This article was updated on July 2, 2018.
Using unpaid interns can help create a wealth of positive opportunities for everyone involved. After all, this relationship allows inexperienced people who are interested in your industry to gain valuable experience while your team gets the chance to mentor the next generation. However, when it comes to unpaid internships, there are a few wage and hour considerations that you should keep in mind.
There are a number of compliance rules that come into play when you're using unpaid interns. After all, the Fair Labor Standards Act (FLSA) requires that most employees receive minimum wage and overtime for hours worked over 40 in a workweek, unless they are subject to certain exemptions.
According to the United States Department of Labor, unpaid internships in the for-profit sector may be permissible if the program meets the following seven conditions:
- The internship is for the intern's benefit and lasts only as long as the benefit is sustained.
- The internship is more like training, similar to that which would be received in an educational environment.
- The internship is tied to coursework or provides course credits.
- The internship's relationship to the academic calendar doesn't put pressure on the intern's school work.
- The intern is not displacing any of your regular workers, and he or she is supervised by an existing staff member.
- The intern is not necessarily entitled to a paying job after he or she completes the internship.
- The intern and the employer understand that the intern will not receive wages for this internship.
College Credit Is Not Enough
Unpaid internships are a popular way for students to earn college or university course credit. However, the fact that a school recognizes your unpaid internship as worthy of course credit does not justify designating the program as unpaid. A federal court ruling found that receiving academic credit wasn't enough to make an unpaid internship legal, according to the New York Times. As stated above, the designation of an internship as unpaid depends largely on the type of work your intern will perform and the benefits (or lack thereof) for all parties involved. The Department of Labor notes that the more an internship program is structured around an academic experience, rather than the employer's operations, and the more the program teaches the intern skills that can be used in multiple employment settings, the more likely the internship is to be seen as an extension of the individual's educational experience and training. If interns are performing productive work (such as filing) or engaging in business operations, they may not be excluded from the FLSA's minimum wage and overtime requirements because the employer is benefiting from their work.
Exception for the Public Sector and Nonprofits
If your organization is in certain sectors, you may be able to permit your interns to perform a wider range of work activities. According to the Department of Labor, "Unpaid internships in the public sector and for nonprofit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible."
The Consequences of Breaking the Rules
If you use an unpaid intern without meeting the above conditions, you may be subject to compliance risks for unpaid wages, including overtime, and other benefits afforded to employees as well as other penalties and fees. If you're unsure whether an unpaid internship meets the criteria outlined by the Department of Labor, you should consider reaching out to a legal or compliance professional.
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