United States: Unpaid Internships

The idea of offering unpaid internships is attractive for startups trying to maximize their labor force while minimizing spending. However, using unpaid interns can pose significant legal risks. This post will help you understand the risks of intern misclassification, navigate the federal and state legal requirements for unpaid internships, and learn how to structure compliant unpaid internships if they are appropriate for your company.   

Understanding the Law Regarding Unpaid Internships

Both federal and state laws govern who is considered an employee and therefore must be compensated for services performed. For example, the federal Fair Labor Standards Act sets minimum-wage and overtime requirements for employees and requires that individuals who are "suffered or permitted" to work must be compensated for the services they perform. Most interns in the private sector will be considered employees under federal law; only if they receive training for their own educational benefit and meet the following six criteria may they be considered interns or trainees who do not have to be paid at least minimum wage:

  1. The internship must be similar to training provided in an educational environment;
  2. The internship experience must be for the benefit of the intern;
  3. The intern must not displace regular employees and must work under close supervision;
  4. The company must derive no immediate advantage from the activities of the intern; in fact, its operations may actually be impeded;
  5. The intern must not be entitled to a job at the end of the internship; and
  6. The company and the intern must understand that the intern is not entitled to wages for the time spent in the internship.

Some states, such as California, apply these same factors in determining whether an individual is an employee or an unpaid intern under state law. Other states, such as New York, require that companies satisfy additional, more stringent factors in order for an individual to be properly classified as an unpaid intern. Make sure to consider both federal law and the laws of any states in which you plan to offer internships when determining whether such internships may be unpaid.

Tips for Structuring an Unpaid Internship Program

After considering the factors outlined above, if you determine that it is appropriate for your company to offer unpaid internships, here are some tips for creating an unpaid internship program that is more likely to meet legal requirements:

  • Structure the internship around a classroom or academic experience. It is best if interns receive educational credit for internships and if a college or university exercises oversight over the internship program.
  • Provide interns with skills that can be used in multiple employment settings.   
  • Focus on the skills and knowledge to be gained by interns and minimize productive work performed by them; such productive work should be merely incidental to their gaining of those skills and knowledge.
  • Offer structured learning opportunities at least weekly.
  • Do not have interns perform the routine work of your business on a regular and recurring basis.
  • Do not use unpaid interns as substitutes for regular workers or to augment your existing workforce during specific time periods.
  • Provide job shadowing opportunities and close supervision of interns.
  • Make sure internships are for fixed durations.
  • Do not use an internship as a trial period for employment and do not guarantee employment at the end of an internship.
  • Provide a clear written notice that no job offer or guarantee of an offer exists and that the intern is not an employee and will not be paid.
  • Document the terms and conditions of the internship with a good offer letter that is different than an employee offer letter.
  • Make sure that the reality of the internship aligns with the description and documentation of the internship.

Requirements for Paid Internships

Because the legal requirements for an unpaid internship are often difficult to meet, you may determine that it would be more beneficial and less risky for your company to hire paid interns rather than offer unpaid internships. Misclassified interns may have claims for unpaid wages, overtime and other benefits, and a number of high-profile cases have generated significant press coverage. Offering paid internships may not only be less risky, but may also attract higher quality candidates and possibly reduce future recruiting costs.

If there is any doubt that your company's interns would meet the requirements for compliant unpaid internships, your company's interns should be classified as employees and paid at least the applicable minimum wage and overtime compensation (both of which are more stringent under California law than under federal law). Providing interns with equity in the company cannot substitute for payment of wages.

Moving Forward

Determining whether an internship can properly be designated as unpaid depends upon all of the facts and circumstances of the particular company, intern and internship program. Do not hesitate to consult with legal counsel for assistance in making the determination.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.