Are Unpaid Interns Really Free?

To a small business trying to stretch a budget, interns seem like a dream come true. They are mostly students, early in their career and eager to prove themselves. Best of all, the economic realities of job-hunting and the catch-22 of needing “experience” to land their first job mean that many students will intern for you free of charge. What’s not to love?

But before you go out and create a part-time workforce of students, know that federal law actually prohibits you from using interns as free labor. If you bring on an unpaid intern for a position that looks and functions just like an employee role, you risk violating the Fair Labor Standards Act (FLSA).

Below are some factors the Department of Labor uses to distinguish between internships vs. employee positions that are simply disguised as internships. If the answer to most of the following inquiries is a firm “yes,” you’re likely safe not paying your intern. If not, your intern might technically be an employee entitled to minimum wage and overtime pay.

1. No Expectation of Pay. Do the employer and intern both clearly understand that there is absolutely no expectation of payment?
2. Training. Does the internship provide training similar to what the intern would receive in school, including at clinics or hands-on workshops?
3. Relationship to Formal Education Program. Is the internship incorporated into the intern’s educational curriculum, and/or is the intern receiving credit for the internship?
4. Accommodation for School Commitments. Does the internship accommodate the students’ education? Do classes and other academic commitments take precedence?
5. Duration. Is the internship for a limited period of time? (It should only last as long as it remains educational.)
6. Nature of Work. Does the intern’s work complement rather than displace employee work?
7. No Job Offer. Does the intern understand that there’s no promise of a paid position after completion of the internship?

True interns aren’t free. Even if they don’t cost money, they cost time — you need to be willing to spend time training and teaching them, more as you would with a mentee or a student rather than a new hire. You need to be giving them opportunities to learn that don’t necessarily “pay off” for you, like letting them sit in on interesting meetings or shadowing you or your employees as they work.

If you don’t invest time to make your intern’s experience truly educational, and if they’re doing basically the same work as your other employees, paying them less than minimum wage may well be an FLSA violation.