Do I need an Internship Agreement?
In short: An internship agreement sets out the terms of an internship — the role, schedule, duration, pay, confidentiality, and who owns the work the intern creates. For a small business, it does one especially important job: documenting whether the internship is paid or unpaid, which is a decision with real legal weight under wage-and-hour law.
Bringing on your first intern feels like a milestone — extra hands, fresh energy, and a chance to mentor someone. But internships come with a legal wrinkle most founders don't see coming, and it's a big one: at a for-profit business, you often have to pay your intern. Let's walk through what an internship agreement covers and, most importantly, how to get the paid-vs-unpaid question right.
What an internship agreement actually covers
A good internship agreement makes the relationship clear for both sides:
- The role and learning goals — what the intern will do and gain.
- Schedule and duration — hours, start and end dates.
- Pay — whether it's paid, and at what rate (more on this below).
- Confidentiality — protecting your designs, plans, and customer info.
- Ownership of work — making sure anything the intern creates for your brand belongs to you.
- No guarantee of a job — clarifying the internship doesn't promise future employment.
That ownership piece matters more than founders expect: if your intern designs graphics, shoots content, or writes copy, you want a written assignment making that work yours — just like you would with a contractor.
The part that trips up small businesses: do you have to pay your intern?
Here's the honest, important truth. At a for-profit business, interns are generally considered employees under federal wage-and-hour law — which means they must be paid at least minimum wage (and overtime) — unless the internship genuinely qualifies as unpaid under what's called the primary beneficiary test.
That test asks who's really the "primary beneficiary" of the arrangement — the intern or the business. Courts and the U.S. Department of Labor weigh factors such as:
- Whether both sides clearly understand there's no expectation of pay
- Whether the internship provides training similar to what you'd get in school
- Whether it's tied to the intern's formal education or academic credit
- Whether it accommodates their academic calendar
- Whether it lasts only as long as there's genuine learning value
- Whether the intern's work complements rather than replaces your paid staff
- Whether both sides understand there's no promise of a paid job afterward
No single factor decides it — it's the overall picture that counts. The takeaway: if your "intern" is essentially doing the work of a paid employee, they very likely need to be paid. Getting this wrong can lead to claims for back pay and penalties, so when in doubt, pay the intern or check with an attorney.
A quick, practical way to stay on the safe side
Many small brands find the cleanest path is simply to pay their interns at least minimum wage. It sidesteps the whole classification risk, widens your talent pool, and is often the right thing to do anyway. If you're set on an unpaid internship, partner with a school so it's tied to academic credit, keep the focus on learning, and make sure the intern isn't replacing paid work. And remember: some states have their own, stricter rules, so check yours.
What an internship agreement does and doesn't do
An internship agreement is essential for documenting your terms — pay, scope, confidentiality, and ownership. What it can't do is magically make an unpaid internship legal if the actual arrangement doesn't qualify. The document records your intentions; the law looks at the reality of how you work together. Use the agreement to set clear, compliant terms from day one, and treat the paid-vs-unpaid decision as the real legal question it is.
Frequently asked questions
Do I legally have to pay my intern?
At a for-profit business, usually yes — unless the internship genuinely meets the primary beneficiary test for an unpaid internship. If your intern is doing the work of a paid employee, they most likely need to be paid.
What is the "primary beneficiary test"?
It's the standard used to decide whether an intern can be unpaid. It weighs who benefits more from the arrangement — the intern (through genuine learning) or the business (through free labor) — across several factors.
Who owns the work my intern creates?
Without an agreement assigning it to you, ownership can be murky. A good internship agreement makes clear that designs, content, and other work the intern creates for your brand belong to your business.
Can I offer an unpaid internship if I give college credit?
Academic credit is one helpful factor, but it doesn't automatically make an internship legally unpaid on its own. The full arrangement still has to meet the primary beneficiary test.
Does an internship agreement guarantee my intern a job?
No — and it shouldn't. A well-drafted agreement makes clear the internship doesn't promise future employment, which protects both sides.
Bring on an intern the right way
Dream Shop's Internship Agreement is attorney-drafted for small brands — so you set clear, compliant terms, protect your work, and start the relationship on solid footing.
Disclaimer: This article is for educational and informational purposes and isn't personalized legal advice. Accessing Dream Shop content and contract templates doesn't create an attorney-client relationship. For high-stakes situations, have a local attorney review your customized contract.