COMMENTARY: One step forward and two steps back

Unpaid internships are intended to help students gain knowledge, experience and make connections in their field, while minimizing costs to organizations. While unpaid internships are legal, they must meet certain requirements.

In January 2018, the U.S. Department of Labor (DOL) updated its guidelines, a seven-part test under the Fair Labor Standards Act (FLSA), that a for-profit company must meet if they choose to not pay their interns. If the test determines that an intern is actually an employee, the intern must be compensated at least minimum wage and overtime pay.

The seven factors included as part of the new test require: 1) the employer and the intern to understand the internship is unpaid; 2) the internship to provide training similar to one given in an educational environment; 3) the internship to be tied to the intern’s formal education program for credit; 4) the internship to correspond to the intern’s academic calendar; 5) the internship to be limited to the period in which the internship provides the intern with beneficial learning; 6) the intern’s work to complement rather than displace current employees; 7) the intern and the employer to understand that the internship is conducted without a guaranteed position in conclusion of the internship.

The new test is described as a “primary beneficiary test” and it is used by courts to determine which party benefits more from the internship, the intern or the company. Although these new guidelines are meant to be fairer for both the intern and the employer, they are too flexible and make it easy for employers to get away with not paying their interns.

The previous six-part test, adopted in 2010, required: 1) the internship to be similar to training that is given in an educational environment; 2) the internship experience to benefit the intern; 3) the interns to work alongside or in supervision of current staff without displacing regular employees; 4) no immediate advantage to the employer from the intern’s activities; 5) the employer to not guarantee a position to the intern upon conclusion of the internship; 6) the employer and the intern understand that the intern is not entitled to wages during the internship.

The six-part test was considered too rigid by the courts because if only one of the six criteria was not met, an intern would be considered an employee and therefore must be paid. The new test allows for more flexibility and does not require all seven factors to be met, rather they must be weighed and considered under the circumstances, leaving them up to interpretation.

This flexibility will no doubt lead to an increase in unpaid internships, which is not necessarily what is best for the intern or the employer. Studies show that paid internships benefit interns not only because they are getting paid for their work, but also because they are more likely to be offered a job.

The National Association of Colleges and Employers (NACE) reported that the internship experience and the pay status of those internships affected the job offer rate of recent graduates. Of about 4,000 students who applied for a full-time job after graduation, 57.5% of those who had an internship received at least one job offer compared to 43.7% of those who did not have an internship. However, 66.4% of those who had a paid internship received a job offer compared to 43.7% of those who had an unpaid internship.

A survey from NACE found 67.7% of interns were offered a full-time position by their employer and 83.6% of those offers were accepted, which saved the company resources from having to recruit, hire and train new employees. An average of 98.6% of the internships that extended an offer paid their interns.

Employers also benefit from paying their interns. Paid internships have a higher applicant pool giving companies more options when looking for qualified candidates. A paid internship is also more likely to turn into a full-time position, saving employers money by not having to train someone new.

Additionally, Los Angeles Times reported that many companies began paying their interns after a wave of lawsuits. By paying interns at least minimum wage, employers can avoid expensive litigation costs and government intervention as well as bad publicity.

The new legal guidelines are more flexible than the previous ones, but employers are still required to follow a consistent procedure when hiring unpaid interns.

Employers must still follow the seven guidelines which require companies to “provide training that would be similar to that which would be given in an educational environment, [be] tied to the intern’s program by integrated coursework or the receipt of academic credit, [and accommodating] the intern’s academic commitments by corresponding to the academic calendar.”

With or without pay, interns are still gaining valuable experience and making connections that will be useful in their careers. However, not everyone can afford to take on an unpaid internship on top of a paying job and classwork.

Although unpaid internships benefit interns in terms of experience and help employers keep costs to a minimum, paid internships are more beneficial for both the intern and the employer. The new guidelines are too flexible and make it easier for employers to offer unpaid internships. The law should be more rigid to protect the interns from being exploited for their labor.