Are you considering adding an intern to your company? The allure of young, inexpensive and eager workers is hard to deny when you’re busy and spread too thin. Interns can be a great asset to your business, but it’s important that you understand the restrictions and restraints imposed by the government on the hiring of interns.

The myth perpetuated for many years was that interns can work for free if they choose to do so, especially if they are earning college credit for their internship. If they are eager enough to gain the experience, then why not let them make that choice? Well, the federal and state governments disagree.

The federal government has defined six strict criteria that for-profit employers must satisfy in order to offer an unpaid internship:

1. The training given in the internship must be similar to what would be given in an educational setting or vocational school;




2. The training is for the benefit of the trainee;




3. The trainee does not displace regular employees, but works under their close observation;




4. The employer that provides the training derives no immediate advantage from the activities of the trainee, and on occasion the employer’s operations may actually be impeded;




5. The trainee is not necessarily entitled to a job at the conclusion of the training period; and




6. Both the employer and the trainee understand that the trainee is not entitled to wages during the training period.

The main takeaway is that it is very hard for a for-profit employer to meet the requirements necessary to engage unpaid interns. Requirement number four is particularly hard to satisfy, since the company cannot receive any direct benefit from the work done by the unpaid intern.

Despite the stringent requirements, many businesses still get away with using unpaid interns because the interns are eager for the work and are unwilling or afraid to report their employers for fear of losing their position. With the job market and economy in their current states, opportunities for young, relatively inexperienced workers are scarce, and they are at the point in their burgeoning careers where all they care about is improving their resume.

While the Labor Department says there has been an increased crackdown on the failure of businesses to pay interns properly, there is little statistical evidence or specific information. So if your chances of getting caught by the government are pretty slim, maybe you’re thinking you should risk it? My personal opinion is that aside from the illegality, perpetuating unpaid internships does a disservice to those individuals who cannot afford to work for free at a position that offers them the kind of targeted experience and skills they hope to gain. Making your internships paid, even if it’s just minimum wage, may make the difference to open the doors to deserving and eager interns who otherwise may never have had such an opportunity.

Of course if you’re paying your intern, even if it’s just minimum wage, you’re now faced with the numerous requirements related to employers, like payroll, tax withholdings and additional taxes. If you have no other employees, you may be thinking that an independent contractor status for your new, paid intern will be the way to go in order to skirt these requirements. In my next post we’ll look at the rules for the use of independent contractors.

6 Responses to “The Legality of Unpaid Interns”