Every spring and summer, we get a version of the same question from clients across the Carolinas: Can we bring on an intern without paying them? It’s a fair question. Internships are a genuine on-ramp to a career, and plenty of students want the experience more than the paycheck. But the answer is not, "Yes, because they agreed to it." Whether an unpaid internship is lawful turns on a specific legal test.

The Fair Labor Standards Act does not explicitly carve out interns. If a worker is an "employee," they are owed at least minimum wage and overtime, and an intern’s willingness to work for free does not change that. You cannot waive the FLSA by agreement. The real question is never, "Did they agree to work unpaid?" It should be, "Is this person an employee in the first place?" 

Courts in the Fourth Circuit, which includes North Carolina, South Carolina, Virginia, Maryland, and West Virginia, answer that question with the primary beneficiary test, which looks at the economic reality of the relationship to decide who gets the greater benefit, the intern or the business. If the intern is the primary beneficiary, the arrangement can be a lawful unpaid internship. If the employer is the primary beneficiary, the intern is an employee and must be paid for every hour worked.

And even though the Department of Labor’s guidance is no longer binding on the federal courts, the DOL’s framework remains the clearest practical guide, and building your program around it is a sound belt-and-suspenders approach. The DOL asks, in substance:

• Do both sides clearly understand there is no expectation of pay? Any promise of compensation points toward employment.
   
• Does the internship provide training similar to an educational environment?
   
• Is it tied to the intern’s formal education, i.e., integrated coursework or academic credit?
   
• Does it accommodate the academic calendar and the intern’s school commitments?
   
• Is the duration limited to the period of beneficial learning?
   
• Does the intern’s work complement rather than displace paid employees?
   
• Do both sides understand there is no guaranteed job at the end?

How Employers Can Structure Internship Programs 

Here’s how we typically advise our employer clients when it comes to setting up their internship programs: 

• Decide paid vs. unpaid on purpose: Paying at least minimum wage plus overtime is the surest way to avoid the whole classification fight. Many employers choose to pay for exactly that reason.
   
• Build the internship around education and transferable skills, not around getting free help with routine work.
   
• Keep interns complementing your staff, not replacing them.
   
• Set expectations in writing: If the internship is unpaid, put no pay, and no guaranteed job at the end in writing.
   
• Coordinate academic credit with the intern’s school where possible.
   
• Onboard, supervise, and keep records of what each intern actually does. Those records are your best defense if the classification is ever challenged.
   
• Confirm the ancillary obligations such as wage, workers' comp, unemployment, tax, child labor, and immigration before the program launches.

Misclassification is expensive. Think back pay, liquidated damages, interest, attorneys' fees, and unpaid taxes and benefits. A little structure up front is far cheaper than a fix after the fact.

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