Overview
Unpaid internships can be a valuable way for students to gain hands-on experience while employers get help and a chance to evaluate future hires. Federal guidance uses a six-point test to decide whether an internship must be paid under wage and hour laws.
Failing to meet the criteria can expose a business to wage claims and other liability, so it helps to understand how the test applies and how to document a program that is primarily educational.
Key takeaways
- Internships must primarily benefit the intern and provide learning similar to an educational environment.
- If the intern substitutes for regular employees or provides an immediate advantage to the employer, wages and overtime rules are likely to apply.
- Document expectations in writing and design the experience under supervision to reduce legal risk.
How it works
The six-point test focuses on whether the internship is more like a classroom experience than a job that produces immediate business gains. Important elements include supervisory training, educational outcomes, and a clear understanding that the position may be unpaid.
Academic credit or a structured learning plan can support the educational nature of an internship, but credit alone does not automatically qualify the role as unpaid. Employers should assess each placement against the criteria and adjust duties or compensation if the role functions like paid work.
What it may cover (and what it may not)
An appropriate unpaid internship typically covers supervised learning tasks, exposure to industry practices, and specific training goals. It may also include mentorship, evaluations, and a schedule that aligns with a school term.
An internship that requires routine production work, replaces paid staff, or delivers direct, immediate advantage to the company usually does not qualify as unpaid under wage-and-hour rules. In those cases, employers should treat the person as an employee for purposes of pay and overtime.
Common mistakes to avoid
- Using interns as a substitute for regular employees instead of assigning training-focused tasks.
- Failing to document the learning objectives, supervision plan, and the unpaid nature of the arrangement in writing.
- Assuming academic credit alone satisfies legal requirements without reviewing the actual job duties and supervision.
- Overlooking state or local wage laws that can be more protective than federal standards.
Questions to ask an agent
When reviewing your internship program, ask whether your industry has specific liability considerations and whether your current insurance covers unpaid trainees; if your operations touch niche areas, see Ship Repairers Legal Liability (SRLL) for an example of trade-specific coverage you may need to consider.
Consider whether your general liability program adequately addresses risks in your business sector and review relevant policy options such as Real Estate Risks Primary Liability when your operations overlap with property or premises exposure.
After discussing program design and insurance considerations, it can be helpful to talk to an agent who can review coverage gaps and recommend appropriate limits or endorsements.
Next steps
Review each internship role against the six-point test and document how the experience benefits the intern, who supervises the work, and whether academic credit applies.
Update position descriptions to emphasize training, limit production work, and make the unpaid status clear in writing. When in doubt, consult human resources or legal counsel and confirm your liability coverage with an insurance professional.
Frequently Asked Questions
Can an internship that offers academic credit be unpaid?
Yes—academic credit can support an unpaid internship, but the role must still meet the educational and supervisory criteria of the six-point test.
What happens if an intern performs the same tasks as employees?
If an intern substitutes for regular employees or provides immediate business advantage, wage and hour protections likely apply and the intern may be entitled to pay.
Should unpaid internships be documented?
Yes. Written descriptions of learning objectives, supervision, duration, and the unpaid nature of the internship help demonstrate intent and reduce disputes.
Do state laws affect unpaid internships?
Many states have their own wage and hour rules that can be stricter than federal guidance, so check applicable state requirements.