Now that summer is coming and schools are letting out for summer many companies look to use unpaid interns.  While this seems like a great idea in theory, there are laws the companies need to be aware of to keep themselves out of trouble.  

The Fair Labor Standards Act (FLSA) governs workers and lets us know when an employee should be classified as an employee or an intern. Within the FLSA  the term trainees is used rather than interns so many people don’t think the law applies to them or are not sure how to decipher it when looking into using unpaid interns.  I am going to interchange the word interns for trainees in the criteria listed below. 

There are six federal criteria that a business must meet to use an unpaid intern: 

1.  The intern must be training, even though it includes actual operation of the facilities of the employer, the work must be similar to what would be given in a vocational or academic setting; 

2.  The training must be for the benefit of the intern;

3.  The intern must not replace regular employees, but instead work under their close supervision and observation; 

4.  The employer must not derive immediate advantages from the activities of the intern, and on occasion the employer’s operations may be impeded; 

5.  The interns are not entitled to a job at the conclusion of the training period; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent training. 

The Department of Labor (DOL) has explained a bit further what they mean by issuing opinion letters.  In the opinion letters,  the DOL has said that the more the training program is structured around a classroom setting the more likely the internship will be viewed as an extension of education.  Also, the more the intern is provided with skills that can be used in multiple employment settings the more likely it is they are viewed to be receiving training. The intern should not just be learning how to work for your company and your industry, but they should be able to take their new skills elsewhere.   If an employer would have had to hire a paid employee to do the work, but is instead using an intern then the intern will be viewed as an employee.  The intern should likely require more supervision than a regular employee and have minimal actual work.  And regarding number five above, an internship generally has a set date as to when the relationship will end.  A fixed duration for the internship should be set so that there is no expectation of a job.  An internship should also not be a trial period so that an employer can decide if they want to hire the person at a later date.  

Stipends or scholarships are given for some internships. This money is not considered pay for purposes of the FLSA and the training element must be still be present.

The bottom line is the most unpaid internships are illegal and it is quite difficult to meet all of the criteria the DOL and the FLSA need met. 

If you are not sure you can satisfactorily meet all six criteria you may consider paying the intern minimum wage, this could help keep you out of trouble later.  Weigh the pros and cons of this risky decision carefully.   If you really need some good help maybe pay is a motivational tool for good work? On the other hand, if your business just doesn’t have the funding or wants to do good for the community incorporating training might be worth your while. 

An issue that arises with unpaid interns is that often the interns don’t mind not being paid as they think they are getting great experience that will help them find a job later.  However, most interns do not understand the laws and the fact that they don’t mind is not a valid defense if you are investigated.  

With the decline of the economy in 2008 many employers began using unpaid interns as a source of free labor, however due to the rise in this behavior the federal and state governments have begun investigations into how workers are classified and being paid.  There is now more reason than ever to watch how you are using and paying interns. 

This is a brief overview of using unpaid interns in the workforce.  Please let me now if you have further questions.