Legal Reference & Blog

Avoid Trouble with Unpaid Interns

August 3rd, 2008 Posted in Legal Reference

Before hiring that enthusiastic intern who is willing to work for free at your company, you need to be aware that the unpaid intern may be considered a nonexempt employee under the Fair Labor Standards Act (FLSA), and entitled to minimum wage for all hours worked. That “intern” may also receive one-and-a-half times the minimum wage for all hours worked in excess of 40 in a workweek.

To qualify as a true unpaid internship (and avoid payment of a minimum wage), the internship must satisfy the following conditions:

1. The internship must be an educational experience, similar to the training given in a vocational school.

2. The training must primarily benefit the intern, and not the employer.

3. The intern cannot do work that would otherwise be done by a regular paid employee, and must work under close supervision.

4. The employer cannot profit from the intern’s work.

5. The employer cannot (when hiring an intern) promise a paid job at the completion of the internship (however, its acceptable to offer a paid job after the internship ends.

6. The intern and the employer must agree that no wages will be paid for the training. I recommend putting this in writing.

Remember, it takes only one unhappy intern to notify the U.S. Department of Labor about labor law violations. In 2007, the Labor Department collection $221 million in back wages and received about 24,950 new complaints about wage and hour laws.

Furthermore, a misguided classification that an unpaid intern is actually an employee, can also lead to issues relating to workers’ compensation, state and federal taxes, benefits and unemployment insurance coverage. This can easily cost your company thousands of dollars in unpaid wages, overtime, fines and other costs. Here are some more helpful tips before you decide to take on an unpaid intern:

1. Interns can do actual work if they are closely supervised, are learning and not creating a final product.

2. Decide beforehand if your company has the time and resources to closely supervise and mentor an unpaid intern.

3. When in doubt, businesses can avoid legal problems by paying interns at least minimum wage.

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