Are Unpaid Internships Legal (and Worth It)?

• Unpaid internships are still legal in many cases, but are increasingly considered exploitative.
• The Department of Labor outlines criteria for determining whether an internship is legal.
• Carefully consider your options and finances before agreeing to do unpaid work.

Unpaid internships are in decline across the United States, with the National Association of Colleges and Employers (NACE) reporting that the percentage of students working unpaid internships fell from 50% in 2012 to 43% in 2017.

However, internships as a whole have grown: Another 2017 NACE survey shows that 60% of college graduates in 2017 said they had an internship at some point while in school, while that number was only 50% in 2007.

Internships, including unpaid ones, have long been considered valuable opportunities to gain relevant work experience, network with professionals in your field, and build your resume while working towards a degree.

[T]he difference in employment rates for students with unpaid internships and those with no internship experience is minimal.

While there is truth to these claims, there are also many negative qualities specific to unpaid internships that are not present in fellowships, assistantships, and paid internships.

While paid internships typically yield good employment outcomes, the difference in employment rates for students with unpaid internships and those with no internship experience is minimal. Even more concerning is that many unpaid internships are highly exploitative and, in some cases, outright illegal.

Since the Department of Labor (DOL) cannot monitor every job listing and does not aggressively pursue complaints of illegal internships, it is often up to students to identify whether an internship is legal or not.

Unpaid Internship Laws

The Fair Labor Standards Act (FLSA) of 1938 states that any employee of a for-profit company must be paid for their work. While the FLSA does not consider interns employees, the intern must be the primary beneficiary of the arrangement for an internship to be legal. But there is an acknowledged degree of subjectivity involved in determining who the primary beneficiary is in a given scenario, which can lead to disputes between interns and their employers.

To address this subjectivity, the DOL created the primary beneficiary test (outlined below) to ensure that the intern is benefiting more than the employer from an unpaid internship.

If the employer is determined to be the primary beneficiary after considering these points, then the intern is entitled to both minimum wage and overtime pay under the FLSA. It should be noted that these rules do not apply to internships at public or nonprofit organizations.

Another legal matter to consider is that many unpaid interns receive no legal protection from sexual harassment or discrimination. While Title VII of the Civil Rights Act of 1964 protects employees from such abuse, it does not include provisions for unpaid workers or trainees. While a few states have laws in place to protect unpaid interns, the vast majority do not.

Attitudes Towards Unpaid Internships

The current economic landscape may explain why many millennial and Gen Z students are reluctant to participate in unpaid internships. The cost to attend college increased nearly eight times faster than real wages between 1989 and 2016, saddling Americans with over $1.5 trillion in student loan debt. The cost of living around the country is also increasing at its fastest rate in 10 years, especially in major economic hubs where college graduates are seeking jobs.

The Federal Reserve reports that over half of young adults who went to college took on some college debt and that first-generation students are more than four times more likely than non-first-generation students to be behind on their student loan payments. Considering the strong correlation between debt and higher education, it's not surprising that many feel they can't afford to spend their time on internships that neither pay them nor provide them with valuable work experience.

Increasingly, unpaid internships are a luxury that only economically advantaged students can afford.

Unpaid internships are a luxury that only economically advantaged students can afford. While students from lower-income families might have to work throughout college to afford tuition, often in positions unrelated to their fields of study, affluent students are free to pursue career-advancing opportunities without needing to be paid.

Working too many hours in school, which is more common among low-income students, can have negative long-term effects on a student's academic performance and immediate employability. Nearly 60% of low-income students who work 15 hours or more had a "C" average or lower, since they had less time to study and work on assignments.

These positions also typically don't prepare them for jobs in their area of study. Sacrificing grades and internship experiences to afford attending college can be a huge disadvantage when applying for jobs.

However, paying interns can help solve this inequality. If more paid internships were available for low-income students, those students could maintain the income they need while gaining experience relevant to their future careers.

Traditionally, unpaid internships were more common in the public and nonprofit sectors and were essential to starting a career in government or public service. While unpaid internships may still be the only option in some cases, there are many more paid government internships available for students than in the past.

For example, the federal government's Pathways Program offers paid internship opportunities for high school, college, and trade school students at numerous federal agencies. Even Capitol Hill interns, the majority of whom have long been unpaid and overworked, will now be paid up to $1,800 a month as part of a new program that allocates $14 million for intern payments.

Are Unpaid Internships Worth It?

So if an unpaid internship is your only option, you may be asking yourself questions like, "Is it worth it?" or "Will this benefit my career?" While the quality of internships can vary between companies and industries, participating in multiple internships during college helps students secure employment or enter graduate school within six months of graduation.

However, the disparity in outcomes between students participating in paid and unpaid internships can be discouraging. As mentioned above, unpaid internships have a lower chance of leading to a job than paid ones and tend to provide less professional development. Unpaid interns may also be relegated to menial office tasks and have fewer opportunities for meaningful work. Unpaid internships that do not pass the seven-point criteria outlined by the DOL tend not to make an intern's professional development a priority.

[Unpaid] internships have a lower chance of leading to a job than paid ones and tend to provide less professional development.

However, a NACE report notes that unpaid internships often help participants confirm or realign career interests and network within their industries. If you find an unpaid internship that will help you build skills relevant to your field, then it may be worth taking, but make sure you've explored all of your paid options first.

It's important to note that paying interns can also benefit employers. While many companies have long viewed unpaid internships as a cost-saving tactic, employers primarily concerned with their bottom line should consider the personnel benefits paid interns provide. Paying interns helps companies recruit talented students away from competitors and attract more interest from qualified candidates. It also allows companies more time to screen potential employees before deciding to hire them full time.

Universities and Grants for Unpaid Internships

Universities play an increasingly pivotal role in student internships, with one study reporting that 90% of universities now offer academic credit for internships. Some programs even require internships for completion. For example, Ball State University's journalism program, along with various programs at Seton Hall University and California Polytechnic State University at San Luis Obispo, all require internships to graduate.

While not yet common practice, some schools offer scholarships for students working as unpaid interns. For example, students at Texas Christian University working low-paying or unpaid internships can qualify for the university's Internship Scholarship Funding Program, which pays between $500 to $6,000 during their internships.

For tips on how to find internships that meet your needs, consult the guides below.

Additional Resources

Editor's Note: This article contains general information and is not intended to be a substitute for professional advice. Please consult a professional advisor before making decisions about legal or financial issues.