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Summer Interns: Are Small Businesses Flirting with Disaster?

Posted by Nina Kaufman | June 30, 2010
URL: http://www.entrepreneur.com/blog/218824
summer-internships-small-biz.jpgUnpaid summer internships can be a rite of passage for many college students. But for the companies who offer them, unpaid summer internships could start them on a trip down the labor law rabbit hole.

Unpaid internships used to be all about "the experience"--an opportunity for young students to break into a new field, to gain contacts, to explore new career possibilities. But with the current administration's increased focus on enforcing labor law violations, small businesses could well fall into the enforcement net.

There's a fine line between an unpaid intern and an unpaid employee. According to the U.S. Department of Labor, a person can only be considered an unpaid intern if ALL of the following six criteria are met:
  1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.
  2. The training is for the benefit of the trainee.
  3. The trainees do not displace regular employees, but work under 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 completion of the training period.
  6. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.
Here's the kicker: There are very few tasks that won't be considered "to the advantage of" an employer. As noted in the Labor and Employment Blog, the intern can't deliver mail, sort files, file papers, organize a person's calendar, conduct market research, write reports, schedule interviews, or any other job that assists the employer in any way in running their business. And few internships are really considered worthwhile (by the intern's standards) unless there's some real-world experience that comes out of it. Therefore, most internships run afoul of this criteria. And small businesses have on their hands--not an intern whom they don't have to pay --but an unpaid employee who may be entitled to back pay and other penalties.

Who will find out? A number of states (including California) have whistleblower statutes, where anyone at a company (doesn't have to be the intern) could report a violation to the state Department of Labor. And, of course, an intern could well bring a claim (although they'll tend to prefer the good reference or opportunity for future employment).

How to avoid getting caugt in the web? Keep your employment books clean. Pay your interns, and confirm the appropriate wages with an employment attorney in your area.