DOL Changes Rules on Unpaid Internships: What Employers Need to Know

In a move that will have significant implications for employers across the country, the U.S. Department of Labor (DOL) has changed rules on unpaid internships, providing clearer guidelines on when internships must be compensated. These changes aim to protect workers from exploitation while ensuring that internships remain a valuable learning opportunity for students and early-career professionals. As part of this update, the DOL has redefined what constitutes a “bona fide” internship and clarified when an internship must be paid under the Fair Labor Standards Act (FLSA).

What the DOL Changes Mean for Employers

The DOL’s new rules come at a time when unpaid internships have been increasingly scrutinized for potentially violating wage and labor laws. While internships are designed to provide valuable work experience, the DOL’s updated guidelines make it clear that employers cannot take advantage of interns by failing to pay them when their work qualifies as “employment.”

Under the new DOL rules, internships in the private sector are only exempt from payment if they meet a strict set of criteria. The intern must gain educational experience that aligns with their academic program, the internship must be for the benefit of the intern, and the intern cannot be displacing regular employees. Importantly, if the intern is performing work that directly benefits the employer—such as assisting with day-to-day business operations—they must be paid at least the minimum wage.

Key Changes in the DOL’s Internship Guidelines

1. Educational Benefit Must Be Clear: The internship must primarily benefit the intern, not the employer. Interns should be engaged in tasks that provide hands-on learning experiences directly related to their academic goals or career development. Work that merely supports the business operations of the company (like filing, answering phones, or general office tasks) may no longer qualify as unpaid work.
2. No Displacement of Paid Employees: Under the new rules, interns should not replace regular employees. Interns are meant to supplement existing teams, not take on tasks that a paid worker would typically perform. This is a critical distinction that could determine whether an internship program complies with federal wage and labor laws.
3. Clear Understanding of Unpaid Internships: If an employer is offering an unpaid internship, they must ensure that the position meets all of the educational and non-exploitative criteria laid out by the DOL. Internships that don’t meet these standards must be paid in accordance with the minimum wage laws.
4. Internship Duration: The length of an internship has also come under scrutiny. While there are no hard-and-fast rules regarding the duration, internships that extend too long without a clear educational component might raise red flags with the DOL. Employers should ensure that the internship is time-limited and focused on skill-building rather than just cheap labor.

Previous DOJ Position and NLRA Enforcement Debate

For several years, the DOJ advocated in support of the legal interpretation held by the National Labor Relations Board (NLRB). The government argued that class action waivers within employer-drafted arbitration agreements violated employee rights protected under the National Labor Relations Act (NLRA). The NLRA legally shields “concerted activity,” meaning workers are protected when acting together to improve workplace conditions, dispute wage violations, report statutory harm, or jointly pursue litigation based on shared corporate policy abuse.

Updated DOJ View in Supreme Court Filing

That legal stance has now reversed. In a brief submitted to the Supreme Court, the DOJ announced it withdrew past support and adopted the opposite conclusion, stating that class action waivers are not inherently illegal under the NLRA, even if those waiver agreements restrict collective litigation.

This brief was filed in connection with consolidated employment law disputes involving mandatory arbitration enforceability, waiver agreements, misclassification impact, employee bargaining power challenges, retaliation defenses, and statutory coverage issues under U.S. labor law.

Three major cases before the Supreme Court are expected to frame precedent this term:

• Epic Systems Corp. v. Lewis
• NLRB v. Murphy Oil USA
• Ernst & Young LLP v. Morris

The core issue in these cases centers on whether employment agreements that require workers to resolve disputes individually through arbitration can lawfully strip employees of their ability to pursue claims collectively in federal court—even when thousands of workers face identical statutory harm.

Why This Matters for Worker Rights

If the Supreme Court adopts the DOJ’s new conclusion, employers may gain stronger legal support to enforce:

• Mandatory arbitration agreements requiring individual-only dispute filings
• Contract clauses restricting participation in employee collective actions
• Waiver agreements used broadly at onboarding
• Defense strategies minimizing national labor liability for systemic wage or discrimination claims

For workers, this could mean:

• A continued decline in group litigation access under federal labor protections
• More disputes diverted into private arbitration instead of open federal courts
• Increased emphasis on state-based anti-retaliation statutes where applicable
• Difficulty challenging employer patterns collectively without opting out

Gig Economy and Misclassification Consequences

The DOJ’s policy reversal is especially relevant in industries where independent contractor misclassification lawsuits have been widespread—rideshare platforms, delivery fleets, staffing networks, or companies relying on 1099 agreements defended nationally. Courts evaluating misclassification claims often apply an economic realities test similar to the one used by the Department of Labor, but interpretations vary significantly by state and federal district.

Reasonable Accommodation and Retaliation Coverage Remains Unchanged

The DOJ reiterated that the withdrawal does not change employers’ legal responsibilities. Disability discrimination claims, retaliation safeguards, interactive accommodation processes, emotional harm damages, or statutory protections under state anti-discrimination law may still apply depending on jurisdiction, bargaining conditions, and personnel record evidence. Employment Law Resources

Final Note for Workers Seeking Legal Guidance

Employees facing retaliation, misclassification contract interference, or legal restriction behaviors tied to arbitration or class waivers should evaluate their legal reporting options early. If you are unsure whether a waiver agreement impacts your ability to pursue collective remedies, legal consultation can clarify enforceability, retaliation risk, coverage strategy, and alternative statutory protection routes.

The Purpose of the Withdrawn Guidance

The former guidance was introduced during the Obama administration to address persistent judicial inconsistency surrounding worker classification. Courts across the country—sometimes even courts applying the same state or federal precedent—issued conflicting rulings on who qualifies as an employee versus an independent contractor for purpose of wage rights, overtime eligibility, retaliation protection, and personnel accountability.

To resolve those systemic differences, the DOL’s 2016 guidance encouraged courts to use a broad economic realities test, emphasizing practical work conditions over contract title. That test specifically analyzed:

• The level of control a company exercises over the worker
• The worker’s ability to operate as an independent business entity
• Who assumes financial risk for expenses and operational costs
• Whether the work function is central to the company’s core business model
• The worker’s ability to increase profit through managerial decisions rather than simply working more hours

This framework was intended to discourage companies from relying solely on 1099 agreements to classify a workforce as independent contractors when the actual role function was operationally inseparable from the company’s main offering.

DOL Statement on Employer Responsibilities

Despite withdrawing the guidance, the DOL issued a public clarification stating that the withdrawal “does not change the legal responsibilities of employers.” This means companies may still be held liable under preexisting statutory obligations for wage rights, retaliation claims, bargaining power imbalance exploitation, documentation integrity, interactive policy review failures, expense burden disputes, and other protections arising under federal labor law standards.

Expected Judicial Reversion and Workplace Consequences

Legal analysts anticipate many federal and state courts will now revert to earlier precedents and narrower interpretations of the economic realities test. This could reduce the likelihood of large arbitration opt-out collectives and group-wide misclassification lawsuits that depend on broad statutory interpretation for employee status.

This reversion may affect industries such as:

• Rideshare services
• Nationwide delivery fleets
• Franchised business worker models
• Multi-employer worksite environments
• Logistics partners classified as independent operators
• Staffing networks assigning operational risk to workers without managerial autonomy

Who This Matters For

Workers who are currently classified as independent contractors or work in joint employment conditions should understand that courts will now apply existing statutory frameworks without relying on DOL-expanded interpretation. Employers may still be required to engage in classification accuracy debates depending on jurisdiction, retaliation evidence, documentation proof, hiring practice records, policy enforcement step compliance, and the economic realities underpinning the working relationship.

What is Joint Employment?

Joint employment occurs when one worker is employed by two or more separate employers simultaneously. These typically occur when there are joint ventures, staffing services, temporary work agencies, subcontracting and job sharing arrangements.

When there’s a violation though, the deep pocketed company often wants out, pointing the finger and claiming that the real employer is the smaller entity. In the face of rampant problems across the country, the DOL released a new interpretation to clarify which types of arrangements fall under the joint employment heading. The agency explains that it separates joint employment into two separate and distinct categories:

• The “Horizontal” View applies when two or more separate employers share a significant amount of responsibility over the employee’s work. To determine whether this classification applies, look for:
  • Common ownership, officers, directors or managers between the companies
  • Shared supervision over the employee
• The “Vertical” View applies when a company contracts for workers who remain directly employed by an intermediary company. Temporary staffing arrangements may fit into this category. Relevant factors for determining applicability include:
  • Who supervises the work of the employee
  • Permanency of the relationship
  • Where work is performed
  • Who controls the employment status of the employee
  • Are the employee’s responsibilities integral to the joint-employer’s business

For an employee, it is important to evaluate your employment arrangement to determine the responsibilities and duties of each joint employer.

If you have questions about your employer, contact our law office to speak with an employment law attorney.