Could Your Unpaid Interns Lead to Costly Risks?

Difficult economies can create the desire to save on labor costs. One of the solutions some companies are using is unpaid internships. This can be an appealing idea for those organizations struggling to afford employees to keep up with their demand. However, before starting an unpaid internship program a company needs to ask, is the reward worth the risk?

Unpaid interns must meet specific requirements in order to avoid governmental challenges. Training of the interns is the key to protecting the programs. A company can increase the likelihood of a ‘training’ status if the interns gains skills that can be used in multiple settings, not just the specific company. The intern should be allowed to observe aspects of employer’s day-to-day operations, such as job shadowing. There should not be a need for the intern to perform critical services the entire time on the job.

An unpaid intern must never be a supervisor of another employee and/or intern. If an unpaid internship is properly done, it should actually be a drain on employers due to education and training time, since one is not getting production out of it.

There are six standards set of by the U.S. Department of Labor’s Wage and Hour Division to determine if the intern is a ‘trainee’ or an ‘employee’ with compliance to the Fair Labor Standards Act.

1) The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or educational instruction.
2) The training is for the benefit of the trainee.
3) The trainees do not displace regular employees, but work under their close observation.
4) The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded.
5) The trainees are not necessarily entitled to a job at the conclusion of the training period.
6) The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

All of the above must be met in order to have ‘trainee’ status which would allow for an unpaid intern.