Be Aware Of Labor Laws Before You Decide To Hire An Unpaid Intern

from the save-now,-pay-more-later dept

Many companies have long been taking advantage of young, bright-eyed students and recent college graduates who are eager to work for nothing (or practically nothing) in the hopes that their work experience will eventually land them their dream job. But is it legal for a for-profit company to not pay a full-time intern? Talk to your lawyer, but generally, the answer is no. Only government and non-profit organizations are allowed to use unpaid interns without worrying about breaking the law. Given the rampant (ab)use of unpaid interns during this recession, the Department of Labor is starting to crack down on employers who don't pay their interns fairly. The confusing part, though, is that labor laws are somewhat outdated and open to interpretation.

The six federal legal criteria that must be met in order to hire an unpaid intern are based on a 1947 Supreme Court decision about whether the Fair Labor Standards Act (FLSA) was applicable to prospective train yard brakemen. (Hmm. When was the last time you heard about a good train yard internship?) Under the current FLSA, employers can hire an unpaid intern if all of the following conditions are met:

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 or academic institution. The idea here is basically that any work should be for training purposes only -- not for the sake of getting real work done at the company.
2. The training is for the benefit of the trainee. This is generally true. Interns are happy to work for no pay if it means that in the end, they can put a company's name on their resume or even get a paid full-time job at the company.
3. The trainees do not displace regular employees, but work under close observation. This implies that interns shouldn't be doing actual work that might displace a paid employee.
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. When doesn't an employer gain an advantage from having an intern? This is where many companies can get into trouble. The definition of "immediate advantage" leaves a lot of room for interpretation.
5. The trainees are not necessarily entitled to a job at the completion of the training period. Companies often use internships as "working interviews" where the intern is hired as an employee after the internship is over if they perform well.
6. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training. This is generally not a problem, since both parties should agree to the scope of the internship.

So it's quite difficult to meet all six criteria, and hiring an unpaid intern based on a loose interpretation of the laws could cost employers more than just compensating for minimum wage and overtime. Think potentially huge fines and legal bills -- as well as long drawn-out legal proceedings. However, since the enforcement of the intern criteria has been lax for some time, many companies haven't put too much thought into their internship programs. Some startups have even incorporated somewhat questionable unpaid internship work into their business models. Just last year, the Huffington Post famously had an auction where the winner actually paid $13,000 (which went to charity) for an intern position. Clearly, the rules governing internships have not been well-established according to the 'modern' workforce.

The upshot of all this, though, is that unpaid interns have hidden costs and liabilities -- which can be significant. Labor laws seem to favor the benefit of the intern and seem to frown upon companies that might be trying to just get free labor. But besides running afoul of labor laws, unpaid interns without proper supervision can also come back to haunt employers, especially when interns represent the company and are trusted with interacting with clients. Add the Department of Labor looking into the issue, and there are even more reasons to double-check and make sure internship programs make sense.

What has your experience been with internship programs and training interns? What are your motivations for offering intern positions? Do you think labor laws need to be adjusted to reflect more current trends in the workforce? Tell us what you think in the comments below.

Filed Under: employers, internships, labor