Business

April 25, 2014

Unpaid internships may be illegal

At least six criteria determine whether internships legally can be unpaid but the rules are open to interpretation and difficult to monitor. Employers and interns should understand the nuances of federal wage and hour law and attempt to comply.

Students and new graduates will soon flood workplaces for summer internships. About half of them will be unpaid.

Employers increasingly are using internships to decide if they want to offer “permanent” jobs. A trial period in itself isn’t wrong. But there’s mounting concern that many unpaid internships are illegal.

Regulators say violations of labor law are widespread but hard to stop. Interns eager to get job offers aren’t likely to complain. And the fine points of wage and hour law aren’t clear to most workers and to many employers.

The U.S. Labor Department warns for-profit employers that it’s difficult to have unpaid internships and comply with the law. Nonprofit employers have wider discretion because people can do volunteer work.

Broadly, if the intern gets more value from the internship than the employer gets from having free labor, then the internship can be unpaid. For example, if a student gets academic credit for the internship, an unpaid arrangement likely is OK with regulators.

But if the intern’s work gives “immediate advantage” to the employer or the employer is the “primary beneficiary” of the intern’s work, then courts have said the intern should be paid at least minimum wage and be covered by all rights and protections of federal wage and hour law.

The labor department has six rules for qualified unpaid internships. They: must give training similar to that given in academic or vocational schools; mustn’t displace existing employees; give prime benefit to the intern; give no immediate advantage to the employer, whose operations actually may be impeded; don’t entitle the intern to a future job; and are unpaid according to mutual understanding.

Pay isn’t the only issue. Vigilance is needed because unpaid interns aren’t protected by anti-discrimination and anti-harassment laws and other workplace rights.

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