The short version
- In the US, an unpaid internship is lawful only if the intern is the primary beneficiary of the relationship. If the employer is, the intern was an employee and minimum wage was owed from the first hour.
- The Department of Labor applies a seven-factor test adopted on 5 January 2018. No single factor decides it, and there is no minimum number you have to satisfy.
- Signing a document that says you are an unpaid intern does not settle anything. The written label is one factor out of seven, and it is the weakest.
- The UK does not use this test. If you are a worker — real tasks, set hours, obligation to turn up — the National Minimum Wage is due, and calling the role an internship changes nothing.
Two things are true at once, and confusing them is why this question keeps getting answered badly. Unpaid internships are not illegal. And most of the unpaid internships people actually describe would not survive the test that decides the question. The gap between those two sentences is where the money is.
Why agreeing to work unpaid does not settle it
Minimum wage law in both the US and the UK is not a default you can contract out of. It attaches to a status — employee, or worker — and the status is determined by what the arrangement looks like in practice, not by what the paperwork calls it. This is the same principle that governs employee or contractor classification, and it works the same way here: the label is evidence, never the answer.
So the useful question is never "did I agree to be unpaid". It is "what did the relationship actually consist of, and who got the benefit of it".
The US test: who was the primary beneficiary?
Until 2018 the Department of Labor used a six-factor test in which an internship had to satisfy every factor to be lawfully unpaid. Courts refused to follow it. In Glatt v. Fox Searchlight Pictures (2015) the Second Circuit declined to defer to the agency's fact sheet, called the all-or-nothing structure too rigid, and replaced it with a single question: is the intern or the employer the primary beneficiary of the relationship? The Eleventh Circuit adopted the same test months later in Schumann v. Collier Anesthesia, and the Ninth followed in Benjamin v. B & H Education in 2017. Four federal appeals courts had gone this way before the Department of Labor gave in and adopted the test itself on 5 January 2018.
The consequence is that the test is now flexible in both directions. There is no minimum number of factors to hit, which helps employers — and no single factor an employer can point to as a safe harbour, which helps interns.
| The factor | What it is really asking | What fails it |
|---|---|---|
| No expectation of compensation | Was this understood by both sides at the outset, in fact and not only on paper? | A promise of pay "once we have budget", or a stipend that looks like a wage |
| Training similar to an educational environment | Is somebody teaching, including hands-on instruction — or are you being assigned output? | A supervisor who allocates work but never explains it |
| Tied to a formal education programme | Integrated coursework, or academic credit for the placement | No enrolment at all, or credit the intern paid tuition for and the employer arranged nothing towards |
| Accommodates academic commitments | Does the schedule follow the academic calendar rather than the business calendar? | Full-time hours in term, or an expectation to skip classes |
| Duration limited to the beneficial learning period | Does it end when the learning ends, or when the project ends? | A placement extended because the work is useful, not because the teaching continues |
| Complements rather than displaces paid employees | Would the business have had to hire someone to do this? | Covering a vacancy, staffing a rota, or carrying a caseload |
| No entitlement to a paid job at the end | Is the internship an extended unpaid trial for a role? | An offer conditional on completing the unpaid period first |
Which way the weight falls
Intern is the beneficiary
- Credit or coursework attached
- Someone is visibly teaching
- Hours bend around classes
- Ends when the learning does
Employer is the beneficiary
- Covering an unfilled role
- Billable or shippable output
- Business hours, business deadlines
- Extended because it is useful
Weight on the right means the intern was an employee. Minimum wage was owed from the first hour, not from the day someone complained.
Academic credit is the strongest factor and the most abused
Two of the seven factors turn on the connection to formal education, which makes credit the single most load-bearing fact in the analysis. It is also where the reasoning most often gets inverted. An employer will say the internship must be lawful because the student is receiving academic credit for it — but the credit was arranged by the student, awarded by the university, and frequently paid for in tuition. The employer contributed nothing to the educational side and still banked the factor.
Internship agreement template
Free full text — learning objectives, supervision, duration, the academic-credit link and the compensation position stated openly rather than assumed.
What "displacing paid employees" means in practice
This is the factor with the clearest evidential test, and interns routinely have the evidence without realising it. Ask what would happen if the internship simply ended tomorrow. If the answer is that a rota has a hole in it, a client goes unanswered, or a hire has to be made, the intern was not complementing paid staff. They were staffing.
Four kinds of work, and where the line actually falls
Shadowing
Supervised practice work
Production work
Rota coverage
The UK asks a different question and gets a stricter answer
There is no primary beneficiary test in the UK. The National Minimum Wage Act turns on whether the person is a worker — broadly, someone under a contract, written or implied, to perform work personally. Attending at set times, carrying out defined tasks and contributing to the organisation's operations will usually satisfy that, and payment is not part of the question. An employer cannot escape it by writing "unpaid intern" or "volunteer" on the arrangement.
Two exclusions matter, and both are narrower than they are usually described.
- Work shadowing. If the placement genuinely involves only observation and the intern carries out no work, the minimum wage does not arise. The moment tasks are assigned, the exclusion is gone.
- Required course placements. Students on a UK further or higher education course who are required to complete a placement of less than one year as part of that course are not entitled to the minimum wage. A voluntary summer internship taken by a student is not this, and a placement of a year or more is not this either.
What an internship that fails the test is worth
If the arrangement was employment, the intern was underpaid, and the US remedy is deliberately uncomfortable for employers. Under the FLSA an affected employee can recover the unpaid minimum wages plus an additional equal amount as liquidated damages — the recovery doubles — and the court is directed to award a reasonable attorney's fee and costs against the employer on top.
The window is two years from when the cause of action accrued, extending to three years where the violation was wilful. That timing is the reason to work out where you stand while the internship is recent rather than after graduation.
A practical caution in the other direction: these claims are almost never worth bringing individually, because the sums are small relative to the effort. What makes them serious for employers is that internship programmes are standardised, so one arrangement failing the test usually means every intern in the cohort has the same claim.
If you think you should have been paid
- Write down the facts while they are fresh — hours actually worked, what you produced, who used it, and whether anyone taught you anything. The seven factors are all factual, so the record is the case.
- Find the paperwork. An internship agreement that states learning objectives and supervision looks very different from one that states duties and deliverables, and either helps you.
- Establish whether anyone was paid for the same work before or after you. Displacement is the factor with the sharpest evidence.
- Raise it internally first, in writing, framed as a classification question rather than an accusation. Programmes are usually designed by someone who was never told the test changed in 2018.
- If that goes nowhere, the US route is a complaint to the Wage and Hour Division or a private claim; in the UK it is a report to HMRC, which enforces the minimum wage itself.
Designing one that does not have this problem
The honest answer for most businesses is to pay the intern. The seven-factor test only exists to police unpaid arrangements; it never applies to a paid one, and minimum wage for a twelve-week placement is a smaller number than a cohort-wide back pay claim with liquidated damages attached.
Where an unpaid programme is genuinely educational, write it down as one. State the learning objectives, name the supervisor responsible for teaching, tie the dates to the academic calendar, and say in the internship agreement that no paid role is promised at the end. If those four things are hard to write truthfully, that is the test giving you its answer early.
Sources
- DOL Fact Sheet #71 — internship programs under the Fair Labor Standards Act
- DOL rescinds the six-factor intern test and adopts the primary beneficiary test, 5 January 2018
- Which circuits adopted the test before the DOL did
- Eleventh Circuit in Schumann v. Collier Anesthesia on internship duration
- GOV.UK — employment rights for interns and the National Minimum Wage
- 29 U.S.C. § 216(b) — liquidated damages and attorney's fees
- 29 U.S.C. § 255(a) — two-year limitation period, three for wilful violations
General information, not legal advice. This guide explains how these documents and rules generally work. Law varies by jurisdiction and changes, and none of it is applied to your circumstances here. For anything consequential, consult a licensed attorney where you are.
Frequently asked
Does signing an unpaid internship agreement mean I cannot claim wages?
No. Minimum wage entitlement follows employment or worker status, and neither can be waived by agreement. The document is one piece of evidence about what both sides understood, which is one of seven factors in the US test. In the UK it carries even less weight, because an employer cannot avoid the minimum wage by labelling someone a volunteer or unpaid intern.
Is an internship legal if I get academic credit for it?
Credit helps but does not decide it. Two of the seven factors concern the link to formal education, so credit weighs on the intern-as-beneficiary side. But neither the courts nor the Department of Labor treat credit as a safe harbour. An internship with credit attached where the intern covers a vacancy full-time still fails, because the remaining factors point the other way.
Can a company offer a small stipend instead of wages?
A stipend does not create a middle category. Either the arrangement is an internship where the intern is the primary beneficiary, in which case no payment is required, or it is employment, in which case the full minimum wage applies for every hour and a below-minimum stipend is simply an underpayment. Paying something can also undercut the factor asking whether both sides understood there was no expectation of compensation.
Do unpaid interns have any protection from harassment or discrimination?
This varies and is worth checking separately. Several protections in both the US and the UK attach to employee or worker status, so a genuinely unpaid intern who is not an employee may fall outside them. Some US states and cities have legislated specifically to extend harassment and discrimination protections to interns. Do not assume the position is the same as for staff.
How long can an unpaid internship lawfully last?
There is no fixed limit in the US. The factor asks whether the duration is limited to the period of beneficial learning, and the Eleventh Circuit framed it as whether the length is grossly excessive compared with that period. In the UK the position is different: the exclusion for required course placements only covers placements of less than one year.