Why Your Unpaid Internship Program is Probably Illegal

Last Updated Apr 22, 2010 10:10 AM EDT

Unpaid internships have helped countless students gain valuable skills in the real business world. In pursuit of a journalism degree I worked the summer at a newspaper fetching coffee for reporters, archiving stories and writing the occasional obituary and wedding announcement.

Today, my internship would most likely be considered illegal. And if you are a for-profit company that uses unpaid interns, your program is quite possibly illegal as well. Listen to the words of Nancy J. Leppink, acting director of the Labor Department's wage and hour division, in an interview with the New York Times.

"If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law."
The Labor Department believes many employers are taking advantage of interns, especially during the economic downturn, and have stepped up enforcement efforts that can include hefty fines against violators.

How can you tell if your program is legal? The Department says you must meet all of the following six requirements:

  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 trainees do 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 trainees and, on occasion, the employer's operations are actually impeded.
  5. The trainees are not necessarily entitled to employment at the completion of the training period.
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
If all six are met, the employee is considered a trainee, not an employee, and thus not covered by minimum wage law.

And don't think that because a school provides your intern with academic credit you are exempt you from meeting these requirements. You're not.

Here's another reason you may want to rethink your unpaid internship program. It sends a bad message about your company. From the outside you look cheap, exploitative, and elitist, writes HBR.org blogger Ross Perlin in his post, What Unpaid Internships Say About Your Company. Worse, it could harm your business in the end.

"Consider the widespread use of interns to manage web content and social media initiatives. It may seem inspired given the generational fit, but it delays the hour when your full-timers have to learn the new tools of their trade, and puts people who know and care least about your brand on the front lines of communicating it."
If you are going to use unpaid interns, he continues, make sure they are offered valuable experience and serious mentoring.

Do you have an intern program? Does it meet federal muster?

(Image by e.t., CC 3.0)

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.