Do You Have Unpaid Interns? You Might be Breaking the Law

If your small business hires interns, make sure that your internship program meets federal and state requirements.


It is not uncommon for startups to hire interns to help grow their businesses. In fact, what startup doesn’t hire interns?

“Silicon Valley mainstays and startups like Google and Dropbox are hiring tons of interns for this coming summer, the Wall Street Journal Reports. Dropbox plans to hire three times as many interns for this summer as for last summer. This would make interns one whole third of Dropbox’s entire engineering team (Business Insider).”

Hiring interns (paid and unpaid) is a method that is particularly popular among young entrepreneurs that are bootstrapping their businesses. I understand this strategy. Who wouldn’t want free and highly motivated labor, right? Plus, the intern often benefits by getting work experience and making worthwhile connections.

Unfortunately, if you have an unpaid intern you could be breaking the law.

 

When is it legal to hire an unpaid intern?

There are federal and state guidelines regarding hiring interns which make it illegal for a company to obtain free labor, even if the intern wants to work for free. If an intern works for you for free and the government later decides that that person should not have been classified as an intern, they can force you to pay the intern wages, the requisite taxes that come with having an employee and fines.

If you hire interns, make sure that your internship program meets federal and state requirements. Here are six criteria for-profit businesses must meet in order to hire an unpaid intern:

 

  • 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;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • 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;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

 

I know. These standards are kind of absurd. Some of the criteria make it really hard for a startup or small business to legally hire an unpaid intern.

 

How can we legally hire an unpaid intern?

When you do decide to hire an unpaid intern, have your lawyer review your internship program to be sure that it is in compliance with the Fair Labor Standards Act. Also, don’t forget to draft an intern agreement for all unpaid interns to sign before they begin working for you.

If you don’t want to follow these regulations, don’t hire unpaid interns. In the long run its cheaper to pay someone to do the work.

 

© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.

   



In this article

Copy link