Over the years, particularly when I worked in politics, I have had the pleasure of working with several interns. The experience is gratifying to serve as a mentor and to watch the next generation develop. All of them know they can call me at anytime.Several startup clients have approached me over the years and asked whether it was legal for them to have an unpaid intern. For any new business, the allure of an extra hand around to help out is obvious. Also since most of us schlepped around once or twice as an unpaid intern, it doesn’t naturally strike us as unfair or wrong.In fact, when my younger sister recently graduated from college I urged her to take on an unpaid internship as a means of gaining experience and making her first professional contacts. Although, as we will see below, the employer should make it clear that internship doesn’t lead to a job, the law simply doesn’t reflect reality in this regard. My advice to my sister was that these do in fact often lead to jobs.The advice for my clients, on the other hand, is much more equivocal. The federal Department of Labor and the California Division of Labor Standards Enforcement have increased scrutiny of internships.  The desperation of young students in this job market has led to enforcement of minimum wage laws as profiled in this story by the New York Times on the subject.So is your unpaid internship legal or not? It depends.  First let’s review the law itself. The U.S. Department of Labor’s Wage and Hour Division has developed the six factors below to evaluate whether a worker is a trainee or an employee for purposes of the FLSA:
  1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
  2. The training is for the benefit of the trainees;
  3. The trainees do not displace regular employees, but work under their close observation;
  4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
  5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
As to California law, although in the past there were additional standards, it appears that the state has moved to become more consistent with the federal law. In an April 7, 2010 opinion letter from Division of Labor Standards Enforcement, Acting Chief Counsel David Balter applied the same six factors when determining whether there was an exemption from California minimum wage coverage for trainees/interns.

Unfortunately, as with all factor-type tests, I suspect that in most cases whether your company’s unpaid internship program is legal would require a careful review by counsel. Of course I’m happy to do that, but I strive to include meaningful tips in my blog articles for the do-it-yourself types so here’s a few suggestions that might help you to structure your program and reduce liability.

First, consider working directly with one or two local colleges or universities where the student will receive academic credit for their internship. The oversight provided by the university will most likely go a long way in ensuring that you are actually providing substantive training to the student because the program will require certain reporting in connection with the internship.

Second, it’s wise to carefully word and target your advertising for the internship (if you advertise it at all). One of my entertainment industry clients made a general posting on Craigslist for unpaid interns and received a threat of a lawsuit from a plaintiff’s attorney who was trolling for lawsuits. Since no interns had actually been hired, they simply cancelled the program to avoid liability. Include a description of the program in any of your advertising rather than simply casting a net for unpaid interns.

Third, consider whether you or someone in your company actually expects to invest significant time and energy into the development of the student. None of the six criteria actually say this, but it’s the philosophy underpinning most all of the criteria. Although it wouldn’t necessarily satisfy regulators, practically speaking if a student leaves your program satisfied that they learned a lot, they won’t end up being a private plaintiff in a lawsuit against you. Further, this is your opportunity to give back and mentor.  If your goal is to take advantage of free labor by assigning demeaning tasks like in the above-referenced New York Times article, you probably need a therapist, not a lawyer. And eventually you’ll need a lawyer.
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