Understanding the Legal Issues of Unpaid Interns

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In the last few years companies have looked for ways to maximize their employees in a cost effective manner. Why not hire interns to work for free? While it seems like a no-brainer, having an intern is more complicated than many employers understand. Not just any for-profit company can legally have unpaid interns. Legal criteria exist to protect interns from being “grunt workers” for free.

There are several things to think about before you start advertising for interns. The basic premise of an internship is that it is real world, hands-on, job training that cannot be achieved in a classroom environment. The first question an employer should ask is, “am I prepared to offer an educational training experience?” Doing so takes manpower, planning, and often actually takes away from work production. In reality, the sole purpose of an internship is training and education.

The Department of Labor (DOL) has set guidelines for the hiring of unpaid interns. The following six criteria must be met:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
  2. The internship experience is for the benefit of the intern.
  3. The intern does not displace regular employees but works under close supervision of existing staff.
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.
  5. The intern is not necessarily entitled to a job at the conclusion of the internship.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The DOL states that all six must be met, but the courts have been more liberal with their interpretation. Historically they look at the internship as a whole. What seems to weigh most heavily is when an educational institution is involved, and credits are given in return for a student’s participation in an internship.

It is important to develop a detailed plan for the company’s internships. The following are points that need to be considered and planned for:

  • Compensation-If all six criteria are not met should you be paying minimum wage?
  • Workspace-Is there a physical space for the intern to work?
  • Manager-Who will oversee the internship?
  • Trainer-Who will provide the required training and education that the internship requires?
  • Training and Experience-What will the actual training entail and what is the work experience you are willing to provide?
  • Tasks-What will the intern actually do?
  • Expectations-What are realistic expectations for the intern and the company?

Once these key points have been addressed and a plan has been made, it is very important to review it with your attorney. This will avoid any problems popping up once an intern starts, especially in the area of compensation. Other important points to discuss with your attorney concerning internships include unemployment compensation, international students and internships, non-compete agreements, worker’s compensation, non-disclosure agreements, and discrimination.

Having an internship program is not just about having free labor. It is a way to give back to the community, local universities and your chosen field, as well as helping students gain real world experience. Understanding the legal aspects of internships is the first step in starting a successful program at your company.

Sources:

Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act. (April 2010).

Department of Labor

. (retrieved January 29, 2013)

https://www.dol.gov/whd/regs/compliance/whdfs71.pdf

Hlavac, Esq, George C. and Edward J. Easterly, Esq. (February 2010) Legal Q & A.

IUPUI.

(retrieved January 29, 2013).

https://www.iupui.edu/~solctr/wp-content/uploads/2010/12/Legal-Issues-2010.pdf