NCPA - National Center for Policy Analysis

ARE COMPANIES TAKING ADVANTAGE OF UNPAID INTERNS?

April 7, 2010

Over the past several years, unpaid internships have gained immense popularity.  But since the onset of the recession, so many young people working for free has raised some eyebrows, says the New York Times.  

According to Nancy J. Leppink, acting director of the Department of Labor's wage and hour division: 

  • The Labor Department is cracking down on firms that fail to pay interns properly and expanding efforts to educate companies, colleges and students on the law regarding internships.
  • If you are a for-profit employer or you want to pursue an internship with a for-profit employer, there are not going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law. 

Of course, this matters because in the United States, workers must be paid, says the Times. That's why we have a minimum wage.  Even voluntarily working for free is against the law if the company is for-profit. 

So how do you tell the difference?  According to the Labor Department, there are six criteria, all of which must be met: 

  • 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.
  • The training is for the benefit of the trainees.
  • The trainees do not displace regular employees, but work under their 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 conclusion of the training period.
  • The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. 

What would happen if the government ramps up enforcement to eliminate any internship that fails to adhere to this standard?  According to the Times, most firms would probably just attempt to tweak the internships to be in better compliance.  But in cases where that's impossible, a company would have two options: eliminate the interns or hire them as paid employees. 

Source: Daniel Indiviglio, "Are Companies Taking Advantage of Unpaid Interns?" The Atlantic, April 5, 2010; and Steven Greenhouse, "Growth of Unpaid Internships May Be Illegal, Officials Say," New York Times, April 2, 2010. 

For Atlantic text:

http://www.theatlantic.com/business/archive/2010/04/are-companies-taking-advantage-of-unpaid-interns/38509/ 

For NY Times text:

http://www.nytimes.com/2010/04/03/business/03intern.html 

 

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