Internships are widely considered to be beneficial for students, even if they are unpaid. They are supposed to provide practical experience and insight into how the student’s education is applied in a work setting. However, just because a student agrees to an unpaid internship, this does not mean that the employer automatically avoids liability under Federal and New York State labor laws. Unpaid internships can be abused by employers seeking to take advantage of unpaid labor for very little substantive benefit to the intern. As a result, New York federal courts look at whether an “intern” is a bona fide intern or whether they are in fact an “employee” who must receive a minimum wage.

The U.S. Court of Appeals for the Second Circuit has developed a set of factors for federal courts in New York to utilize in assessing whether an “intern” is in fact an “employee.” These factors include:

• How similar is the learning and training that takes place during the internship to learning in an academic/school environment? The learning and training that takes place during an internship need not be identical to that which takes place in a classroom setting where a student is constantly learning something new. The intern can learn practical skills which may include some administrative, organizational or repetitive (rote) tasks (such as, taking minutes at a meeting with colleagues) and benefit from continuing to practice the skills he/she has learned.
• Is the internship tied to the intern’s academic studies? The internship should relate to the student’s academic studies or goals and the student should be able to receive academic credit for the internship, even if he/she chooses not to apply for credit. In addition, the internship should not interfere with school commitments. For example, the internship should be part of the student’s coursework during the academic semester or occur during summer break.
• What are the intern’s expectations regarding receiving payment or a full-time job after the internship ends? In normal circumstances, the fact that the employee does not expect to get paid or receive a paying full-time job at the end of a trial period does not impact the determination of whether the employer violated labor laws. However, in the context of unpaid internships, a clear understanding between the intern and employer regarding these factors weighs in favor of the employer. The clearer it is to both the intern and the employer that the internship is unpaid and will not lead to a paid position, the less likely it is that the internship will take an abusive quality.
• Does the intern’s work complement or displace the work of paid employees? If an intern’s work displaces that of a paid employee, this weighs against the employer. An intern’s work should complement the work of paid employees in that it should require some level of oversight or involvement by an employee who still bears primary responsibility for the work. The Court has noted, however, that an intern’s work may be useful and productive to the employer and that the employer receives some tangible, immediate benefit from the work of an intern does not weigh against the employer.

New York employers considering hiring unpaid interns, should take the following steps:

• The employer should provide in writing (signed by the intern) that the internship is unpaid and that a job is not promised upon completion of the internship.
• The internship should provide practical application of the intern’s education and the intern should be able to receive academic credit for the internship.
• Speak to a qualified attorney to structure an internship that complies with state and federal labor laws.

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