Setting Up a Legally Compliant Internship Program

The Paid vs. Unpaid Question

The most critical legal question in any internship program is whether the intern must be paid. Under the FLSA, if the intern is an employee, they must receive at least minimum wage and overtime for hours over 40 per week. The Department of Labor uses a "primary beneficiary test" to determine whether an intern at a for-profit company is an employee or can properly be unpaid.

The primary beneficiary test examines seven factors:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation
2. The extent to which the internship provides training similar to an educational environment
3. The extent to which the internship is tied to the intern's formal education program through integrated coursework or academic credit
4. The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar
5. The extent to which the internship's duration is limited to the period in which the internship provides beneficial learning
6. The extent to which the intern's work complements rather than displaces the work of paid employees
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion

No single factor is determinative. Courts weigh the totality of the circumstances to determine who primarily benefits from the arrangement — the employer or the intern.

The Practical Reality

For most for-profit employers, the safest and simplest approach is to pay interns. Paid internships avoid FLSA litigation risk entirely, attract better candidates, and demonstrate that you value the intern's contribution.

If you choose to offer unpaid internships, structure them to genuinely benefit the intern through training, mentoring, and educational experiences rather than using interns as free labor for routine tasks.

Structuring an Effective Program

Define the Learning Objectives

Before the internship begins, establish clear learning objectives. What skills, knowledge, and experience should the intern gain? These objectives should be specific, measurable, and directly related to the intern's field of study or career interest.

Write a position description that emphasizes learning outcomes alongside work responsibilities.

Assign a Supervisor and Mentor

Every intern should have a designated supervisor who oversees their work and provides regular feedback. Ideally, also assign a mentor — a separate individual who provides career guidance, answers questions about the profession, and helps the intern navigate the workplace.

Balance Productive Work with Learning

A well-designed internship balances meaningful work assignments with learning opportunities. Interns should do real work that contributes to the organization, but they should also:

• Attend meetings to observe decision-making processes
• Receive explanations of why tasks are performed a certain way, not just instructions on how
• Participate in training sessions or professional development events
• Present their work to a team or leadership group
• Receive constructive feedback on their performance

An intern who spends the entire summer making copies, fetching coffee, and doing data entry is not in an internship — they are in an unpaid (or underpaid) clerical position.

Set a Clear Duration and Schedule

Define the start and end dates and the expected weekly schedule. If the intern is a student, accommodate their academic schedule and commitments.

Legal Compliance Checklist

Wage and hour. If you pay your interns (recommended), ensure they receive at least the applicable minimum wage. Track their hours and pay overtime if they are non-exempt, which most interns are.

Workers' compensation. In most states, paid interns are covered by workers' compensation. For unpaid interns, coverage varies by state. Check your state's requirements and confirm with your insurance carrier that interns are covered under your policy.

Anti-discrimination and harassment. Interns are protected by anti-discrimination and anti-harassment laws in many jurisdictions, even if they are unpaid. Include interns in your anti-harassment training and ensure they know how to report concerns.

I-9 compliance. If the intern is being paid, complete an I-9 form just as you would for any employee.

Tax reporting. Paid interns receive W-2 forms. Withhold taxes as you would for any employee.

Evaluation and Feedback

Provide structured feedback at the midpoint and end of the internship. Discuss what the intern did well, where they can improve, and how the experience connected to their career goals. Ask the intern for feedback on the program as well — their input will help you improve the experience for future interns.

Building a Pipeline

A strong internship program serves as a talent pipeline. Interns who have a positive experience become candidates for full-time positions and ambassadors for your organization at their schools. Track which interns convert to full-time employees and how they perform, and use that data to refine your program over time.

An internship program that is well-structured, legally compliant, and genuinely educational benefits everyone — the intern gains experience, and the employer gains a motivated contributor and a potential future employee.