Why Your Unpaid Internship May Be Illegal

Source: iStock
Source: iStock

Most young people see internships as a logical step between formal education and a career, but roughly half of those internships are unpaid. Paid interns are more likely to end up in high-paying jobs, but paid positions can be difficult to find. As a result, many are left wondering whether an unpaid internship is even worth it.

There are plenty of valid criticisms of unpaid internships. They provide companies with free labor, contribute to social inequality, and offer no protection from workplace discrimination or harassment. Some argue an unpaid internship is still better than no internship at all, but the hiring rates for those who complete an unpaid internship are roughly the same as for those who lack any internship experience.

England’s Labour party has proposed to put an end to unpaid internships, arguing that it widens the gap between the rich and the poor. Ed Miliband explained, “it’s a system that’s rigged in favour of those who can afford it.” Opponents have said the change would drastically reduce the number of internships available, but YouGov polling data from Intern Aware found there would be no significant impact on the number of internships, with 60% of businesses saying it would make no difference in the number of interns recruited and some saying the change would make them likely to hire more.

In the U.S., it appears unpaid internships will be around for a while, but a wave of lawsuits is putting pressure on private companies to ensure their unpaid internship programs meet the legal requirements. Some companies are even choosing to stop recruiting interns amid legal pressures. Conde Nast, for example, ended its internship program in 2013 after being sued.

For-profit companies are only permitted to use unpaid internships if they meet six specific criteria outlined by the Department of Labor (DOL). The most important thing to remember is the unpaid internship must be for benefit of intern. If recent lawsuits in the entertainment, media, and fashion industries are any indication, there are plenty of American companies who still use unpaid interns largely for their own benefit.

And that’s illegal.

Here are the six legal requirements for unpaid internships at for-profit, private-sector companies in the U.S. The following language was taken directly from a DOL fact sheet on internship programs under the Fair Labor Standards Act (FLSA).

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  1. The internship experience is for the benefit of the intern;
  1. The intern does not displace regular employees, but works under close supervision of existing staff;
  1. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  1. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  1. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

According to the Department of Labor, “If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.” This 2010 fact sheet was born out of a Supreme Court ruling in a case about railroad trainees from 1947 and now serves as the legal basis for lawsuits brought by unpaid interns.

The document provides additional details, perhaps most notably the assertion that legal unpaid internships should be “of a fixed duration, established prior to the outset of the internship.” This is not listed as one of the six rules, but it is expressly stated in the DOL’s fact sheet nonetheless.

What about public and non-profit employers? Interns in these situations lack a clear set of guidelines to determine if they are being exploited for free labor, which is certainly not impossible just because an organization is not-for-profit. The DOL provides this disclaimer:

“Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. WHD [Wage and Hour Division] is reviewing the need for additional guidance on internships in the public and non-profit sectors.”

The precise meaning of the six rules remains up in the air as well. As a 2015 article in Fortune explained, judges have not been consistent in interpreting these rules. In the case against Fox Searchlight Pictures, the judge ruled in favor of the interns, treating the DOL rules as a rigid checklist. However, in a similar case against Hearst, the criteria were used only as a general “framework” to determine enough requirements were met to make the internship program legal.
Want more great content like this? Sign up here to receive the best of Cheat Sheet delivered daily. No spam; just tailored content straight to your inbox.