How to Hire Unpaid Interns (Legally)

Before you set your bright new interns to work, here are a few things to keep in mind to avoid any missteps:

According to the U.S. Department of Labor and the California Department of Labor Standards Enforcement, there are certain standards that employers must follow when taking on unpaid interns. These requirements are intended to ensure the intern receives a valuable learning experience and does not just provide free labor.

In order to determine whether a person is an employee or a non-employee (intern), there are six factors that must be considered by for-profit businesses. If all factors are not met, the intern is legally an employee who must be paid minimum wage, earn overtime, and receive all other protections guaranteed to employees by Federal and State laws.

Educational Environment

Interns should not merely be assigned “grunt” work, such as filing, assisting customers, and other clerical tasks. Rather, an employer should assign their intern projects that resemble what students would learn in a training or educational course. The more the internship provides the intern with skills that he or she can apply in settings beyond a particular employer’s operations, the more likely the internship will be permissible.

A recommended way to comply with this factor is to write a policy for the internship program outlining the educational goals of the internship and the training that will be provided to reach those goals. Employers should distribute the policy to interns at the start of the internship.

For the Benefit of the Intern

Similar to the first factor, if an employer provides hands-on training and constant supervision, then it is likely that the intern will learn skills that will benefit him or her in the future. While clerical tasks may teach the intern a new skill or improve his or her work habits, it is obvious that an employer is the one receiving the benefit, not the intern.

Again, having a written policy for the intern to receive upon the start of the internship allows the intern to see the ways in which he or she will hopefully benefit from the experience.

The Intern Doesn’t Displace Regular Employees

It is important to remember that interns are not to be treated as employees. If an intern is essentially performing the same tasks as an employee, then he or she is entitled to wages.

This is not to say an intern cannot perform any work. An intern may perform tasks that another employee would normally do if the employer closely supervises the intern while he or she completes the tasks. This interpretation assumes that the intern is not boosting the employer’s overall productivity because the supervising employee is teaching, instead of performing his or her own tasks.

The Employer Gets No Immediate Advantage

Out of all of the factors, this one is arguably the most devastating to small businesses. An intern, for instance, cannot deliver mail, sort files, organize a person’s calendar, conduct market research, write reports, or any other job that assists the employer in any way in running their business.

An internship program should always be designed to benefit the intern and any benefit to the employer is incidental, not the other way around. Since learning comes from doing, there is inevitably going to be some benefit to the employer, but it should never outweigh the benefit to the intern.

The Intern Is Not Entitled to A Job

It is essential that the intern clearly understands the temporary duration of the internship. An employer will violate this factor if the intern considers the work experience a necessary step for future employment, or if the employer treats the internship as a “trial run” before they offer the intern employment. To comply, an employer should make clear from the onset of the internship that the intern is not entitled to a job.

Employers can easily satisfy this factor by having all interns sign and date an offer letter and job description that states that he or she understands that the completion of the internship program does not entitle him or her to a paid position.

Both Parties Understand That the Intern Is Not Entitled to Wages

Again, a signed form or statement saying that the intern understands he or she is not entitled to wages or any other compensation for the time spent in the internship would be sufficient to satisfy this factor. The form or statement may be combined with factor five to save paper.

Noncompliance with the above can result in the intern being classified as an employee, which entitles him or her to wages, and could also result in litigation and/or penalties against the employer. Remember, unpaid interns are great for startups, but the secret to keeping them great is in the six factors.

Also, it’s important to note that although unpaid interns are not employees there are certain privileges that do extend to them, namely: protection against sexual harassment and discrimination. California recently passed a bill that protects unpaid interns from sexual harassment and discrimination, just like any other employee.

Putting It All Together: Offer Letters & Job Descriptions

Taking everything from above and smashing it all together, hiring unpaid interns requires some paperwork. One of the easiest ways to stay compliant is to use offer letters & job descriptions for hiring (see our article here for more detail on that). To do this, it’s probably a good idea to reach out to your lawyer peeps!

Revised by: Zachary Avina – 03/06/18

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Photo Credit:  © Tim Wright