Hiring Unpaid Interns – 6 Things You Need to Know to Avoid Getting Into Trouble

More and more, the Department of Labor is scrutinizing employer hiring practices for internships, especially the unpaid kind. Since 1947, organizations have been able to get away with unpaid Internships under the “trainee” exemption to mandated wage and hour laws, wherein the intern gains practical work experience and learning opportunities on the job instead of pay. This can be a great experience for both the business and the student.

As we noted a recent last post, in many “glamour” industries like fashion, entertainment and publishing, employers increasingly are hiring unpaid interns as a form of slave labor, where the privilege of just being on site every day was considered compensation enough for the eager peons, and little in the way of educational value or structured learning ever took place. A couple of years ago, the US Department of Labor started issuing warnings about this practice and threatening enforcement action. There have also been several lawsuits filed by disgruntled ex-interns seeking back pay.

What’s the RIGHT way to handle an unpaid internship? Here is our explanation of the Department of Labor’s Six-Part Test to determine if an unpaid internship is exempt from minimum wage laws:

1. The internship must be similar to training that would be given in an educational environment, even though it includes actual operations of business.

  • OK: Giving software instruction
  •  NOT OK: Most of their time spent on “Go-fer” jobs.

2. The intern experience must benefit the intern and offer a credible learning experience.

  •  OK: Skill acquisition
  •  NOT OK: A parade of menial, repetitive tasks

3. The intern does not replace or displace a regular employee, and works under the close supervision of an existing staff member.

  • OK: Intern “shadows” and assists supervisor with discrete tasks
  • NOT OK: Filling a clerical job vacancy with an unpaid intern

4. The organization derives no immediate advantage from the intern’s activities and may even suffer impediments to its operations due to the intern.

  •  OK: Intern’s education may slow down work a bit
  • NOT OK: Intern produces work that can be sold to customers

5. The intern is generally not entitled to a job at the conclusion of the internship.

  •  OK: Job offer based on proven potential
  • NOT OK: Guaranteed job after internship

6. Both the employer and the intern understand the internship is unpaid.

 

If the internship is a paid internship, then the rules are much simpler. The intern must be paid at least the minimum wage and does not have the similar restrictions that an unpaid internship has. A paid internship should be one where the intern works, or gains experience in a particular vocation, but because they are paid, they can do work where the organization derives an immediate benefit.

Just be careful in structuring and implementing an unpaid internship, and make sure all supervisors of interns understand and follow the rules outlined above. It may help to remind them that internship abuse is a violation of the Fair Labor Standards Act or FLSA, which can result in significant penalties and back wages in a DOL enforcement action. Or worse, you and the supervisors of the intern may become liable in a civil suit for the payment of those penalties in back wages as individuals.

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