Unpaid internships a "no-no" with Department of Labor

While job openings are certainly scarce during these recessionary times – and companies are looking for ways to cut costs - those aren’t excuses for doling out unpaid internships to young people eager to get a foot in the door. Federal and state regulators are concerned that employers are abusing internships and using them, in a sense, for free labor.

In fact, the DOL plans to crack down on employers who offer unpaid internships, taking the position that interns are entitled to wages under the Fair Labor Standards Act (FLSA). And to support that position, the previously flexible interpretations of whether or not to pay interns are about to get much stricter.

"If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law," said Nancy J. Leppink, director of the Department's Wage and Hour Division.

In general, for an unpaid internship to be lawful under the FLSA, the intern must be properly classified as a "trainee" rather than an "employee." To help you determine this, the DOL has developed a six-factor test.

Interns are likely to be deemed “trainees” if:

1) The training is similar to what might be offered in an academic institution or vocational school.
2) The training is for the benefit of the trainees.
3) The trainees do not displace regular employees, but work under their close supervision.
4) The employer derives no immediate benefit from the training, and occasionally the employer's operations may be impeded by the training.
5) Trainees are not entitled to a job at the end of the training period.
6) The employer and trainees understand that the trainees are not entitled to wages for time spent in training.

In the meantime, legal experts offer this advice: Assume that all unpaid internships are unlawful, and carefully tailor your training programs for new or prospective employees to avoid liability.

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Unpaid internships: A rip-off or legitimate resume booster?

Unpaid internships a "no-no" with Department of Labor

Unpaid internships: A rip-off or legitimate resume booster?

It seems that Mark Cuban has stirred up a bit of a hornet’s nest with his recent post about unpaid internships. He’s already received 90 comments, ranging from wholehearted approval of his argument (pro unpaid internships) to outright disgust that he’d support such a notion.

He explains:

“This summer, in response to the changing sports media landscape, I wanted to
create a “media pool” for the Mavs. I wanted to assemble a group of unpaid
interns that would acquire video, write game reports, track unique stats, do
interviews, interact with fans, and then compile all of this incremental media
and provide it free to any and every outlet we could think of.”

His justification for taking the unpaid internship route was this:

“One silver lining of a “great recession” that we are now in is that there are a
lot of incredibly talented people without jobs, or who have lost their jobs. I
didn’t care if they were 18 years old or 73 years old. I thought we could
assemble a talented group who would enjoy the internships and could also gain
valuable experience to add to their resumes.”

But his plans were quickly halted when he heard back from his HR department. He learned that to be legal, interns must be paid, unless they are performing work that is of no value to the organization. This didn’t sit well with Mark - that whether or not the trainee would welcome the “on the job” experience, or be willing to work for no pay, does not come into play.

To be clear, the U.S. Department of Labor has developed specific criteria for determining an internship’s pay status. For an internship to be unpaid, it must meet these six legal tests:

1. It must be an educational experience, the equivalent of vocational school
2. It must primarily benefit the trainee
3. The trainee cannot do work that would otherwise be done by a paid employee, and must work under the close supervision of a manager
4. The employer cannot derive immediate advantage from the trainee’s work or profit from it
5. The employer must not promise a paid job at the completion of the training period
6. The employer and trainee must agree (ideally in writing) that no wages will be paid during the training period


On one side of the ring are the people who feel that an internship is a great way for someone to try out a particular industry and gain practical experience – and if that person is willing to get a “foot in the door” for free, more power to him. (A risk vs. opportunity scenario.) On the other side of the ring are the people who feel that it’s wrong for an individual to work for a company, in any capacity, and not get paid. That no one should do the work of a paid employee, no matter what the possible pay-off later, for free.

What do you think? Should the guidelines surrounding unpaid internships be loosened? How does your business handle the matter of unpaid vs. paid internships – and how do you make the most of the employer-trainee relationship so that everyone benefits?

Unpaid internships: A rip-off or legitimate resume booster?

Unpaid interns and the FLSA, what you need to know before hiring summer help

Spring is here and summer fast approaching, along with droves of college students hoping to turn their free time into a few months of valuable on-the-job training.

Whether it's because they're simply looking for work experience, or they need to earn a few more college credits, many students are willing to intern for little to no money at all.

While many companies may see at it as the perfect opportunity to get some extra help around the office, there are a few legal issues to consider before agreeing to something for nothing.

Intern or employee?

The Fair Labor Standards Act (FLSA) requires that nonexempt employees receive at least minimum wage for all hours worked and must also receive time-and-a-half pay for all hours worked more than 40 during the workweek.

While the FLSA doesn't define what an intern is, nor provide an exemption from minimum wages or overtime for interns, it does define an employee as "any individual employed by an employer." The definition of "employ" under the FLSA "includes to suffer or permit to work."

Under federal law, for-profit organizations must pay workers unless the position fits six criteria:

1. 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;


2. The training is for the benefit of the trainee;


3. The trainees do not displace regular employees, but work under close observation;


4. The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;


5. The trainees are not necessarily entitled to a job at the completion of the training period; and


6. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

To ensure compliance, employers offering unpaid internships should structure the position in a way that the intern receives the full benefit of the experience.

Employers can take it a step further and establish a written agreement between the business and the intern outlining the terms of the unpaid internship. The document should contain a clear definition of the position, including that it is a learning experience.

If you're not careful, hiring an unpaid intern that later turns out to qualify as an employee could potentially cost your company thousands in unpaid wages and hefty legal fines. When in doubt, pay interns at least minimum wage to avoid legal problems.

Unpaid internships that do not match all six of the DOL's criteria could also lead to legal problems involving workers' compensation, employee benefits, discrimination laws, federal and state taxes, and unemployment insurance coverage.

Failing to comply with wage and hour laws can lead to serious FLSA administration errors that could cost your business thousands in fines. Tools like the FLSA Compliance Kit can help you navigate through every FLSA regulation from child labor laws to timekeeping discrepancies.

Any additional advice for companies hiring unpaid interns for the summer? Please leave a comment and share your tips.

Unpaid interns and the FLSA, what you need to know before hiring summer help