Are unpaid internships legal

A big discussion at ChrisBrogan.com about unpaid internships spilled over into the question of whether unpaid internships are legal in the US.

Hay Hauling
I used to work in the field of workforce development (back in the dark ages), so I wasn't afraid to head to DOL to check. Here's what my research says:
Unpaid internships would not be legal when the intern would otherwise be considered your employee.

Quoting the US Department of Labor: "labor standards will apply in any situation where an employer/ employee relationship, as defined by the Fair Labor Standards Act, exists."

How could an intern be considered an employee?
The basic issue is control. For an employee, you have the right to control the details of how the services are performed. With independent contractors, you control only the results, not the means and methods. This is why interns are more likely to be classified as employees: they are not experienced enough to take full control over their work methods.

The big question:
Are you likely to get in trouble for offering an occasional unpaid internship for a specific project, like Chris did? I doubt it. If you abused the principle with repeated offerings of multiple unpaid internships performing core duties in your business, you'd be at high risk.

For more info on employee versus independent contractor, check with the IRS.

UPDATE: [4/3/2010]
In a New York Times story on internships, more details about internship regulations were provided.

“If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” said Nancy J. Leppink, the acting director of the [federal Labor Department] wage and hour division.

Ms. Leppink said many employers failed to pay even though their internships did not comply with the six federal legal criteria that must be satisfied for internships to be unpaid. Among those criteria are that the internship should be similar to the training given in a vocational school or academic institution, that the intern does not displace regular paid workers and that the employer “derives no immediate advantage” from the intern’s activities — in other words, it’s largely a benevolent contribution to the intern.
....
Many employers say the Labor Department’s six criteria need updating because they are based on a Supreme Court decision from 1947, when many apprenticeships were for blue-collar production work.
I think it's clear that almost all unpaid internships are not legal in the United States, despite the fact that some unpaid internships are valuable opportunities.

Photo by Becky McCray.
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Posted by Becky McCray on Friday, March 05, 2010
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11 comments:

  1. Hmm. This is interesting. Are there any special considerations given to unpaid internships for students? The college program I teach in offers a 6 week internship (unpaid) at the end of the final year of studies.

    This is supported by the college (in that liability insurance, Worker's Compensation, etc. are all covered by the school). Not sure how it works in the States.

    I can see that bringing on an unpaid intern outside of some sort of government or educational institution-supported program would put any liability on the "employer" and that could be an issue. Not sure exactly how it works up here in Canada, but you've definitely prompted me to find out.

    Thanks!
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  2. No, the US law makes no distinction for students, even if they receive college credit.

    Unpaid internships are so common and so useful, my hope was that we could spur some discussion on this question.
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  3. Hi Becky,

    This is a great question. I'm just finishing up a client article on wage & hour regulations (which have been the subject of a growing numbers of lawsuits). I forwarded your blog post to the attorney I interviewed for my piece; wondering if I should be adding something on internships into the mix.

    Best,
    Daria
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  4. Quick update: my employment attorney says that most unpaid internships are legal--as long as they are internships. (Not a formal legal opinion, but an informal response to my quick query.)

    --Daria
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  5. Daria, thanks for getting that response for us. I will say I'm stumped by this phrase: "as long as they are internships." What the heck does that mean? The law does not make that distinction, as far as I know.

    I've been wondering just how many people use unpaid interns. I know I have at least twice during my career. Both were student programs. It is so incredibly widespread that I am fascinated to find the legality questionable.
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  6. Well, it was a quick emailed comment -- and probably not intended to be broadly parsed. But I'm guessing (and just guessing) that occasionally an employer misclassifies a person as an intern long after they should be paying them?

    This is probably just one reason that claims around the FLSA are such a hotbed of legal activity these days.
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  7. Daria, I think you are getting close to the heart of the disputes. Apparently, some employers do abuse interns, and some quite significantly.

    And don't tell anyone, but while poking around the Department of Labor site, it's obvious that some DOL programs have run into this problem, too.
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  8. Hi Becky,

    Came across your article while searching the web on information about the legalities involved with unpaid internships. My grandmother sent me a very interesting piece from The Advocate and Greenwich Time titled, "Know Your Internship." This particular article caught her attention because she believes that the unpaid internship I was doing for the past 6 months was not completely "law abiding." In a nutshell, I graduated last May from a reputable university, spent the entire summer applying for full time, paid positions...and found nothing. Then, at the end of August I was put in contact with a woman who had just recently lost her assistant (whom was paid) and was looking for help. In a nutshell, I landed an opportunity to work alongside the Broadcast Director for a very well known modeling agency. The only downside was that it was an unpaid internship...a FULL TIME, unpaid, internship. The woman told me that after looking at my resume, she thought I would be a great fit since I have previous experience with marketing-which I gained from a paid internship - and that since her division was still relatively new, that they really needed someone strong to come in and get things going. Oh, I must not forget to add that she told me that if I were able to focus on "marketing" there would probably be a job down the road for me. After weighing my options, I took it hoping that within a short period of time it would lead to a paid position. Or at least, if anything open other doors since it was such a high profile company. I worked Monday-Friday 9-5:30, unpaid, for 6 months. In December, I sat down with my "boss" to discuss my future there and how much longer it would be until they could hire me on paid...In a nutshell, without a doubt I was performing an assistants job. I researched and contacted potential clients...i.e. I created a marketing project that I built from the ground up which in turn, did bring them business.I was dealing with clients and talents on a daily basis, and even was conducting castings/auditions all on my own. At the time, I loved what I was doing and loved the people I worked with so despite the fact that I wasn't getting paid, I wholeheartedly enjoyed going to work everyday. But that is exactly what I was doing, I was going to "work" everyday not to "intern." I was introduced to people as so and so's "assistant" or as "Mikala, who is helping so and so" - rarely introduced as an "intern." At the time, I took pride in that but looking back, just as I was performing an actual job, I was being introduced in a way that implied I was paid.
    After 6 months of being led to believe I would be hired. The day finally came where I said, "I need to be paid or I am gone." It was hard since I became so close to my boss but when she told me there was a "hiring freeze in the company and they wouldnt be able to bring me on to a paid position...and wouldnt be able to for at least another year" - I felt abused. While I was grateful for the experience, I felt like my free labor had been taken advantage of when my boss very well knew all along they weren't going to hire me on. While she claims she fought for me, if there was a hiring freeze in the company I believe she knew or at least a hunch they wouldn't be able to hire me but yet, still kept my hopes up because it was for her own benefit. She had too much on her plate as it was, so with me there she was getting help - which allowed her to better perform her job. I still keep in touch with her, however she even admitted that juggling everything without me was hard and quite an adjustment.
    Whether or not I am going to investigate this further is up in the air...but your article brought some interesting insight. Please let me know your thoughts! Thanks!
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  9. Anonymous, this sounds like a case of an inappropriate classification. Especially telling is that the assistant position was previously an employee with pay.

    Whether or not you choose to take action against the organization, I encourage you to make the most of your experience. List it as work experience on your resume. Ask for letters of reference. Stay in contact with the network of people you connected to in that position.

    And all the best to you as you move forward.
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  10. With the economy down many young people are finding it difficult to get work. Rather than wonder around without a job, an internship gives young people the chance to gain experience that could help them find a job. For small businesses, it also provides a low cost way of getting help. I think the relationship between start-up businesses and start-up employees is very important.

    I think small businesses can have legal internships by considering the usually test of employee versus non-employee.
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  11. Calvin, I agree. Internships are very useful, especially for students. There are companies who take advantage of it, but I hope it stays in the minimum.
    ReplyDelete

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