Summer Interns: Are Small Businesses Flirting with Disaster?
Get the working capital your business needs from Entrepreneur Lending, powered by CAN Capital. Learn More »Unpaid 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:
- 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.
- The training is for the benefit of the trainee.
- The trainees do not displace regular employees, but work under close observation.
- 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.
- The trainees are not necessarily entitled to a job at the completion of the training period.
- The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.
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.