When is it permissible to hire an unpaid intern and when should an intern be paid as an employee? To answer this question, one must evaluate the work the intern performs, how such work impacts the company and the intern, and what supervision and training the intern receives. Both the California DLSE and the Federal Department of Labor use a six factor test to determine if an intern may properly be unpaid or should be considered an employee and receive at least minimum wage. These factors include:  

1. The training received via the internship is similar to training that would be received in a vocational school;
2. The intern’s training primarily benefits the intern, not the company;
3. Interns cannot displace or replace regular employees;
4. The company does not derive immediate advantages from the intern’s work, and on occasion, an intern may actually impede the company’s operations;
5. Interns are not guaranteed a job at the end of the internship;
6. The company and the intern understand that the intern is not entitled to wages during the internship period.

These factors must be carefully applied to the specific facts of each internship. To qualify as an unpaid intern, all six factors must be met. Notably, when an intern is doing the work of a regular employee such that the intern might stand in for or replace an employee, the intern is entitled to wages and should be treated as an employee. In such cases, the intern’s work provides a financial benefit to the company and the intern must be compensated. In most cases where the company receives substantial benefits from the intern’s work, the intern must be paid and treated as an employee.

Failing to properly compensate interns violates California and Federal wage and hour laws and carries significant penalties. If you have questions regarding when an intern must be paid, or whether you as an intern are entitled to wages, please call the attorneys at Janssen Malloy LLP for assistance.