Unpaid interns can be trouble for your small business. Through no fault of their own of course. If you take on unpaid interns with the idea that they will do some "grunt" work while you teach or train them you may run afoul of the Fair Labor Standards Act (FLSA). More specifically, you need to be aware of a 6 factor test the Supreme Court in Portland Terminal developed specifically for determining whether an individual is a trainee/intern vs. an employee entitled to at least minimum wage, overtime etc. The factors are:
- The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
- The training is for the benefit of the trainee
- The trainees do not displace regular employees, but work under close observation
- The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded
- The trainees are not necessarily entitled to a job at the completion of the training period; and
- The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.
The bad news (yes I know there was no "good news") is that the above test is only for Federal purposes. Yes there are California standards as well. The Department of Labor Standards Enforcement, in a 1996 opinion letter stated:
the training be an essential part of an established course of an accredited school or of an institution approved by a public agency to provide training for licensure or to qualify for a skilled vocation or profession. The program may not be for the benefit of any one employer, a regular employee may not be displaced by the trainee, and the training must be supervised by the school or a disinterested agency,
Of course, as we are all accustomed to, California has a stricter standard than the Federal government. Don’t forget to check with your worker’s compensation policy holder, and any other aspect of your business where number and nature of employees is material.
Great post! Thank you for providing the factors on paid vs. unpaid interns. After reading your post I am thankful we decided to only use paid interns!