There’s No Such Thing As An Unpaid Intern

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Like most cities with universities, Austin has a large supply of college students and so it seems like it would be a good idea to establish an internship program. After all, all these students need some “real world” experience and you need the free labor, right? Sigh, please don’t blame the messenger for the message. Here we go! As it turns out, you had better be prepared to pay, either with your time and attention or with cold, hard cash, unless you’re looking for a visit from the U.S. Department of Labor or at a minimum getting banned from campus. 

In recent years, the DOL has cracked down on the unpaid intern racket, trying to protect college students from exploitive employers who bring on “interns” but the closest they get to learning the business is how to run the copy machine. These days, if you want to hire an intern without paying money, you must be prepared to demonstrate that you’re serious about offering valuable work experience. To do that, you have to meet the following six criteria, or be found in noncompliance with the Fair Labor Standards Act

The internship has to be similar to training the intern would receive in an educational environment. Key points to remember for unpaid internships:

  1. The internship experience is for the benefit of the intern.
  2. The intern doesn’t displace regular employees but works under close supervision of the staff.
  3. The employer who provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded. (Read: It’s a learning process for the intern even if it’s slow and messy.)
  4. The intern is not necessarily entitled to a job at the conclusion of the internship.
  5. Both employer and intern understand the intern will not earn wages during the internship.

At ValentineHR, we’ve seen some really interesting interpretations of the intern concept. Like, if you have a marketing intern—or HR, Computer Science, or almost any other kind of intern – having her internship consist of data entry isn’t really teaching her the business. It’s clearly replacing a paid employee and it’s pretty obvious that it is more for the benefit of the employer than the intern.

Many universities require companies to be vetted before they’ll send their students to work for the company. Sometimes the business or non-profit is required to prove that it is providing an educational experience for students AND pay them before a college will give credit for the internship.  

Many students are in demand by organizations so having a strong program that is well thought out and planned will be a competitive advantage for you. Taking the time to create a thoughtful, well planned, developed program in which interns are supervised and taught will have an ROI.  Remember, great interns can lead to great new hires upon graduation. 

So what is the worst that can happen if I don’t follow the rules you ask? How about legal problems involving workers’ compensation insurance, state and federal taxes, benefits and unemployment insurance coverage. 

In other words, something that costs a lot more than minimum wage. Contact us! We can help. 

We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business, with offices in Austin, San Antonio, Dallas and Houston. Contact me at Caroline@valentinehr.com or call (512) 420-8267.