Internships can be a true win-win situation. Companies use unpaid labor and find their future employees; and interns gain valuable work experience, develop and refine skills, and build up their resumes for the post-graduation job search.

While internships have numerous advantages, employers who hire unpaid interns might face legal battles and class action lawsuits. If you don’t follow the rules to make sure an internship is a true learning experience, that intern starts to look a lot like an employee who just isn’t getting paid. And that’s when the wage and hour problems begin.

Employers generally use the term “intern” to apply broadly to anyone who is:

– Not being paid for his or her work, either at all or at the regular rate that normally would be paid to an employee performing the same tasks

– Still in school during the time that he or she is working (i.e., the “internship” period).

According to the U.S. Department of Labor and the California Department of Labor Standards Enforcement, there are certain standards that employers must follow when taking on unpaid interns. These requirements are intended to ensure that the intern is really receiving a valuable learning experience in exchange for free labor. Unless all of the following criteria are met, the intern is legally an employee, who must be paid the minimum wage, earn overtime, and receive all of the other protections guaranteed by state and federal employment laws:

– Interns cannot displace regular employees.

– Interns are not guaranteed a job at the end of the internship.

– The employer and the intern(s) understand that the interns are not entitled to wages during the internship period.

– Interns must receive training from the company, even if it somewhat impedes on the work of the organization.

– Interns must get hands-on experience with equipment and processes used in the industry.

– Interns’ training must primarily benefit them, not the company.

Legal Issues for Employers

While internships provide various benefits to employers and students, unpaid interns are quickly becoming the modern-day equivalent of entry-level employees, and are being taken advantage of financially. Employers who exhibit a failure to fairly compensate employees for their work are at risk of legal repercussions.

Please note that during this time of crisis, the updates, advisories and regulations that we receive from the promulgating agency often contain ambiguities and/or are often amended, modified or updated. The statements/opinions expressed herein is not legal advice. The opinions expressed herein are based on our reasonable interpretation of the issuing agency’s publication at the time the opinion is expressed and is therefore subject to change based on further developments. The effect of the opinions expressed may be different based on your particular circumstances, and it is recommended that you not rely upon these general opinions prior to obtaining a consultation with your legal and/or financial advisors.