Be Careful When Hiring Unpaid Interns

You may have heard the news recently that another employer has been ordered to pay back wages to people it had classified as interns (and therefore not paid). Fenox Venture Capital had to pay over $330,000 in back wages, but this is just the latest in a long series of claims against employers who hire interns and don’t pay them.

As a general matter, if you have people working for you, California and federal labor laws require you to pay them for their time. While there is such a thing as a legal, unpaid internship, the requirements for one are interpreted pretty narrowly.

The U.S. Department of Labor uses a 6-part test to determine whether an internship falls outside the paid employee requirements:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

http://www.dol.gov/whd/regs/compliance/whdfs71.htm

If you meet all six parts of this test, the intern is not considered to be an “employee,” and therefore is not required to be paid. If you are considering bringing on an unpaid intern, you will want to be certain that all of these tests are met, or else you may want to pay the intern at least the applicable minimum wage.

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