Take Note

Using Unpaid Interns to Perform Work

Businesses using or thinking about using unpaid interns, watch out. The California Division of Labor Standards recently released an opinion letter regarding "educational internship programs." (2010 Cal. DLSE LEXIS 10.) The Opinion and recent updates to the U.S. Department of Labor’s guidelines for internship programs mean that you will probably have to pay your interns who perform any work.

California does not have a statute or regulation expressly excluding interns from the minimum wage and overtime requirements. Under federal law, an "employee" is "any individual employed by an employer." (29 USC §203(e)(1).) The term "employed" means "to suffer or permit to work." (Id.) Essentially, these definitions are so broad that they likely include interns who do anything that benefits your business. This could include anything from answering a phone to producing a tangible work product.

However, interns receiving training for their own "educational benefit" need not be paid if certain criteria is met, specifically: 1) the work being done as part of the internship 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 replace regular employees, but works under close supervision of existing staff; 4) the employer 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 end of the internship; and 6) the employer and the intern understand that the intern is not entitled to wages for the internship.

If these six factors are met, then your "intern" does not need to be paid.

There are exceptions for individuals volunteering for a state or local government agency and for those who volunteer for humanitarian purposes for private, non-profit food banks. Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.

The Wage and Hour Division of the U.S. Department of Labor is currently reviewing and updating their guidelines related to internships in the public and non-profit sector. If you are going to use an unpaid intern, be careful and make sure you check the most recent opinions or guidelines.