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Are Unpaid Interns Legal?

Written by Zana Tomich on April 25, 2017 Category: Creative Services Firms, General Counsel and Advice, Restaurants, Small Businesses

As  summer approaches, the season of interns is also on the horizon. While college students comprise of the typical intern class, many recent graduates, or students in post-graduate programs who are finding the job market competitive, offer to work as unpaid interns to gain experience in their desired industry. While many employers would like to jump on the idea of volunteer labor, allowing unpaid interns to work without paying them could run afoul of the Fair Labor Standards Act (FLSA).

The FLSA requires that minimum wage (and overtime where applicable) be paid for all work permitted by the employer. The general rule of thumb is if the intern would qualify to be paid for services, regardless of the label, then they are entitled to minimum wage, plus overtime. The Department of Labor provides a six-factor test to on how to make an unpaid internship legal:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which 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; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent on the internship.

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

If all of the above factors exist, then an employment relationship does not exist, and the FLSA does not apply: the employer can continue to accept the work of the unpaid intern. But, for many internship positions, this is not the case. To meet the first criteria, ideally, the intern should receive some sort course credit through their educational facility. The work should have an educational focus, and not merely running the operations of the company. Another reason these criteria are not met, is when the intern is actually displacing the work of a paid employee.  If a paid employee can be doing the job of the unpaid intern, there is a problem.  Finally, the intern should be receiving a benefit from the work performed, not the employer.

While unpaid interns who do not meet these criteria are working in many industries, from banking to the restaurant industry, where they call these unpaid posts a stagiaire, or stage, employers should be careful when accepting these positions. It could put the employer at risk for FLSA violations, including back pay and penalties. When in doubt, treat the intern as an employee, and pay the minimum wage.  For assistance in how to structure these internships, contact me to discuss the parameters of your program.

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