Here’s the six criteria a business must meet in order to allow unpaid internships.
It’s no secret that today’s economy is tough.
Students are working hard to learn needed skills in the career of their choice, while current members of our workforce are going back to school and training to learn a new trade.
Business vets are joining this year’s crop of students as fall interns. They will work away — often for free — in hopes of a future job, a resume builder and even to sample “the real world.”
There is just one problem; in many cases, this is illegal for both the business vets and students.
The Fair Labor Standards Act (FLSA), which is the federal law requiring the payment of minimum wages and overtime compensation, generally prohibits unpaid internships, especially in the private, for-profit sector, has long had spottily-enforced rules on just this issue.
And — things are getting serious.
In recent years, the Department of Labor issued a very specific crackdown regarding unpaid employees — a six-point checklist on just how far an internship can go before requiring a business to pay up by at least offering minimum wage.
The six criteria a business must meet in order to allow unpaid internships are:
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.
If an internship does not meet all of the above areas, the “intern” needs to be paid at least minimum wage as well as overtime as needed. In addition, a true internship should always be offered for a specific, defined time frame — and should never promise potential future work.
In the past, this hope for future work has kept interns from complaining of no pay — and kept employers safe from getting what amounts to free labor. This is not the case any longer. Since the release of the specified internship criteria, the Department of Labor has cracked down on what qualifies as an employee versus as internship in the strictest of senses.
So, what does the Department of Labor mean when it says “crackdown”?
What can really happen to a business not caught paying its interns?
Specifically, employers not in compliance with the Department of Labor regulations face legal exposure both from the government and a potential lawsuit. Penalties can include owing back pay, taxes not withheld, Social Security, unemployment benefits, interest, attorneys’ fees and liquidated damages (double the unpaid wages).
Some tips on offering — and taking — internships moving forward:
- Work the internship through a local college or university — many will offer course credit and specifics tasks that relate back to educational training;
- Keep written, reviewed records specifying that no internship will ever guarantee legal employment to set expectations upfront;
- Encourage interns to shadow team members rather than actively participate in the workload;
- Never offer training specific ONLY to your company — offer a broad education and experiences about the industry instead; and,
- Offer hourly payment to all interns, trainees and other seasonal members of the team no matter what.
One final note – unpaid internships at nonprofit, charitable organizations, where the interns volunteer without the expectation of compensation, are usually permissible.