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Do unpaid interns sound like a good source of free labor? Think again!

This story appears in the November 1997 issue of Entrepreneur. Subscribe »

Your brainstorm about relieving your overworked employees without additional costs sounds flawless: Bring in some students from the local college as unpaid interns, promise them valuable experience and perhaps some college credit, and put them to work on routine chores. Better think twice, though, or you'll risk running afoul of the Fair Labor Standards Act (FLSA).

A public relations agency in Atlanta learned the hard way after billing clients for work performed by its interns. The U.S. Department of Labor investigated and found the agency had violated one of the six criteria for distinguishing interns from employees: The business must not gain immediate advantage from the interns' work. The Labor Department extracted a settlement requiring the agency to pay interns $31,520 in back wages and to pay current and future interns the federal minimum wage.

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