by:  Jonathan K. Driggs
A friend calls you up and informs you that her son, who is majoring in business at the local university, is looking for a summer internship in order to get some practical experience—and he’s completely ok with it being an unpaid internship.  She asks, “would you mind giving him an opportunity?”  Such an arrangement sounds great to you, who couldn’t use a little free help these days?

But hold on a minute, is it really ok to have someone work for free?  What about minimum wage requirements?  One very prevalent wage and hour “myth” is that unpaid internships are an easy to use exception to the law.  Nothing could be further from the truth.

The U.S. Department of Labor (DOL) applies the following six criteria when determining if a relationship qualifies for unpaid internship status when “for profit” employers are involved:

  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 in the internship.

Based upon the above, it is clear that the DOL has set a very high standard for unpaid internships—a standard that is rarely met in real life situations.  In particular, items #2 (the internship experience is for the benefit of the intern) and #4 (the employer derives no immediate advantage) exclude the vast majority of internship arrangements of which I am aware.  Practically speaking, what this means is that the only thing the intern can really do is observe.  If the intern does any work, that can be viewed as the employer deriving a benefit from the relationship.

It is important for employers to remember that employees may not waive their rights under the law—so, even if interns initially agree to not being paid, they can change their mind later on and demand payment (and file a claim with the DOL if their demands are not met).  Further, if an employer is audited by the DOL for any reason, these relationships can be uncovered.  Because of the difficult economy, the DOL is increasing the level of scrutiny on unpaid internships (their view is that they take paying jobs out of the marketplace).  The compliant approach is to pay the intern at least minimum wage for every hour worked.

Further information on this topic can be found on the DOL’s website: http://www.dol.gov/whd/regs/compliance/whdfs71.pdf

This article should not be construed as legal advice.

Jonathan K. Driggs is an employment law attorney with over 18 years of experience, including 3 years with the Utah Labor Commission.  www.jdriggslaw.com

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