Internships provide recent college graduates and those transitioning to new careers with the opportunity for real-life job training and can even lead to full-time jobs. Employers, meanwhile, can use internship programs to scout out new talent and get temporary help without committing to permanent new hires.

But business owners who view interns as free labor or potential hires need to know that federal labor laws require payment in most circumstances. That’s not to say employers can never have unpaid interns; they’re just not very common, at least legally. State laws may also apply, but the Fair Labor Standards Act (FLSA) governs how interns must be compensated under federal law.

Six-Part Test for Unpaid Internships

The vast majority of interns working at for-profit organizations must be paid at least the minimum wage and any applicable overtime. Technically, paid interns are temporary employees and treated virtually the same as regular employees with respect to labor law. But you may legally hire an unpaid intern if the following six criteria are met:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
  2. The experience is for the benefit of the intern.
  3. The intern does not displace regular employees but works under close supervision of existing staff.
  4. The employer providing the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded.
  5. There is no guarantee of a job at the conclusion of the internship.
  6. Both parties understand that the intern is not entitled to wages for the internship.

Common Factors to Consider for Internship Programs

Similar to an Educational Environment – An internship is more likely to be viewed as a training program as opposed to actual employment if it is structured around a classroom experience and if the intern is provided with skills that can be applied to other employment settings. A rule of thumb is that an unpaid intern does not regularly perform the company’s routine work, nor is the business dependent upon that individual’s work product.

Displacement and Supervision – Interns used as substitutes for regular workers or to provide a needed boost in personnel must be paid at least minimum wage and any overtime. But if the intern is receiving job shadowing opportunities without performing more than a minimum of work, the relationship is more likely to be viewed as an unpaid internship.

Job Entitlement – Employers should establish the duration of the internship from the beginning and avoid making any promises of a permanent position or calling it a “trial period.”

Create Value in Your Internship

Internships are increasingly important today, they explained, because skills are increasingly important in the new economy and because colleges increasingly don’t teach the ones employers are looking for. Experience, rather than a degree, has become an important proxy for skill, they note, and internships give you that experience.

It is almost as hard to get a paid internship today as it is to get an actual job. Last summer, Goldman Sachs hired 350 paid investment banking interns out of 17,000 applicants.

Since so many internships are unpaid these days, there is a real danger that only “rich kids” can afford them, which will only widen income gaps. The key, if you get one, is to remember “that companies don’t want generalists to help them think big, they want people who can help them execute” and “add value.”

But what does “add value” mean? It means, show that you have some creativity — particularly in design, innovation, entrepreneurship, sales or marketing, skills that can’t be easily replaced by a piece of software, a machine or a cheaper worker in India.

Ways to Add Value to an Internship

Take Initiative

Be willing and open to learn anything. Take the lead in establishing goals with your boss or manager. Volunteer for assignments and always ask yourself, “What is the best use of my time right now?”

Go Above and Beyond

Once you are given initial assignments and learn more about the needs of the company, go above and beyond to solve problems and make decisions. Make it a practice to exceed expectations, not just meet them.

See Yourself as an Invested Employee

An internship is not a college course, it is your job. Dress for the position you want, come to work on time, and communicate professionally. Think like a success and take note of what the top performers do and say. Success leaves footprints.

Connect With Others Who Can Teach You

Who are the people in the company who can help you attain your professional goals? Your ability to manage the relationship with the people within the company most dictates how you will do this outside of school. Seek out a formal, informal, committee-style mentor relationship. Learning from people in the front lines is the best way to gain insight about any organization. Stay away from negative people, slackers, and malcontents—all emotional vampires that kill the careers of those whom they infect.

Develop Project Management Skills

Ask for a project that might take a week or two to complete. It could be a strategic report, it could be recommendations for building an app, or it could be organizing and running a focus group with other students. Get good at time management and organization. Use the tools (calendars, apps, planners, software) the pros use to get things done.

Follow Through

Be impeccable with your follow through. Summarize meetings in emails. Clarify what you don’t understand. Pick up the phone, go into someone’s office and have a conversation and approach each assignment with a quality mindset. Come in early and stay late if that’s what it takes. Be impeccable in your written and verbal communication.

Identify Your Area of Expertise

Once you have been at the internship for a few weeks, think about your strengths and weaknesses and how you might best use them on the internship. Where do you excel and how can your skills create additional value. Inform your supervisor of your goals and aspirations on a monthly basis and regularly ask, “What am I doing well, what can I be doing better?”

Build Your Portfolio

You should leave your internship with several examples of real projects and outcomes that you’ve completed or contributed to that you can share in a job interview. Assemble this information in a binder and share it in upcoming interviews as tangible proof of the value you can create.