Unpaid Internships: Employers Beware

March 17, 2011, 9:20 AM

With today's overcrowded labor market and summer breaks on the horizon, students and other unemployed individuals may apply for unpaid "internships", as they can appear to be a good way to get a foot in the door for a future employment opportunity. However, "for-profit", private sector employers must be very careful, as the Department of Labor has promised increased audits of employers who hire unpaid interns.

If an intern is deemed an "employee" for wage-hour law purposes, the intern must be paid at least the minimum wage and overtime pay, where applicable. The fact that an intern wants to work for free is not determinative. Instead, an intern must satisfy a six-part test, otherwise he or she will be considered an "employee", and this misclassification can be costly after the fact.

In addition to agreeing that the relationship is for training and not compensation, the six-part test also examines the type of training the intern receives, whether they replace or work side-by-side with regular employees, who benefits from the relationship, and whether a future position as an employee follows the internship period. This analysis is nuanced and more complex than it might appear. The law is designed so that only very limited arrangements should be treated as unpaid internships. Think of the internship rules as a very narrow exception, and carefully examine any arrangements that your company might be considering. --David J. Sullivan