Here is a little bit of the legal history of unpaid internships. In the modern era, they have their origin in the 1947 Supreme Court case Walling v. Portland Terminal Co. Here was the situation in that case:

For many years, a railroad has given to prospective yard brakemen a practical course of training lasting seven or eight days. Under the supervision of a yard crew, each trainee first learns routine activities by observation and is then gradually permitted to do actual work under close scrutiny. His activities do not displace any of the regular employees, who do most of the work themselves and must stand immediately by to supervise what the trainee does. The trainee's work does not expedite the railroad's business, but may, and sometimes does, actually impede and retard it. Trainees who complete the course satisfactorily and are certified as competent are listed as eligible for employment when needed.

The court ruled that "trainees" were not employees under the Fair Labor Standards Act of 1938, because the employer received no "immediate advantage" from their work.

In 1993, the Department of Labor clarified what defines a trainee under this ruling:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

2. The training is for the benefit of the trainee;
3. The trainees do not displace regular employees, but work under close observation;
4. The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer's operations may actually be impeded;
5. The trainees are not necessarily entitled to a job at the completion of the training period; and
6. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

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