Our Clients Ask Us: Unpaid Internships

Q: My company is thinking about offering unpaid internships. Is that a bad idea?

ANSWER:

No. For students, internships can be a great way to earn college credit while also getting some real life work experience. But, before you decide to hire an intern without providing compensation, there are several things you need to keep in mind.

Recently, several states have begun investigations and fined employers for violating minimum wage laws with unpaid internships. So, to avoid any potential violation of wage laws, if possible, it is best to pay an intern in compliance with Ohio law and the Fair Labor Standards.

However, if your company does hire an intern without paying him or her a

wage, regardless of whether he or she earns college credit, the intern must meet the standards set forth by the Department of Labor’s Wage and Hour Division.

The DOL’s Wage and Hour Division utilizes the following six-factor test to determine whether an individual is an employee or a "trainee" (intern) under the Fair Labor Standards Act:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
2. The training is for the benefit of the trainee;
3. The trainee does not displace regular employees, but works under their close observation;
4. The employer that provides the training derives no immediate advantage from the activities of the trainee, and on occasion the employer’s operations may actually be impeded;
5. The trainee is not necessarily entitled to a job at the conclusion of the training period; and
6. The employer and the trainee understand that the trainee is not entitled to wages for the time spent in training.

If all of the preceding criteria apply, the trainee or intern is not an employee within the meaning of the Act and, therefore, does not have to be paid. But if the intern is an employee, then your company must pay the intern a wage for the time worked.

More on Business Law