Can I Hire Unpaid Interns For My Business?

Hiring Unpaid Interns

Be sure to consider the legal implications before hiring unpaid interns for your business.

September 4, 2014

Do you want to hire unpaid interns for your business? There are many factors to consider before taking the leap. One of the most important things to consider is whether or not your new interns will replace existing employees. 

The Fair Labor Standards Act (FLSA) has defined the term “employ” as causing an individual “to suffer or permit to work” while simultaneously paying the individual for the services he or she performs for an employer.

Employers must also pay their employees a minimum of their state’s minimum wage and not employ them for more than 40 hours a week without paying over-time. Over-time should be at least one and a half times an employee’s hourly wage.

Generally, paid interns hired by a business will be considered an “employee” unless they pass the following 6 step test.

6 Step Test For Unpaid Interns

Unpaid Interns Legal or Illegal

6 part test for hiring interns

There are situations where an individual performing work for an employer in a corporate setting can do so without getting paid or violating any laws.

Individuals performing duties for an employer that receive a personal benefit may be deemed an intern. This benefit must be for the intern’s educational gain and meet the following 6 step test:

  1. The experience gained at the internship must be similar to the training experience the intern would receive in an educational setting;
  2. The internship must be for the intern’s benefit;
  3. Unpaid interns do not displace current employees but work under their close supervision;
  4. The employer does not gain an immediate benefit for the intern’s activities, rather there are some scenarios where the intern’s activities impede the employer’s operations;
  5. The intern understands that he or she is not guaranteed a job at the end of the relationship; and
  6. Both the intern and the employer have a mutual understanding that the intern is not entitled to compensation for his or her work.

Under the FLSA, if all 6 steps are satisfied, an employment does not exist and an individual can perform duties for an employer as an “intern.” To ensure the intern is gaining an educational advantage and not merely satisfying the employer’s business operations, employers often team up with colleges and universities.

Employers can contact local colleges and universities to offer interns school credit for their contribution. Not only does this ensure a structured setting where the intern is gaining educational training but also proves as a motivator for interns to produce quality work.

In addition, to ensure unpaid interns are gaining “training” employers should focus on providing interns with diverse skill sets that can be used in any occupational setting.

What Benefits Can I Derive By Hiring Unpaid Interns?

Unpaid Interns Benefits

Hiring an unpaid intern can provide benefits for both the intern and employer

Although unpaid interns are limited in the type of work they can perform (i.e., they cannot replace existing employees) employers interested in hiring interns can receive many benefits. For example, employers are not required by law to compensate interns nor are they pressured to provide employee benefits.

In addition, where employees are required to be added to employer’s payroll and complicate taxes, there are no such requirements for interns.

Prior to making any financial or long term commitments, employers can hire unpaid interns and observe their work ethic. Because all training will be done while interning, employers who decide to later hire their interns will save money they would have otherwise spent during the training process.

In addition, interns are eager to learn and please. Meaning they produce a greater work product. Because interns are eager to land a job at the end of their internship, they go above and beyond what is expected of them to impress their employer. Leading to more productive and influential work days.

Do Not Forget! Hiring an Unpaid Intern Can Sometimes Be Illegal!

Unpaid Interns - Be Cautious

Before hiring an unpaid intern, consider all the legal requirements

It is important for employers to remember that hiring an unpaid intern as a replacement for an employee or causing an intern to perform an employee’s duties is illegal unless the intern is paid at least minimum wage plus overtime for any hours worked over the 40 hour workweek. Failing to comply with the rules can land you in court.

Recently, unpaid interns filed a class action lawsuit against the Fox Entertainment Group, in connection with the movie “Black Swan.” This lawsuit is one of many related to businesses taking advantage of unpaid interns.

It is imperative that employers allow unpaid interns to closely work under the supervision of other employees and constantly shadow them. This is to ensure the intern receives an “education” and/or “training” related to his or her occupational goals rather than performing work services for the employer.

Hiring interns for the right reasons will provide mutual benefits for both interns and employers. Interns benefit by gaining experiences and tools they can later apply to their occupation.

Also, interns can boost their resumes by providing information about the work they did at their internship and provide their employers as a reference.

Employers will ultimately benefit by increasing productivity at their business while potentially training new future employees without pay.


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