Unpaid Interns

With the downturn in the economy over the past few years, we've seen an increasing number of unpaid intern positions pop up, which capitalize on the eagerness of people to work in any capacity on the chance that they may get a permanent job. This has prompted the Department of Labor to begin scrutinizing these positions to ensure that employers are in compliance with the wage and hour rules under the Fair Labor Standards Act (FLSA). There are six factors that need to be met in order for an intern to be unpaid:

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. 

According to Advisory Letter 12-09, "If the workers are engaged in the primary operations of the employer and are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits is unlikely to make them trainees given the benefits received by the employer." In other words, if you are using interns as a form of free labor, you're probably out of compliance and could be the target of a potential wage and hour claim. As I've mentioned previously, the penalties piled on top of the owed wages can make this an extremely costly mistake, especially if unpaid interns have been a longstanding practice at your company.