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.

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.

The Financial Scale Behind College Athletics

College sports is no longer a small-scale extracurricular system. Television rights, merchandise deals, ticket sales, sponsorship contracts, and licensing agreements generate billions in annual revenue across major athletic programs. Universities invest heavily in stadiums, coaching staff salaries, media production, recruitment, and branding—because the return on investment is often enormous. Yet the athletes who create the most market value traditionally receive only scholarships, housing, and limited cost-of-attendance stipends.

Supporters of player compensation argue that:

• College athletic labor produces measurable commercial profit
• Programs depend on players to sustain revenue, media value, and branding
• Scholarships alone do not equal fair market compensation for revenue-generating labor
• Restrictions historically limited collective bargaining and wage rights while shifting economic risk to players, not institutions

Opposing View: Education vs Employment

Organizations and universities resisting direct wage payment historically framed student athletics as education first, not employment. Their argument includes:

• Athletes are students, not contracted employees
• Scholarships fund education, training, housing, and future opportunities
• Compensation could impact Title IX balance, tax structure, university expenses, and scholarship models
• Paying salaries may create economic strain or redefine employer roles for universities

NIL Policies Changed the Game

A major turning point occurred when the Supreme Court ruled in favor of expanded rights for players to earn income from their own name, image, and likeness (NIL). Following this shift, the U.S. broadcasted organization National Collegiate Athletic Association (NCAA) updated its policies, enabling players to legally sign endorsement agreements, social media sponsorships, local marketing partnerships, branded merchandise deals, and personal appearance contracts—without losing eligibility, provided they do not violate contract disclosure rules or university operational agreements.

While NIL policies granted income opportunities, critics still note:

• NIL is not the same as a guaranteed wage or revenue-sharing employment model
• Only high-visibility players see measurable NIL value, leaving thousands still uncompensated
• Revenue still flows primarily to institutions, media partners, brands, and broadcasters, not athletes

Legal Angle: Labor Classification and Fair Compensation Principles

Some legal scholars believe the future of college sports may eventually see deeper challenges including:

• Whether long-term workforce control amounts to employee-type classification
• Whether collective bargaining rights extend to college athletic labor
• Whether wage or revenue-sharing frameworks may apply in certain jurisdictions

The legal principle used in worker misclassification cases—economic realities tests, bargaining power analysis, employer control factors, undue hardship balancing, and contract enforceability review—now increasingly surrounds collegiate athletics conversations.

Who This Matters For

This impacts:

Courts evaluating revenue distribution fairness and worker rights principles

Universities reviewing risk and compliance for player contracts

Sports media partners, sponsors, merchandise brands, and recruitment systems

Athletes seeking fair compensation planning strategy at onboarding

Labor law advocates tracking collective employment standard evolution

(View Article)

Details of the Case

• The employee verbally complained to his employer that months had passed since his last paycheck.
• The employee alleged that his employer pointed a gun at him and told him that he would get paid when the employer felt like paying him.
• The plaintiff filed suit for unpaid wages and retaliation.
• The plaintiff argued that the exchange with his employer was a constructive discharge that violated the FLSA prohibition against retaliations.
• The district court ruled against the plaintiff on the retaliation claim, following a previous ruling by the Second Circuit that informal verbal complaints made to supervisors did not fall under the FLSA protections.

On appeal, the Second Circuit reversed its prior stance by holding that the goal of the FLSA favors the inclusion of certain intra-company complaints under retaliation protection. The court went on to explain that “grumbles in the hallways about an employer’s payroll practice” are not covered by FLSA and that covered complaints must have “some degree of formality.” For employees, this decision offers some level of assurance that formal complaints to supervisors are protected against retaliation.

If you have questions about FLSA protection from retaliation, don’t hesitate to reach out to our office today to speak with a skilled legal professional.

Have you ever been asked to record fewer hours than you actually worked? If yes, you’re not alone – many workers face pressure from supervisors to under-report overtime, leaving them unpaid and unheard.

Recently, employees received a major win when the Eleventh Circuit Court of Appeals ruled against an employer that encouraged this exact behavior. In the case, Bailey challenged his employer, arguing that he was denied rightful overtime pay under federal law.

Case Breakdown: Bailey v. Titlemax of Georgia

The key facts presented to the court were:

• His employer required him to regularly work overtime.
• His supervisor pressured him to falsely report fewer hours on his time card.
• He eventually resigned from the company.
• He later filed a lawsuit claiming unpaid overtime under the FLSA.

The employer requested a summary judgment, claiming the employee violated company policy by not reporting accurate hours. They also argued he should have escalated the issue to higher management. The employee acknowledged these policies.

Initially, the District Court sided with the employer using the “unclean hands” defense—suggesting the employee was partly responsible for his unpaid overtime.

Appeal Decision: Workers Protected Under the FLSA

On appeal, the Eleventh Circuit Court overturned the ruling, emphasizing that the purpose of the Fair Labor Standards Act (FLSA) is to protect workers and level the imbalance between employers and employees.

The court determined that:

• An employer cannot avoid overtime liability just because hours were under-reported.
• The employer knew or should have known about the overtime work.
• Since the employer had actual or constructive knowledge, they were legally required to pay overtime.

What This Means for Employees

This ruling sets an important precedent:

• Employers can no longer pressure workers to misreport hours.
• Companies remain responsible for overtime pay even if supervisors demand under-reporting.
• Denying liability based on false time card entries is no longer a valid defense.

Final Thoughts

Workers often feel powerless when forced to choose between job security and fair wages – especially under supervisor pressure. Thankfully, courts continue to reinforce that labor laws exist to protect employees, not penalize them.

If you have concerns about unpaid or unreported overtime, consider seeking guidance from a labor attorney or a local wage and hour authority. No employee should have to work for free.

Under the Fair Labor Standards Act, employers must compensate employees for any work that the employer did “suffer or permit” the employee to perform. It is a highly debatable standard that is often contested by workers who are classified as exempt employees, but seek compensation for overtime work that they performed. This was the situation in a case recently decided by the Court of Appeals for the 11^th Circuit.

The plaintiff in the case presented evidence that management changed his timesheets or instructed him to change his timesheets for the purpose of decreasing the amount of hours worked.  The court ruled against the employer, stating that the work was compensable if it was done with the employer’s knowledge, regardless of what is represented on a timesheet.

The significance of the ruling

The ruling is especially relevant to employees who wonder whether they can ever be paid for work that wasn’t recorded, and for employers who look to shield themselves by arguing that the information on a timesheet protects them against allegations of unpaid work. At least one court recognizes the inequity and ruled that, even with a completed timesheet that does not reflect off-the-clock work, an employee can present evidence regarding additional work hours for payment.

If you have a question about timekeeping practices and FLSA compliance, reach out to our office today to speak with an experienced attorney.

The case involved warehouse workers who pulled items from shelves and packaged them for delivery.  At the conclusion of each shift, the company mandated that each worker pass through a security screening.  According to the employees, this process took approximately 25 minutes to complete.  In bringing the case, the plaintiffs asserted that they should be paid for this additional time.

What is an “Integral and Indispensable” Activity

Though the workers were successful in front of the Ninth Circuit Court of Appeals, the Supreme Court reversed and handed a major victory to employers. In defining an “Integral and Indispensable” responsibility, the court explained that it is an “intrinsic element of those [work] activities and one with which the employee cannot dispense if he is to perform his principal activities.” In this case, the Court found that the security screenings were not essential to the work responsibilities, ruling that the employees were able to continue with their responsibilities whether or not the security screenings continued.

If you have questions about the implications of this court decision, contact our office for a free case evaluation.