Internship Agreement

Overview

An internship agreement records the terms of a short-term work placement, typically for a student or recent graduate, at a company or organization. In the United States, the single most important legal question this document must address — and get right — is whether the internship must be paid. The "primary beneficiary" test: under the Fair Labor Standards Act (FLSA), an intern at a for-profit, private-sector employer is presumed to be an employee entitled to at least minimum wage and overtime, unless the internship satisfies the U.S. Department of Labor's "primary beneficiary" test. This flexible, seven-factor test asks whether the intern or the employer is the primary beneficiary of the relationship, considering: (1) the extent to which both parties understand there is no expectation of compensation (any promise of compensation, express or implied, suggests employee status); (2) the extent to which the internship provides training similar to what would be given in 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 providing beneficial learning; (6) the extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits; and (7) the extent to which the intern and employer understand the internship is conducted without entitlement to a paid job at its conclusion. No single factor is determinative — courts and the DOL weigh the totality of circumstances. This is a materially different framework from many other countries' internship regimes (including France's convention de stage, which is a distinct, separately regulated status with its own mandatory gratification thresholds and school-agreement requirements) — there is no equivalent federal "internship status" in the US outside of this multi-factor, fact-specific test. Nonprofit and public-sector internships, and internships that are genuinely structured as volunteer work, are analyzed under related but distinct DOL guidance. When to use this agreement: whenever a business brings on an intern, whether paid (in which case ordinary wage-and-hour rules simply apply as with any employee) or unpaid (in which case the agreement should reflect, and the actual practice must satisfy, the primary beneficiary test factors above). Because misclassifying a paid-work role as an "unpaid internship" carries real wage-and-hour liability exposure, when in doubt, the safer and increasingly common practice is to pay at least minimum wage. Key clauses: whether the internship is paid or unpaid and, if unpaid, an acknowledgment referencing the relevant factors; the internship's fixed start and end dates; whether it is tied to academic credit or a specific institution; a description of the training and supervision to be provided; work schedule; confidentiality of company information; intellectual property ownership for any work product; and a clear statement that the internship does not guarantee subsequent employment. Common pitfalls: labeling a role "unpaid internship" while assigning the intern regular productive work that displaces a paid employee's duties; failing to tie the internship to any educational component; open-ended or indefinite internship duration; and vague or absent language about educational benefit, all of which increase the risk that a regulator or court would reclassify the intern as an employee entitled to back wages.