s Almost Internship Season



It is that time of year where businesses start to make plans and define their goals for the Spring and Summer months. A common question for our law firm is whether a business should hire an intern – and more specifically, does the business need to pay that intern. 

Our firm understands that when the economy is down or highly unpredictable, businesses will want to find ways to cut expenses – which may include exploring an unpaid internship program. It is a common misconception that determining whether to pay interns is in the sole discretion of the business owner. Instead, businesses must comply with the U.S. Department of Labor and federal standards regarding internships. Failure to do sure may result in potential liability and penalties for unpaid wages as well as liability for unpaid employment-related taxes for misclassifying an intern and not paying them wages.  Therefore, business owners should proceed with extreme caution.

The Test: Should an Intern be Paid?

Although every jurisdiction will vary in its analysis; however, a strong baseline for any business when considering an internship program is to review and consider the “Glatt Test.” In 2018, the U.S. Department of Labor endorsed a non-exhaustive seven-factor test to analyze whether an intern is entitled to compensation. These factors include:

1.    Do the intern and the employer clearly understand that there is no expectation of compensation?  Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2.    Is the training in the internship program similar to that which would be given in an educational environment?

3.    Is the internship tied to the intern's formal education program by integrated coursework or the receipt of academic credit?

4.    Does the internship program accommodate the intern's academic commitments by corresponding to the academic calendar?

5.    Is the internship limited to the period in which the internship provides the intern with beneficial learning?

6.    Does the intern's work complement, rather than displace, the work of paid employees while providing significant educational benefits to the intern?

7.    Do the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376, 384 (2d Cir. 2015).

It is important to remember that this decision requires a balance of all the circumstances. No single factor will be dispositive to conclude whether an intern should be paid – therefore, every factor should be taken into consideration. For example, factor #2 requires businesses to think about the educational value that their internship provides. Is such position commensurate with the training that the intern would receive at their educational institution? If not, then such an internship would weigh towards a paid position. Factor #6 requires businesses to assess whether an intern’s duties is designed to replace the work performed by paid employees, thereby allowing the business to reduce the number of employees needed. If so, that would again lean towards a paid position.

After review of the seven-factor test, if a business decides that their internship would qualify for an unpaid position, the business should enter into a written agreement signed by both the business and the unpaid intern. Such an agreement would reinforce the legal requirements above and clarify the general expectations for the position. 

For assistance or more information, please contact Matthew Bolewitz, Senior Counsel at Cozza Law Group at (724) 858-8742 or mbolewitz@cozzalaw.com.