Must interns be paid?

In the summer, tribal employers give interns a chance to expand their skills and understand the important work of tribal governments and enterprises.  For interns, these real life experiences may be a fair substitute for wages and the intern may agree to no pay.  But even with the intern’s consent, do employers have risks in no-pay internships?

The threshold question is whether the federal wage law, the Fair Labor Standards Act, applies to tribal employers.  The answer is there is no answer.  There is an argument that the FLSA applies to tribal employers and an argument it does not apply.  If the FLSA applies to tribal employers, or if the tribal employer applies the law, what does the law say regarding the payment of interns?

The careful analysis starts with the assumption that workers get paid at least minimum wage for all hours and overtime pay for hours worked in excess of 40 hours in a workweek. After starting with the assumption that interns are workers and must be paid, are there exceptions to that general rule?  In other words, under what circumstances can employers not pay interns?

FLSA payment obligations do not apply to workers who are part of tribal programs that provide training for the worker’s benefit if the training meets the following six requirements:

1.  The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.

2.  The internship is for the benefit of the intern.

3.  The intern does not displace a regular employee, but works under close observation of existing staff.

4.  The employer that provides training derives no immediate advantage from the activities of the intern and, on occasion, the employer’s operations may actually be impeded.

5.  The intern is not necessarily entitled to a job at the completion of the internship.

6.  The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Determining whether interns are paid or not is answered by the application of these six factors.  If application of these six factors reveals that the intern should be paid, the intern’s consent will not help the employer.  If in doubt, in my view, pay the intern at least minimum wage and overtime at 1.5 times the employee’s regular rate.

If you determine that the intern will not be paid (presumably after applying the above factors) make sure the managers and supervisors understand that the purpose of the internship is educational, and development of a workplace curriculum serves that objective.  Also, rotating the intern from department to department or job to job may be further evidence to support the educational focus.  Moreover, staffing during the internship should not decrease to avoid the argument that interns are performing the work of employees.  Having the intern sign an agreement acknowledging the educational focus and no-pay status is consistent with best practices. Finally, avoid promising that the internship will lead to employment.

Recommendation:  Examine the true nature of your internship program to determine whether interns are entitled to pay which may also include overtime compensation.  If interns are not entitled to pay, develop and execute the best practices which are consistent with no-pay status.

About the Author:

Richard McGee is a lawyer in Minneapolis, Minnesota who focuses his practice on gaming, gaming regulation, tribal employment and litigation in tribal, state and federal courts.  Richard has the privilege of working with tribes and tribal organizations on Human Resources matters including training.  Additionally, tribes ask Richard to address specific topics while incorporating the tribe’s related laws and policies into the sessions.  This is an invitation to engage Richard to produce and facilitate training for your tribe.