In California, you generally do have to pay interns. State law presumes anyone performing work for an employer is an employee owed at least the minimum wage, which is $16.90 per hour as of January 1, 2026.1California Department of Industrial Relations. Minimum Wage An internship can be unpaid only if it satisfies a strict legal test showing the intern, not the employer, gets the real benefit from the relationship. Fail that test, and the “intern” is an employee entitled to full wages, overtime, and meal and rest break protections.
The Test That Decides Whether an Intern Can Be Unpaid
The Ninth Circuit, which covers California, uses the “primary beneficiary” test, adopted in Benjamin v. B&H Education, Inc. (2017). The court held the same framework governs both federal and California state wage claims.2Justia Law. Benjamin v. B&H Education, Inc., No. 15-17147 (9th Cir. 2017) The question is who benefits more. If the intern gains meaningful education and training that outweighs the productive work the employer receives, the internship can be unpaid. If the employer comes out ahead, the intern is an employee and must be paid.
One complication: the California Division of Labor Standards Enforcement has never formally adopted the primary beneficiary test. Its last published guidance, a 2010 opinion letter, applies an older six-factor analysis that asks, among other things, whether the employer derives “no immediate advantage” from the intern’s activities. The DLSE could still apply that stricter standard in an enforcement action, so cautious employers try to satisfy both tests.
The Seven Factors Courts Weigh
Under the primary beneficiary test, courts weigh seven factors, and no single factor controls. The analysis looks at the relationship as a whole.3U.S. Department of Labor. Fact Sheet 71 – Internship Programs Under The Fair Labor Standards Act
- Both sides clearly understand the internship is unpaid, with no implied promise of compensation.
- The internship provides training comparable to what the intern would get in a classroom or vocational program.
- The internship is tied to the intern’s formal education through coursework or academic credit.
- The schedule accommodates the intern’s academic calendar rather than treating them like a regular employee on a fixed shift.
- The internship lasts only as long as the intern is actually learning, not indefinitely.
- The intern’s work complements rather than displaces paid employees, and comes with genuine educational value.
- Both sides understand the internship does not entitle the intern to a paid job at the end.
Displacement is the factor that trips employers up most often. When an intern spends the bulk of their time doing the same tasks as entry-level employees, without meaningful mentorship layered on top, the arrangement looks less like education and more like free labor. Courts notice that quickly.
What You Owe an Intern Who Is Really an Employee
If an internship fails the primary beneficiary test, the intern is an employee under California law and gets the same protections as any other worker. That starts with the $16.90 state minimum wage, but many California cities set higher local floors. Several Bay Area cities require rates between $17.50 and $18.95 per hour for 2026.4County of San Mateo. 2026 Minimum Wage Reference Chart Some industries have their own floors as well; fast food restaurant employees, for example, have had a separate minimum starting at $20.00 per hour in 2024. Employers must pay whichever rate is highest.
Overtime
California overtime is stricter than federal law. An intern classified as an employee earns overtime after eight hours in a single day, not just after 40 hours in a week. The first eight hours worked on a seventh consecutive workday in the same workweek are also paid at one and a half times the regular rate.5California Legislative Information. California Code LAB 510 Hours beyond 12 in a single day, or beyond eight on that seventh consecutive day, are paid at double time.
Meal and Rest Breaks
An intern working as an employee must get a 30-minute meal break before the fifth hour of work. If the total shift is six hours or less, both sides can agree to waive it. A second meal break is required after ten hours, though it can be waived by mutual agreement if the shift stays under 12 hours and the first break wasn’t waived.6California Department of Industrial Relations. Meal Periods
Rest breaks are required too: a paid 10-minute break for every four hours worked, or major fraction thereof. Miss a required break, and the penalty is one additional hour of pay at the regular rate for each workday a break was missed.7California Department of Industrial Relations. Rest Periods/Lactation Accommodation The penalty is capped at one extra hour per type of break per day, not one hour per individual missed break. Miss two rest breaks in one day, and the penalty is one hour, not two.
Protections That Apply Even to Unpaid Interns
Even a legitimately unpaid intern has legal protections. California’s Fair Employment and Housing Act explicitly covers unpaid interns and volunteers. Under Government Code Section 12940, it is illegal to discriminate against an unpaid intern based on race, sex, gender identity, sexual orientation, age, disability, religion, national origin, or other protected characteristics.8California Legislative Information. California Code GOV 12940
Harassment protections are equally explicit. Employers can be held liable for harassment of an unpaid intern by supervisors, coworkers, or even non-employees, when the employer knew or should have known and failed to take corrective action.8California Legislative Information. California Code GOV 12940 Some employers assume that because interns aren’t on payroll, the company has less exposure. That assumption is wrong.
Nonprofits and Government Agencies Follow Different Rules
The primary beneficiary test applies to for-profit employers. Nonprofits and public agencies operate under a different framework. The Fair Labor Standards Act recognizes that people volunteer for religious, charitable, and civic organizations without expecting pay, and allows this as long as the arrangement is genuinely voluntary.9U.S. Department of Labor. Fair Labor Standards Act Advisor – Volunteers For-profit businesses cannot use this volunteer exception at all. Under the FLSA, employees may not volunteer services to a private for-profit employer.
Nonprofits can accept unpaid interns or volunteers more easily, but the arrangement still has limits. The individual must volunteer freely, without pressure. If the nonprofit assigns a “volunteer” a regular schedule, requires them to do the core revenue-generating work, or creates an implicit expectation of future employment, the line between volunteer and employee blurs fast.10U.S. Department of Labor. Wage and Hour Division Fact Sheet 14A – Non-Profit Organizations and the Fair Labor Standards Act State and local government agencies can accept volunteers for public service, but the same principle applies.
What Misclassifying an Intern Costs
An employer that calls someone an unpaid intern when the relationship is really employment faces exposure on several fronts. The most immediate liability is all unpaid wages, including minimum wage shortfalls and overtime the intern should have received. California Labor Code Section 1194 gives the worker the right to recover those amounts in court, plus interest and reasonable attorney’s fees.11California Legislative Information. California Code LAB 1194
Waiting time penalties under Labor Code Section 203 pile on top. If the employer willfully fails to pay final wages when the relationship ends, the penalty accrues at the worker’s daily rate of pay for each day the wages go unpaid, capped at 30 days.12California Legislative Information. California Code LAB 203 For a full-time intern at $16.90 per hour, that 30-day cap alone translates to over $4,000, before back wages or overtime.
Meal and rest break violations add another layer. Each workday a required break was missed generates an extra hour of premium pay. Over a 10- or 12-week internship, those penalties compound. Because misclassified interns were never set up on payroll, employers often also face penalties for failing to provide accurate wage statements and for not maintaining required employment records.
Tax Withholding Once an Intern Is on Payroll
Once an intern qualifies as an employee, the employer has the same tax obligations as with any other hire: federal income tax, Social Security (6.2%), and Medicare (1.45%) withheld from the intern’s pay, plus the employer’s matching share of Social Security and Medicare. California state income tax must also be withheld.
A narrow exception exists for students employed by the school, college, or university where they are actively enrolled. In that specific situation, FICA taxes do not apply to the student’s wages, provided education rather than employment is the predominant purpose of the relationship.13Internal Revenue Service. Student Exception to FICA Tax The exception does not help a private company that hires an intern from a local university. It applies only when the school itself is the employer.