Legal Traps of Unpaid Internships

Employers, whether small or large, for-profit or nonprofit, should be aware of the legal traps of unpaid internships.  Summer internships are a rite of passage for many high school and college students. Each spring, businesses field requests for summer internships. Historically, many internships were either unpaid or the student received a small stipend.  The intern found in the knowledge gained and the connections made and not the cash earned. These unpaid and low-paid internships are becoming a thing of the past with changes to the Department of Labor’s guidance.

According to the recently updated Fact Sheet #71, the Department of Labor (DOL) will conform with the 7-part “primary beneficiary” test used by several appellate courts to determine whether an internship is paid or unpaid.

In plain English, this means the DOL will look to which party is the primary beneficiary of the relationship. If the internship primarily benefits the employer, the employer must pay the intern.  If the internship primarily benefits the intern, the employer and intern may agree to an unpaid internship.

Very broadly speaking, some factors evidencing an internship primarily benefits the intern are: the employer works around the intern’s academic commitments, the intern will receive academic credit or fulfill graduation requirements, the internship teaches skills/subjects used in the intern’s degree program, and the intern does not expect payment. This is a generalization and each case must be reviewed individually.

For small business owners and nonprofits, this means you must examine each intern’s role individually to determine whether that particular intern should be paid. It is very important to use a consistent (and compliant) hiring/selection process for your interns.

Given the economic costs of inappropriate classification, I highly recommend you seek legal review of your intern positions to ensure compliance. An attorney can help you develop a complaint hiring/selection process, provide sample language for your offer letters, and review the work to be performed by the intern.

About Christine Jarzab Kuntz

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