If you are in an unpaid internship and not getting paid as per labor laws, then understand whether unpaid internship laws are legal or not. Know your rights when it comes to the laws on unpaid internships.
Internships offer a fantastic chance to build valuable work experience, enhance your CV, and move closer to landing your ideal job.
They create a mutually beneficial situation for both the employer and the intern. The employer benefits from an additional set of hands, while the intern acquires transferable skills and crucial practical knowledge in their chosen field.
However, when it comes to unpaid internships, it’s essential to understand your limits and what is legally permissible. Are you expected to put in the same hours as a paid employee and perform identical tasks?
If these questions are swirling in your mind, we’ve put together a helpful guide to clarify what is genuinely acceptable in the realm of unpaid internships. Let’s dive in and ensure you make the most out of this valuable experience while staying within legal bounds.
What Are Unpaid Internship Laws?
Unpaid internship regulations vary between the UK and the USA.
In the USA, the Department of Labor introduced new regulations in January 2018, simplifying the process for companies to engage interns without providing payment.
Prior to these changes, prominent organizations like Vogue magazine had to deal with legal challenges from dissatisfied interns due to unjust terms in their work experience programs, leading to the discontinuation of their internship initiatives.
To ensure the legality of an internship in the USA, it’s crucial to follow these rules:
- Both parties acknowledge that the intern is not entitled to compensation unless explicitly stated otherwise
- The program involves training within an educational environment
- The placement is an integral part of the intern’s educational course
- The program does not disrupt the intern’s academic commitments
- The internship spans the necessary duration for the intern to receive valuable training
- The intern’s tasks complement the work of paid employees and do not replace them
- Both parties are aware that there is no guarantee of a paid job upon completion of the internship
- The internship’s duration is limited to a period in which the placement provides valuable training
In the UK, the laws are a bit unclear.
Under the National Minimum Wage Act 1998, interns are generally considered volunteers and, as such, are not required to receive payment. However, the government specifies that if someone meets the criteria of a worker, they should legally be paid the national minimum wage.
The challenge lies in the ambiguity surrounding what distinguishes a worker from an intern, leading to situations where employers might exploit interns by having them perform tasks typically done by paid employees.
According to the law, employers are not obligated to pay their interns the national minimum wage if:
- If the internship is a component of a higher education course based in the UK
- When the intern is engaged with a charity or voluntary organization that covers their food and travel expenses
- When the intern is primarily observing and shadowing without actively carrying out tasks
Also, if you’re volunteering or doing work shadowing for less than four weeks, it’s seen as a learning experience, and you shouldn’t anticipate any payment.
Understanding unpaid internship laws:
What Is An Unpaid Internship?
In an unpaid internship, it’s usually structured as a work shadowing program. This means that a school leaver, student, or graduate spends a designated period observing and learning from a paid worker.
The setup is akin to an educational environment, where the intern gains valuable insights and knowledge from their mentor. This type of arrangement helps ensure a meaningful and educational experience for the intern.
Are Unpaid Internships Legal?
According to the Fair Labor Standards Act (FLSA) of 1938, any employee working for a for-profit company must receive compensation for their work. However, interns are not classified as employees under the FLSA.
So, are unpaid internships legal? In short, yes, but there’s a catch. They are legal as long as the intern, not the employer, is considered the “primary beneficiary” of the work arrangement.
The challenge here lies in the subjective nature of the question; interns and employers might have different perspectives on who benefits the most. This subjectivity, combined with varying state regulations, often results in the costs for employers outweighing the benefits.
When Are Unpaid Internships Illegal?
If the intern finds themselves performing tasks equivalent to those of a regular employee, like handling junior or administrative responsibilities without receiving the national minimum wage, the internship is deemed illegal. Similarly, if the intern is assured a future full-time position, that arrangement is considered unfair.
If your contributions are directly benefiting the company and you’re sensing exploitation or undervaluation, it’s essential to reflect on whether you’re essentially taking on the role of a full-time employee. If so, it might be worth considering reporting the situation to HM Revenue & Customs.
Will Your Travel Expenses Be Covered?
While it’s best to address this in your initial communication, you have every right to inquire about compensation for your travel expenses.
It’s important to note that not all companies provide travel reimbursement for interns. If they do, make sure to retain copies of your tickets and receipts to ensure accurate reimbursement.
What Hours Will You Be Required to Work?
Typically, interns are expected to be on-site for less than 40 hours per week, generally aligning with the company’s regular working hours. If you find yourself asked to work beyond this limit, according to employment law, you are entitled to receive at least the minimum wage.
While daily attendance may not be mandatory, it’s crucial to communicate with your employer if you can’t make it to work on a particular day due to health and safety considerations. Keeping open lines of communication ensures a smooth and safe work experience.
What Duties Should You Have as an Intern?
Your responsibilities as an intern can differ based on the company, but in broad terms, you’ll collaborate closely with a mentor, supporting them on various projects. This experience is designed to help you cultivate essential professional skills, laying the groundwork for future full-time employment.
Your mentor’s role is to steer you in the right direction, supplying all the necessary learning materials, and offering feedback based on an evaluation of your performance. This guidance is crucial for your growth and development in the professional realm.
Are You Entitled to a Full-Time Job after an Internship?
While your unpaid internship may lead to valuable connections and a growing network, it’s important to note that the typical outcome doesn’t involve a direct job offer at its conclusion. If you decide to pursue an entry-level position after your internship, be prepared to follow the standard application process, just like any other candidate.
Despite the lack of immediate job placement, your internship significantly enhances your CV by contributing real industry experience. Securing a strong reference during this time can be an extra advantage for your future applications.
Unpaid internships have proven beneficial for many school leavers and graduates. However, it’s crucial to be aware of the legal definition of an unpaid internship to ensure you’re treated fairly throughout the experience.
Internship Programs Under The Fair Labor Standards Act
This information below offers general insights to help you understand if interns and students working for “for-profit” employers are eligible for minimum wages and overtime pay under the Fair Labor Standards Act (FLSA).
According to the FLSA, “for-profit” employers are obligated to pay their employees for their work. However, it’s important to note that interns and students may not always be classified as “employees” under the FLSA. In such cases, the FLSA may not require compensation for their work.
According to FLSA internships:
The Test for Unpaid Interns and Students:
Courts use the “primary beneficiary test” to figure out whether an intern or student qualifies as an employee under the FLSA. In simple terms, this test helps courts assess the “economic reality” of the relationship to determine who benefits the most. The following seven factors are considered:
1. Clarity of Compensation Expectations: The extent to which both the intern and the employer understand that there’s no expectation of compensation. Any promise, whether explicit or implied, can indicate an employee relationship.
2. Training Similarity to an Educational Environment: Whether the internship provides training similar to what one would receive in an educational setting, including hands-on training from educational institutions.
3. Ties to Formal Education: How closely the internship is connected to the intern’s formal education program, either through integrated coursework or the receipt of academic credit.
4. Accommodation of Academic Commitments: The extent to which the internship aligns with the intern’s academic calendar and accommodates academic commitments.
5. Limited Duration for Learning: The duration of the internship is limited to the period in which it provides valuable learning experiences for the intern.
6. Complementary Work: The extent to which the intern’s tasks complement, rather than replace, the work of paid employees while delivering significant educational benefits.
7. Understanding of Unpaid Nature: The mutual understanding between the intern and the employer that the internship doesn’t guarantee a paid job at its conclusion.
The “primary beneficiary test” is flexible, with no single factor determining the outcome. Whether an intern or student is considered an employee under the FLSA depends on the unique circumstances of each case.
If the analysis shows that an intern or student is indeed an employee, they are entitled to both minimum wage and overtime pay under the FLSA. Conversely, if the analysis confirms that the intern or student is not an employee, they are not entitled to either minimum wage or overtime pay under the FLSA.
Unpaid Internships in California – Are they legal?
In California, unpaid internships are legal and permitted, but there are specific regulations employers need to follow at both the state and federal levels to host such internships. According to federal guidelines, the primary beneficiary of the internship should be the intern, not the employer.
In California, employers must submit a proposal for the internship to the Division of Labor Standards Enforcement (DLSE) for approval. It’s crucial to ensure that the internship structure aligns with these regulations to create a positive and legally compliant experience for both interns and employers.
In California, unpaid internships are allowed, but there’s a key condition: the primary beneficiary of the internship must be the intern. Various factors come into play, such as the extent of training offered, whether the internship contributes to formal education, and several other considerations. It’s essential to weigh these factors to ensure that the internship not only meets legal requirements but also provides valuable benefits to the intern.
What Does Federal Law Say About Unpaid Internships?
Under federal law, the distinction between an intern and an employee is determined by assessing the economic reality of the employment relationship. Courts apply the “primary beneficiary test,” which essentially asks which party benefits the most from the arrangement:
- intern, or the
- the employer
If the employer is the one getting the most benefit, you might be misclassified as an intern.
The U.S. Department of Labor (DOL) provides guidance on seven factors to help figure out who the primary beneficiary is:
When determining who benefits the most in the internship arrangement, there are seven key factors to consider:
1. Clear Expectations: Ensure there’s a shared understanding that no compensation is expected for the work performed.
2. Training Alignment: Examine the level of training provided and how closely it resembles an educational environment.
3. Educational Connection: Check if the internship is linked to the intern’s formal education program, including the possibility of receiving academic credit.
4. Academic Accommodation: Evaluate whether the internship accommodates the intern’s academic commitments, aligning with their academic calendar.
5. Limited Duration: Confirm that the internship duration is confined to the period necessary for providing training.
6. Complementary Work: Assess how the intern’s tasks complement the work of other paid employees, rather than replacing it.
7. Mutual Understanding: Ensure there’s mutual agreement between the intern and the employer that there’s no guarantee of a paid job at the end of the internship.
Remember, no single factor can solely determine the outcome. The analysis hinges on the individual circumstances of each situation.
These factors help figure out whether you’re truly:
- unpaid intern, or
- employee
If you’re considered an employee, you have certain legal rights protected under the Fair Labor Standards Act (FLSA), which is the main federal labor law. These rights encompass:
- a minimum wage, and
- overtime pay
These guidelines are fresh; the Department of Labor (DOL) introduced them in January 2018. However, they are rooted in insights gathered from federal court cases spanning decades.
What Do California Employers Have To Do To Make Unpaid Internships Legal?
California employment law adds extra steps for employers to follow. In the state, employers need to submit an application to the Division of Labor Standards Enforcement (DLSE) to establish an unpaid internship.
The internship program can only move forward without pay if DLSE approves the application.
When applying to DLSE, employers need to provide details about the proposed internship. The application must be persuasive enough to convince DLSE that:
- The internship aligns with the coursework in an educational program
- The intern won’t be entitled to employee benefits such as health insurance or workers’ compensation coverage
- The intern will gain training or work experience in a specific industry
- The employer will be transparent about the absence of compensation
If the unpaid internship program doesn’t get approval, the employer needs to treat interns as regular employees.
What Legal Recourse Do Unpaid Interns Have?
If you’re an unpaid intern and feel like you’re being treated as an employee, you have the option to file a worker misclassification claim. If the claim is successful, you could recover:
- Enough unpaid wages to meet the minimum wage,
- Other benefits, and
- Attorneys’ fees and interest on unpaid wages
Typically, unpaid interns would be reclassified as nonexempt employees in most cases. This shift would also entitle you to recover:
- Unpaid overtime, and
- Compensation for missed meal or rest breaks
Full-time interns have the potential to recover substantial amounts, and even part-time interns can also benefit.
However, deciding to take this path can be challenging. Initiating a lawsuit for unpaid wages may impact your reputation. If you file a claim against the company where you interned, it’s unlikely that you’ll be offered a job there.
Additionally, finding employment elsewhere might be difficult if your employer withholds a recommendation due to your legal claim. Unfortunately, some companies rely on this reluctance to secure free labor from young workers.
Seeking the guidance of an employment lawyer from a reputable law firm is crucial in such situations.
What Are The Benefits of Unpaid Internships?
Why would someone choose to be an intern without receiving a paycheck? For many college students aiming to kickstart their careers, the valuable professional experience gained from unpaid internships is the key.
They see internships as an investment in gaining work experience rather than providing free labor to a business. For young professionals, having a resume filled with robust internship experiences is incredibly valuable.
According to Keeon Yazdani, a marketing strategist with experience in various companies, including CBD’R US, an online cannabis business, interning marketing majors has proven beneficial for both the companies and the interns. Yazdani stated, “We give interns the chance to understand how a small business operates, and in return, they provide insights into social media strategies, helping us keep the younger demographic engaged with our content.”
Similarly, Kristi Porter, the founder of the copywriting consultancy Signify based in Georgia, has found her unpaid internship program to be a positive experience for both her and the interns she’s hired.
“I only require five hours per week, which is why it is unpaid,” explained Porter. “All the interns have been comfortable with our arrangement, and I believe they have enjoyed the experience and learned a lot. As a one-woman business, it’s also great to sometimes get others’ opinions and insights.”
It’s worth noting that neither Signify nor CBD’R US provided academic or vocational credit for their internships. Porter mentioned, “Although I have offered class credit in the past, no one has taken me up on it. They seem to prioritize the experience more than anything else.”
What Are The Risks of Hiring Unpaid Interns?
Having unpaid interns can bring value to your business, with the interns still being the primary beneficiaries of the internship. However, it’s essential to be aware that there are potential downsides and risks associated with hiring unpaid interns.
Legal Hurdles:
Businesses still interested in bringing on unpaid interns should reach out to their nearest Department of Labor Wage and Hour Division agency to confirm if the Fair Labor Standards Act (FLSA) applies to their proposed internship. However, it’s crucial to be prepared for a likely “yes” as the answer.
Even when internships are legally sound, staying compliant is a delicate balance where non-compliance can be expensive. While some large companies may manage legal issues by factoring legal fees into their labor costs, paying a settlement to one intern out of court might be more affordable than paying wages to 25 interns. However, smaller businesses don’t have the same financial flexibility.
Ruiz emphasizes, “Ensuring that any internship is legally compliant before bringing on an intern is generally a more cost-effective approach in the long run.”
Moreover, with eager college students willing to work for free, small businesses may unintentionally overlook their legal responsibilities. Many well-intentioned employers might be surprised to discover that their informal internships violate labor laws.
Therefore, small business owners are advised to lean toward caution. While not mandated in every state, the following suggestions can help prevent disputes between your business and an unpaid intern:
- Clearly document all agreements regarding compensation and commitment
- Make sure both the intern and their supervisor sign off on all internship terms
- Maintain a record of hours worked, including any overtime
- Whenever feasible, provide opportunities for college credit
- Focus on providing broad, transferable training; avoid assigning menial tasks. Consider incorporating effective employee training techniques
Quality Issues:
Not every unpaid intern is solely driven by ambition for the cause. While they may find the professional experience valuable, the absence of compensation might affect their motivation to deliver their best work. Unpaid interns might perceive their internship as less serious compared to a paid one, leading to potential lower commitment levels.
Some employers discover that the quality of talent gained from a paid internship outweighs the cost-effectiveness of having an unpaid intern. The Hire Talent, a company offering pre-employment assessments to recruiters, reached this conclusion during its own hiring process. Consequently, The Hire Talent chooses to pay its interns on an hourly basis rather than offering no compensation.
According to Fletcher Wimbush, the CEO of the company, “This makes us more competitive for the best talent. For us, it’s a very inexpensive way to… test out new ideas.”
Russell D. Knight, a divorce attorney running a family law firm in Chicago, had a similar experience when hiring interns.
“The quality of work is always higher if you’re paying someone even a nominal amount,” Knight noted. “If the intern isn’t generating value greater than twice the minimum wage, do you really even want them there?”
What Are Tips For Hiring Unpaid Interns?
If, after carefully considering the advantages and disadvantages, you decide to establish an unpaid internship program, it’s crucial to know how to attract interns and ensure the success of your program.
Where to find unpaid interns:
Discovering potential interns can happen in various places. Generally, internships are appealing to young individuals actively pursuing education and experience in their chosen field.
This makes colleges and trade schools excellent starting points for your search. Many of these institutions host virtual or in-person job fairs.
Considering the digital shift in recruiting, make the most of online job boards like Indeed.com to enhance your search. Explore industry-specific job boards to increase your chances of finding the right candidates. Don’t forget to promote your opportunity on LinkedIn, leveraging its professional network.
Lastly, your personal and professional networks are valuable assets for finding interns. Your contacts might connect you with students seeking internships, share insights from their own past interns, or even provide access to their pool of applicants.
Direct references, such as connections from your college alumni network, can streamline the recruitment process.
What Tasks Can Unpaid Interns Perform?
Ideally, interns should engage in tasks that are low-risk yet relevant to their field of study. For instance, a writing intern could handle research and prewriting tasks that will be later refined by a professional.
An engineering intern might be involved in supervised fieldwork. The tasks assigned to interns should align with their role and contribute to their professional growth.
On the flip side, interns shouldn’t be tasked with grunt labor, running errands, or filling gaps in areas that existing employees are uninterested in.
It’s important to emphasize that interns shouldn’t be performing the duties of a paid employee without compensation; their contributions should complement the existing work within the company.
Can You Profit From Unpaid Internships?
Legal unpaid internships are seldom financially rewarding, and internships that bring profit without compensation are seldom legal. Even in the rare cases where these overlap, ethical considerations come into play.
While you might not have to provide a salary, there are other incurred costs. Just like the saying goes, there’s no such thing as a free lunch, and similarly, there’s no such thing as a free intern to fetch you that lunch.
Hey, I am Sachin Ramdurg. I run and manage futuredecider.com website that helps students, graduates, and professionals, to find and decide on their future career with ultimate future career advices and future career guides. I have an overall 12+ years of career guidance experience in multiple domains which has helped multiple students, graduates, and professionals to find the best career path for their future.