Learn the law on unpaid internships to avoid running afoul of the Department of Labor.

Many companies use unpaid internships as a means to obtain free labor. There are, however, crucial legal issues related to unpaid internships. Learning the basics of internship labor law will keep your company on the good side of the Department of Labor.

What Is an Unpaid Internship?

Unpaid internships are arrangements where young people trying to get experience, often college students, work for a set period of time without monetary compensation. Alternative forms of compensation, such as free lunches or employee discounts, are sometimes provided. An unpaid internship is distinct from a paid internship where a student receives a very low wage or a stipend at the end of the internship.

What Does the Law Say?

The law is clear on unpaid internships -- if you run a for-profit business you cannot, in most circumstances, have any kind of unpaid labor. Enforcement, however, is spotty. California, Oregon and other states have begun aggressively pursuing companies that violate federal labor law regarding internships. Nancy J. Leppink, acting director of California’s Wage and Hour Division stated unequivocally that there were few circumstances where for-profit enterprises could hire interns and be in compliance with labor law.

Department of Labor Guidelines

The U.S. Department of Labor provides clear guidelines for unpaid internships. There are six criteria that are used to determine whether or not your company’s unpaid internships are legal:

· Both the intern and the company must unpaid up front that there will be no wages paid for the internship.

· The intern cannot be promised a job at the termination of the internship period.

· Employers cannot get any immediate and obvious advantage from the internship. In other words, the internship is largely a gift for the intern, a way for him to get experience and not a way for the company to get free labor.

· Interns cannot displace regular employees or otherwise act as a substitute for paid labor. Indeed, they must work under the close supervision of your current staff.

· The intern must benefit from the experience. Having an intern do grunt work that provides nothing in the way of useful and meaningful experience is against the law. You cannot have an intern lick stamps all summer -- unless you get an intern majoring in stamp licking.

· The training you provide an intern must be similar to what he would learn in a classroom setting.

If you think having internships that conform to these rules is difficult, you are correct. Consult with your company’s legal team before you start an internship program to ensure that your company is in compliance with Department of Labor regulations.

Strictly Prohibited

Some internship situations are expressly forbidden by the Department of Labor:

· Unpaid internships cannot be used as a trial period for evaluating an employee. If you plan to hire the intern at the end of the internship, you don’t have an intern -- you have a trainee.

· Interns cannot be used as replacement or supplementary labor. If interns perform any work that you would have otherwise hired a new employee to do, you must pay the intern at least minimum wage.

Recruiting Interns

If you run a bona fide non-profit, many of these regulations do not apply and you have far greater leeway to take on interns or volunteers. Those in the business of making profits, however, need to tread very lightly when taking on interns. Talk to your legal department in consultation with the state labor department. Violations of the Fair Labor Standards Act are taken very seriously and can result in stiff fines if you are not in compliance.