Hiring Unpaid Interns: Is it Legal?

internsWhether it is the New Yorker, W Magazine, NBC, Fox Searchlight Films and “Black Swan,” or even Sean “Diddy” Combs, these days many employers now face lawsuits by former unpaid interns, asserting that their unpaid internships were unlawful and in violation of the Federal Labor Standards Act and California Law.  Even minor or unintentional noncompliance with California labor and employment laws can subject employers to liability for overtime and/or minimum wage violations.

Legal Unpaid Internship? There are certain guidelines that can help determine whether an unpaid internship should really be unpaid, or whether it should be better classified as a paid employment.

Federal Laws.  According to the Department of Labor, internships at for-profit, private sector employers (meaning, virtually all small, medium, and large businesses) should almost always be paid at least minimum wage, as offering employment to interns as “unpaid internships” will usually result in a violation of labor laws. There are six (6) factors that have been enumerated to help employers deal with whether unpaid internships can be offered without violating federal labor laws.  In order for an intern to qualify as an “unpaid” intern exempt from federal labor laws:

  • The internship must be “similar to training” that would be given in an “educational environment”;
  • The internship and training must be “for the benefit of the intern”;
  • The intern must not “displace regular employees,” but must instead work “under close supervision of existing staff”;
  • The employer must derive “no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded”;
  • The intern is “not necessarily entitled to a job at the conclusion of the internship”; and
  • There is a clear understanding between the employer and the intern that the intern is “not entitled to wages for the time spent in the internship.”

California Laws.   Furthermore, the California Division of Labor Standards Enforcement (DLSE) has in the past set forth five (5) additional factors that help determine whether an unpaid internship violates California labor laws:

  • Any internship should be part of an “educational curriculum”;
  • The interns should not receive “employee benefits”;
  • The training received by interns should be general “so as to qualify the [interns] for work in any similar business, rather than designed specifically for a job with the employer offering the program”;
  • The screening process for interns should be based on “criteria relevant for admission into an independent educational program”; and
  • Advertisements or postings for internships should clearly describe the positions as educational or training-based rather than as employment.

Does the Internship Violate Labor Laws?

The factors above, though instructive, still leave a lot of gray area in determining whether an internship is unlawfully unpaid, and whether the intern deserves at least minimum wage. Here are some points that should be evaluated to determine whether the internship truly is an “internship,” or an unlawful substitution for paid employment:

  • Tasks Assigned. Are the tasks assigned more similar to classroom/training experiences, or consist of traditional work projects? Does the employer provide interns with “general” experience, or assignments/duties specific to that employer’s operations.
  • Supervision. How is the intern supervised? Does the intern report to a specific individual, and if so, what is the supervisor’s role? Are there weekly meetings during which the intern is given “educational-style” feedback? Are there any faculty or professors who will be sharing in the duties of supervising the intern in the work setting?
  • Menial Tasks. Are interns performing menial tasks, such as filing, mailings, data entry, answering phone calls, serving as receptionists, etc., that are primarily for the benefit of the employer, and not the intern?
  • Duration. Is the internship ongoing? Or does it have a definitive start and end date? Most internships track semesters/quarters, or are offered over summers, so an open-ended internship can give the impression that it is employment in disguise.
  • Intern’s Course of Study.  Is the work being provided to the intern part of that intern’s course of study, meaning, will the intern actually gain any benefit from the tasks being provided to them? The more distance there exists between an intern’s educational or career prospects, and the work being given to them, the more it may appear as though the internship is simply an attempt to gain an advantage of labor without payment of minimum wages.
  • Job Opportunity.  Is there any expectation that a job will be awaiting the intern after completion of the training or their schooling? If yes, it may be an unlawful internship.  Internships must usually make it clear to the student that no job is guaranteed once they finish school or complete the internship.

Internships can be a great way to get help in areas for which employees typically do not provide services. With a little planning and pro-activity, you can keep your company’s unpaid internship in the clear and complaint with California and federal labor laws.

Getting Legal Help

AXIS Legal Counsel’s Business and Corporations Practice provides legal advice to numerous businesses with a wide range of business matters. Axis  represent small, medium-sized, and large business clients with a wide variety of business and corporate law matters. We represent early-stage companies as well as established businesses on a wide variety of business law matters, ranging from contracts and transactions, intellectual property, labor/employment law, business financing, mergers and acquisitions, real estate, insurance, business succession planning, and general advice and counsel.  For information on retaining AXIS Legal Counsel to represent your business in connection with any legal matter, contact info@axislc.com or call (213) 403-0100 for a confidential consultation.

 

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