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What are the rules for unpaid internships?

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in Employment Law,Hiring,Human Resources

Q. Our company has received a number of résumés from college students interested in working as unpaid interns for us during the summer months. Would hiring such unpaid internships violate federal or state laws?

A. They very well might. The Fair Labor Standards Act (FLSA) defines the term “employ” very broadly.

Under the FLSA, individuals who are “suffered or permitted” to work must be compensated for the services they perform for an employer. Thus, internships for a for-profit private-sector company often will be viewed as employment.

However, there are some circumstances in which individuals who participate in for-profit private-sector internships or training programs do not need to be paid. Generally, this exception applies to individuals whose work serves only his or her interest—for example, interns who receive training for their own educational benefit.

In April 2010, the U.S. Department of Labor (DOL) issued a fact sheet discussing the very limited circumstances under which an individual can work for a for-profit employer as an unpaid intern. In the same month, California’s Division of Labor Standards Enforcement, in an opinion letter, said it would apply the same rule to California employers.

According the DOL’s fact sheet, for individuals to qualify as unpaid trainees, the internship program must pass the following test:

  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 providing the training derives no immediate advantage from the activities of the intern; on occasion its operations may actually be impeded.
  5. The intern is not necessarily entitled to a job at the conclusion of the internship.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The determination of whether an internship or training program meets this test depends upon all of the facts and circumstances of the program. If all of these factors are met, the intern is not an employee under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the intern.

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