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When is an Unpaid Internship Illegal?

June 26, 2014

During the summer months, thousands of college students and recent graduates flock to companies and organizations for internships in the hopes of bolstering their resumes.  About half of these positions do not offer the students any compensation. 

Although there is a mutual benefit in the tradeoff between experiential learning for the students and free labor for the organization, there is growing concern within the workforce that many of these unpaid internships are illegal in their failure to comply with wage and hour law.

Non-profit organizations are less likely to incur violations because people can legally do unpaid work for them in the form of volunteerism. However, the U.S. Department of Labor warns for-profit companies that it is difficult to establish unpaid internships that comply with the law.  Companies often rely on summer programs as a “trial run” to determine whether or not they want to offer the student a full-time position post-graduation, and students with high hopes of getting these coveted job offers are unlikely to complain about working for free. For these reasons, violations of labor law are widespread in the realm of summer internships, but difficult to identify or stop.

Generally speaking, if the intern derives a greater benefit from the unpaid internship than the company does from the free labor, the internship can be considered legal.  For example, the completion of summer internships satisfies academic credit requirements for many colleges.  However, if the employer is the “primary beneficiary” of the intern’s labor, the intern should be compensated at least minimum wage and be covered by the protections of federal wage and hour law.  The Labor Department offers these six rules for employers establishing unpaid internships:

  1. They must give training similar to that of an academic or vocational institution
  2. They must not displace existing workers
  3. They must give prime benefit to the intern
  4. They must not give immediate advantage to the employer
  5. They do not promise a future job
  6. There is a mutual understanding that the position is unpaid

If you or your organization has any questions or concerns about the legality of unpaid internship programs, please call the offices of HoganWillig at 716-636-7600.