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To pay or not to pay interns? The feds are cracking down

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in Compensation and Benefits,Human Resources

With fewer real, paying jobs available to young people, the number of unpaid internships is on the rise. Now the U.S. Department of Labor and many state labor departments (including California) are stepping up enforcement against employers who illegally use internships for free labor.

The DOL says many employers fail to pay even though the internship doesn’t meet the six federal criteria that must be satisfied for an internship to be legitimately unpaid (see below).

Receiving school credit doesn’t necessarily free companies from paying interns.

If an intern secures education, class credit and experience from working at your company, the “flow of benefits” is equal, so your company usually isn't required to pay the intern.

But if you profit too much from the arrangement, federal law says this would suggest an employment relationship, meaning your intern must be paid.

Advice: To avoid paying student interns, know the Labor Department rules regarding the Fair Labor Standards Act (FLSA). They say interns must be paid at least the minimum wage if the program doesn”t meet the following “learner/trainee” rules:

  • The training must be comparable to that given at a vocational school.
  • The training must benefit the student.
  • The student would not replace a regular employee.
  • The employer does not immediately benefit from the student's activities.
  • There is no promise of a job following the training.
  • Both the employer and the student understand that no wages will be given for the training period.

NOTE: In April 2010, the U.S. Department of Labor published "Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act" that helps clarify for-profit, private-sector employers' obligations to interns under the FLSA.

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