Before entering into the workforce as a full-time employee, many people have completed an internship or two.
Generally, an internship gives someone the opportunity to expose themselves to a career they’re considering upon college graduation. It’s also viewed as a good way to get a foot in the door at a company you’re interested in working for full-time down the road. And, if nothing else, it looks good on your resume to show you have tangible work experience beyond just a college degree.
A common form of internships, however, are those of the unpaid variety. According to a study by The Viscardi Center, 47% of all internships obtained by college students are unpaid. These promote experience and usually count as college credit in return for labor that ultimately isn’t compensated. These are the kinds of internships that are increasingly being challenged by local, state and national governments in the United States and abroad.
Given the recent legislation in California, which will force many businesses to reclassify independent contractors as employees — with more states likely to follow — it’s fair to wonder if that line of thinking could bleed over into internships in the near future.
Prior to AB5 in California, the U.S. Department of Labor updated their fact sheet in January of 2018 to provide general information to employers to help determine whether interns and students for “for-profit” employers are entitled to minimum wages and overtime pay under the Fair Labor Standards Act (FLSA). The FLSA requires “for-profit” employers to pay employees for their work. Interns and students, however, may not be “employees” under the FLSA — in which case the FLSA does not require compensation for their work.
The DOL noted that, “courts have used the ‘primary beneficiary’ test to determine whether an intern or student is, in fact, an employee under the FLSA. In short, this test allows courts to examine the ‘economic reality’ of the intern-employer relationship to determine which party is the ‘primary beneficiary’ of the relationship.”
The courts have identified the following seven factors as part of the test:
- The extent to which 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.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Ultimately, the current language offered by the DOL leaves it up for interpretation, thus giving employers some loopholes if they would like to proceed with offering unpaid internships.
Trent Hancock, a principal lawyer at McDonald Murholme in Australia, argues that unpaid internships are a form of exploitation that should cease to continue.
“Under this sham arrangement, the ‘intern’ contributes to the operations and profitability of the business without being remunerated for their work,” Hancock wrote. “If an intern is completing work that could otherwise be done by an employee of the company, they should be entitled to at least the minimum wage and other employee benefits.”
As there continues to be more momentum toward eliminating certain forms of contract workers, it’s fair to wonder if unpaid internships could be next on the chopping block.
Landing an internship at Google is among the most coveted prizes for college students aspiring to get into the tech industry. Kathryn Vassel of CNN Business spent a day shadowing some of these interns to shed light on what makes the experience so special. Vassel’s intriguing piece notes that Google received more than 125,000 applications this year for its program.
Proceed with Caution
Colleges and universities should proceed with caution before they encourage or even require students to have internships, writes Mathew T. Hora for Inside Higher Ed. Hora approaches the topic from a research angle, which reveals that while internships do show positive impacts on student outcomes, the effects vary considerably, depending on the students’ disciplinary and institutional affiliations, socioeconomic status and the nature of the internship itself.
Returnships’ Time Has Come
Internship is a familiar term whose definition is well-known in the business and academic communities. “Returnship,” on the other hand, is a concept evidently coined by Goldman Sachs in 2008, but its heyday may be on the horizon, writes Dan Cafaro in this Rewarding Reads piece for WorldatWork. Cafaro explores the good and the bad of returnships and surmises that it very well may become an official entry into Webster’s Dictionary, if not the buzzword of 2020.
Labor Protections in Canada
Unpaid interns in federally regulated industries in Canada are getting closer to having some of the same labor protections that paid employees get, according to a report by The Canadian Press in June. The federal government posted the proposed rules under laws that extended standard health and safety protections to unpaid interns and limited those internships to placements that are part of educational courses.
Career Opportunity or Exploitation?
Writing from an Australian perspective, Trent Hancock of Smart Company notes that some companies misclassify an employee as an unpaid intern in order to avoid paying the employee for their work. Hancock writes that under this sham arrangement, the intern contributes to the operations and profitability of the business without being remunerated for their work.
About the Author
Brett Christie is a staff writer at WorldatWork.