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Advice from Small Business Attorneys about the Best Practices for Unpaid Internships

Written by: Andrew Gale - Orange County - Small Business Attorney

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Hiring interns is a perfectly acceptable way of adding to your workforce. However, it can get a little tricky when you are thinking of not paying the intern. This is a common question and an activity that requires caution. There are a number of criteria that must apply to the job and the intern. Incorporation Attorney, a team of trusted small business lawyers in California, highly recommend that employers should strictly adhere to the six-part test for hiring unpaid interns. Learn more about the best practices for an unpaid internship. 

Is it Okay to Hire Unpaid Interns for your Small Business?

It’s summertime! For many people, it means vacation. But for small business owners, it means a temporary but straining decrease in their company’s workforce. Many entrepreneurs are looking for additional assistance in their business during this season, because a number of their key employees are on a holiday. The common solution to get some added coverage during this time of the year is by hiring interns.

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Andy Gale of Incorporation Attorney

One of our clients at Incorporation Attorney called us recently and talked to us about his need to hire a little extra help. He was considering bringing on an intern over the course of the summer. Moreover, he was interested in getting an unpaid intern. The client talked to Andy Gale, one of our expert corporate lawyers, about how to go about unpaid internships.

The client believes that unpaid internships are a win-win situation for both the intern and the employer. The setup will benefit him because he will have an extra pair of hands to help share the labor in his business, without having to pay a salary. It will also be advantageous for the intern because these days, it is so difficult to earn ample work experience, which is a requirement in all job applications.

Although hiring an intern is a good idea if an employer wants to add to his workforce, unpaid internship programs are a little bit trickier. There are legal precautions that have to be considered. The Department of Labor has established a six-part test that must be followed, in order to make the hiring of unpaid interns to be acceptable. Andy Gale strongly advised the client to have a written agreement between the intern and the employer. This document should set out all the six elements of the working relationship that both parties have agreed upon. It is imperative that the client has a copy of the agreement and that it is safely kept in an employee folder. The intern should also be given a copy of the document.

Is it Okay to Hire Unpaid Interns? Small Business California

Six-Part Test to Determine Whether Hiring Unpaid Interns is Okay

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As a best practice for small businesses, Andy Gale highly recommends that employers should meet the six standards set by the Department of Labor for hiring unpaid interns. The criteria are as follows:

1. The internship is similar to training, which will be given in an educational environment.

Although the internship involves the actual operation of the company’s facilities, its main purpose is still for learning and gaining experience. An intern’s goal during the duration of the program is to be trained, and therefore, it is the employer’s responsibility to provide a conducive, educational environment.

2. The internship experience is for the benefit of the intern.

In 2015, the U.S. Court of Appeals raised a concern: “the proper question is whether the intern or the employer is the primary beneficiary of the relationship.” In the end, it was ruled that the internship program is set up so that ultimately, interns can benefit from the work experience. Through the duration of their time with the company, the interns should be given as much opportunity to hone their skills and expand their knowledge in the industry that they find themselves in. As a result, they can grow to become the professionals they are called to be and be able to fulfill their highest potential.

3. The intern does not displace regular employees, but works under close supervision of existing staff.

Since the main purpose of the internship program is for training, the interns should not be used to substitute regular employees in the company. Otherwise, they shall be paid at least the minimum wage, including overtime compensation for hours worked in excess of forty hours a week. A supervising staff should be assigned to work alongside them. A competent and knowledgeable employee should always be placed as an overseer of the interns, not only to make sure that they do their work properly, but also to monitor and evaluate the progress of their learning.

4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion, its operations may be impeded.

It is imperative that the responsibilities given to an intern do not include routine work on a regular and recurring basis. Since the intern is not a hired employee, the small business should not be dependent on the work that they do. If an intern engages in the operations of the enterprise or is performing productive work wherein the company earns or benefits from the activity, then the intern should be paid at least the minimum wage, as well as overtime.

5. The intern is not necessarily entitled to a job at the conclusion of the internship.

Before the onset of the internship, a fixed duration of the working relationship between the intern and the employer should be established. Moreover, unpaid interns should not be used by the small business owner as a trial period for individuals who are seeking employment at the end of the internship period. An intern should not be assigned to a trial employee position with the expectation that he or she will be given a permanent employment after. Otherwise, that intern would be considered an employee under the Fair Labor Standards Act (FLSA), and should be paid wages accordingly.

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

There should be a clear understanding between the intern and the employee regarding this matter. It is imperative that this should be established before the internship program commences, and there should be a written agreement to document this.

If all of the criteria listed above are met, an employment relationship will not be deemed to exist under the FLSA. Without an employment relationship, the intern will not be considered an employee, and thus, the Act’s minimum wage and overtime provisions will not apply to them. Additionally, it is important to note that workplace protections like the Civil Rights Act, the ADA, OSHA, and many state-specific laws apply to interns, whether paid or unpaid.


Hiring Unpaid Interns California – The Six Part Test Explained

Click for larger imageTrusted Small Business Lawyers in Orange County, California – Incorporation Attorney

Andy Gale of Incorporation Attorney is one of the most competent business lawyers in California. If you need any help or advice in the legal aspects of hiring an intern for your small business, do not hesitate to call Andy at +1 (714) 634-4838!

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Andy Gale
Posted - 09/13/2018 | California