It is that time of year again – college and high-school kids are looking for practical, hands on work experience. Lured by the possibility of future “real” employment or at least a way to beef up the resume, these students are willing to work for free. According to a 2012 Time Magazine article, there are about 1.5 million internships in the U.S. each year, and it is estimated that up to one-third of them are unpaid.

So what is the big deal? Having an intern seems like a “win/win” for all – the student gets hands on experience, and you get free help for the summer. Right? Well, probably wrong if you are a private sector employer.

Here is how it works.

Federal and state wage and hour laws establish requirements for employees. Most employers are pretty familiar with the basics – minimum wage, breaks, overtime, and the exempt/nonexempt classifications.

These wage laws generally apply to all employers and employees unless they are somehow excluded. For example, these very limited categories of workers are excluded from wage laws:

• Casual laborers working in private homes (think baby sitters)
• Volunteer workers who perform services for educational, charitable, religious, government or non-profit organizations (think Sunday School teacher, Habitat for Humanity volunteer)
• Newspaper carriers
• Those involved in a forest protection and fire prevention activities
• Inmates and others in custody
• Elected or appointed public officials
• Certain agricultural employees if they harvest by hand and are paid piece meal

So, in general, volunteers (unpaid interns) are not allowed in “for-profit” businesses.

 “Academic” Student Internships – can these be unpaid?

Just calling it a student internship doesn’t make it legit. You can have unpaid student internships, but it is difficult. Student internship programs must specifically be designed to provide students with professional experience in the furtherance of their education, and the training must be academically oriented for the benefit of the student. These internship programs are generally sponsored through a university, and the student usually receives academic credit. To qualify, the U.S. Department of Labor had provided a six factor test. All six factors must be met in order for an intern to work unpaid; otherwise a student intern is considered an employee and must be paid appropriately.

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

The easiest  - and legal – solution is to pay your interns. Think of it as a three month on-the-job interview. This is the true “win/win”. The intern gets experience and pay, and you, the employer get extra help in your workplace and a possible future employee.

Like many employment-related regulations, these rules can be complex. If you have any questions, we encourage you to contact us. Personnel Management Systems can assist on this or any other Human Resource issue.