Are Internships Paid or Unpaid? What the Law Says

Whether internships are paid or unpaid comes down to one legal question: who benefits more from the work, you or the employer? If you are the primary beneficiary — learning skills, earning academic credit, doing work structured around your education — the internship can lawfully be unpaid. If the employer is the primary beneficiary — getting productive work that would otherwise require a paid employee — federal law treats you as an employee entitled to at least the $7.25 federal minimum wage and overtime, no matter what your title says.¹² Many states raise that floor further, and at for-profit companies an unpaid arrangement is the hardest to defend.

The Seven-Factor Test That Decides It

The Fair Labor Standards Act defines “employ” broadly enough to sweep in most work, so an employer cannot avoid wage obligations by handing out the label “intern” or “trainee.”¹ To sort real internships from disguised employment, the Department of Labor and every federal appeals court that has ruled on the issue use the primary beneficiary test.³

The test weighs seven factors, and no single one controls the outcome:⁴

You and the employer both clearly understand that no pay is involved. Any promise of compensation, express or implied, points toward employee status.
The training resembles what you would get in a classroom or clinical setting rather than on-the-job production work.
The internship is tied to a formal education program through integrated coursework or academic credit.
The schedule accommodates your academic calendar rather than the employer’s staffing needs.
The internship lasts only as long as you continue to learn, not as long as the employer wants the help.
Your work complements, rather than displaces, work that a paid employee would otherwise do.
You and the employer understand the internship does not entitle you to a paid job afterward.

Courts look at the whole picture. A weak showing on one factor can be offset by strong showings on others, and vice versa.

Academic Credit Does Not Settle It

Getting course credit for an internship does not automatically make an unpaid arrangement legal. Credit is one factor of seven, and the DOL has been explicit that no single factor decides the outcome.⁴ An internship that carries credit but otherwise runs like a regular job — with the intern producing work that benefits the company and takes the place of paid staff — can still violate wage laws.

What “Displacing Paid Staff” Actually Looks Like

This is where most for-profit internships fail the test. If the company would need to hire another worker or ask current employees to put in extra hours to get the same work done without you, you are almost certainly functioning as an employee. Shadowing under close supervision, sitting in on meetings, and completing training exercises usually pass. Handling customer orders, doing regular clerical work, or plugging a staffing gap during a busy season usually does not.

Internships at For-Profit Companies

Private, for-profit employers have the toughest time running lawful unpaid programs. Courts scrutinize these arrangements because for-profit businesses have a direct incentive to use free labor. If the work you do generates revenue or keeps operations moving, the balance tips toward the employer as primary beneficiary, and pay becomes legally required.

Post-internship hiring matters too. If a company uses an unpaid internship as a trial run for a permanent role, that arrangement weighs heavily toward employee status.⁴ Any promise or implication of a paid job at the end suggests you are working now in exchange for future compensation, which undercuts the educational character of the internship.

A for-profit company that gets this wrong can be on the hook for all unpaid minimum wages and overtime, an equal amount in liquidated damages, and the intern’s reasonable attorney’s fees.⁵ When several interns are affected, a single collective action can pull them all into the same lawsuit. Willful or repeat violators can also face civil money penalties of up to $2,515 per violation.⁶

Government Agencies and Nonprofits Work Differently

The rules soften considerably outside the for-profit world, but not identically for both.

State and Local Government

The FLSA carves out a specific exemption for people who volunteer at state or local government agencies for civic, charitable, or humanitarian reasons. To qualify, you cannot receive compensation beyond expenses, reasonable benefits, or a nominal fee, and the volunteer work cannot duplicate work you are already paid to do for the same agency.⁷ The arrangement has to be genuinely voluntary, without coercion from the agency.⁸

A public agency can provide a stipend without turning a volunteer into an employee, as long as the payment is truly nominal — not a substitute for wages and not tied to productivity. Federal regulations set no specific dollar cap; instead they weigh factors like the time and effort involved and whether the person serves year-round or only occasionally.⁸

Nonprofit Organizations

Private nonprofits do not enjoy the same blanket volunteer exemption. Someone can genuinely volunteer for a nonprofit’s charitable mission, but if the organization puts an intern into a role that resembles regular employment, the primary beneficiary test still applies. The more the day-to-day work looks like a paid staffer’s job, the more likely the nonprofit owes wages, charitable purpose or not.

State Laws Can Require Pay When Federal Rules Don’t

State wage laws often go further than the FLSA. Where a state sets a higher minimum wage or applies a stricter classification test, the employer must follow whichever standard is more favorable to the worker.⁹ Some jurisdictions do not use the flexible federal test at all, applying instead a stricter standard that asks whether the employer gets any immediate operational advantage from the intern. Under those rules, even a small benefit to the company can trigger a duty to pay. An internship structure that passes federal scrutiny may still be unlawful under state law, so if you work in a state with strong wage protections, check the state rule as well.

One More Reason Paid Status Matters

Whether an internship is paid affects more than your paycheck. Federal anti-discrimination laws such as Title VII, the ADA, and the ADEA generally protect employees, and the EEOC has indicated that an unpaid intern’s coverage turns on whether they receive significant remuneration such as health insurance or a pension; academic credit and work experience alone typically are not enough. Unpaid interns are covered against discrimination in admission to and participation in training or apprenticeship programs themselves.¹⁰ A number of states have filled this gap by extending harassment and discrimination protections to unpaid interns under state law.

OSHA workplace safety standards similarly run to employers and their employees. A 1999 OSHA interpretation letter stated that coverage does not extend to unpaid students.¹¹ Paid interns get the full range of OSHA protections; unpaid interns in hazardous settings may need to rely on state workers’ compensation or tort law instead.

If You Should Have Been Paid

If you think you were misclassified as an unpaid intern, you can recover the wages you were owed, an equal amount in liquidated damages, and reasonable attorney’s fees.⁵ Under federal law you generally have two years from the date each paycheck should have been issued to bring the claim. If the violation was willful — meaning the employer knew or showed reckless disregard for whether the conduct was lawful — the window extends to three years.¹² State deadlines vary and can be shorter or longer.

You have two ways to move. You can file a complaint with the Department of Labor’s Wage and Hour Division at 1-866-487-9243, and the agency will investigate at no cost to you.¹³ Or you can file a private lawsuit in federal or state court. The two tracks are separate, and if the DOL files suit on your behalf, your independent right to sue on the same claim ends.⁵

1
Office of the Law Revision Counsel. 29 U.S.C. 203 – Definitions
2
Office of the Law Revision Counsel. 29 U.S.C. 206 – Minimum Wage
3
U.S. Department of Labor Wage and Hour Division. Field Assistance Bulletin No. 2018-2
4
U.S. Department of Labor. Fact Sheet 71 – Internship Programs Under the Fair Labor Standards Act
5
Office of the Law Revision Counsel. 29 U.S. Code 216 – Penalties
6
eCFR. 29 CFR Part 578 – Tip Retention, Minimum Wage, and Overtime Violations – Civil Money Penalties
7
Office of the Law Revision Counsel. 29 U.S. Code 203 – Definitions
8
eCFR. 29 CFR Part 553 Subpart B – Volunteers
9
U.S. Department of Labor. State Minimum Wage Laws
10
U.S. Equal Employment Opportunity Commission. EEOC Informal Discussion Letter
11
Occupational Safety and Health Administration. OSHA Standard Interpretation – Coverage of Unpaid Students
12
Office of the Law Revision Counsel. 29 U.S. Code 255 – Statute of Limitations
13
U.S. Department of Labor. How to File a Complaint