The test for unpaid interns

By Thomas L. Boyer

Unpaid internships have probably never been more popular. Since it has been difficult for recent college graduates to obtain full-time positions in their fields or in many cases jobs of any kind, there is a large pool of students and graduates eager to obtain experience but more importantly, find an advantage in obtaining a full-time paid position. From an employer’s standpoint, unpaid interns provide an opportunity to train individuals without paying them while they learn, and allowing the employer to evaluate the performances of new people at a reduced cost and risk compared to providing full-time employment to untested applicants. Utilizing unpaid interns would seem to be a fine example of what an old mentor of mine used to call “doing well by doing good.”

Unpaid internships still may be a good idea and valuable for both the company and the intern but as I am sure you guessed, there are several rules and limitations that apply to intern programs.

For individuals to qualify as unpaid interns, rather than employees subject to the minimum wage, overtime and other state and federal labor and tax laws, compliance with all of the following criteria is necessary:

  • 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;
  • The training is for the benefit of the intern;
  • The interns do not displace regular employees, but work under close observation;
  • The employer that provides the training derives no immediate advantage from activities of the interns and on occasion the employer’s operations may actually be impeded;
  • The interns are not necessarily entitled to a job at the completion of the training period; and
  • The employer and the intern understand that interns are not entitled to wages for time spent in training.

Certainly, an employer may ultimately derive benefit from the efforts of an intern but the United States Department of Labor and the courts make it clear that an unpaid internship is primarily for the benefit of the intern. If there is an audit, and the Department of Labor concludes that interns are really employees, the potential liability to the employer includes back pay, tax withholding, unemployment contributions and workers’ compensation premiums along with any penalties that may apply. To avoid legal problems, it is helpful to obtain interns who are part of an internship program sponsored by a college or school district. It is better if the intern is receiving course credit for the internship. However, a school sponsored internship program is not a guarantee that the interns will qualify for unpaid status. The six criteria listed above must still be satisfied.

Internships may be mutually beneficial but the rules must be followed. Also, please remember that an individual has no right to waive the application of the law. An intern agreeing to a work arrangement or even initiating it, is not a defense to a violation of the law. Likewise, the argument that “everybody does it” or “this is the standard in the industry” are not valid defenses as Fox Searchlight Pictures and Comcast/NBC Universal are finding out.

For further information regarding these matters, please contact Mr. Boyer at 248.740.5666 or click here to send an email.