What Every Employer Needs to Know About Unpaid Internships

What Every Employer Needs to Know About Unpaid Internships

Internships are a popular way for businesses to get some help during vacation season, and for college students to get some experience working in the real world. But internships can be a legal minefield for employers who set up an unpaid internship program without doing it correctly. Here is an overview of the legal basics for offering an unpaid internship.

Know the Requirements

To be legal, the unpaid internship must meet the requirements set forth by the Department of Labor. These requirements include:

The internship must be educational. Even though the internship may include actual work for the employer, it must be similar to training that would be given in an educational environment, says Lori Adelson, attorney at law at Adelson Law. Work with the intern’s educational institution to determine credit that can be given.

“A properly designed unpaid internship will have assignments that build on each other to help the intern develop more skills, similar to the way each chapter of a textbook builds on the other,” says Donna Ballman, founder of Ballman Law Firm and author of “Stand Up for Yourself Without Getting Fired.”

The internship must benefit the intern, not the company. The company must not derive immediate advantage from the activities of the intern, Adelson says. In fact, having an intern may even disrupt regular operations by requiring other employees to spend time on training and monitoring the employee.

Avoid assigning the unpaid intern routine operational tasks, such as janitorial or clerical tasks, or work that other employees would normally perform, Adelson says. Keep in mind that any skills that the intern learns should be transferrable and not specific to your business’s own operations.

The internship must not displace regular employees. Employers cannot bring on unpaid interns to take the place of regular employees or add to the workforce during busy times, Adelson says. Unpaid interns cannot be used to displace or substitute regular employees or to supplement the workforce during times when the company would otherwise hire more employees or ask existing employees to work longer hours.

The internship is not a job guarantee. Adelson recommends setting a fixed period for the internship, established before it begins, and says employers must make it clear to interns that they are not entitled to a job at the end of the internship.

There must be no expectation of wages. Both the employer and the intern must understand that the intern is not entitled to wages for the time spent in the internship, Adelson says.

Know the Risks

Some employers may have unpaid interns sign a form stating they’re interns and not employees, but wage claims cannot be waived, Adelson says. Unpaid interns can later sue for back pay.

The consequences for not paying interns can be severe, Ballman says, including having to pay back wages, additional liquidated damages and attorney’s fees. In addition, the intern who sues can also sue on behalf of all the other interns you failed to pay over the past several years, she says.

Is It Worth the Trouble?

If you’re not comfortable with these restrictions or risks, you may want to avoid offering unpaid internships. “Basically, the best course of action is to pay at least minimum wage now, or pay a lot more later,” says Jeanine DeBacker, of McPharlin Sprinkles & Thomas LLP.

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