Unpaid interns may be deemed employees who must be paid

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Unpaid internships are often a mutually beneficial arrangement in which the intern gains valuable experience and training and the business can vet potential future employees. However, employees must be careful that their unpaid interns are not deemed to be employees.

Employers who approach unpaid internship programs as the means for obtaining free labor are at highest risk of violating the law. The Department of Industrial Relations has issued guidance as to when an intern would be deemed an employee who should be compensated. There is no single definitive test as to when an intern would be deemed an employee; rather, this determination is based on a series of factors that must be looked at in their totality. The factors that tend to indicate an unpaid intern arrangement include:

  • The formality of the training — if the training is more formal or academic it would tend to support an unpaid internship as opposed to just training on how to perform work tasks.
  • The type of training — If the training is more beneficial to the intern’s education, and less beneficial to the employer, that would support an unpaid internship arrangement.
  • The intern should not be assigned tasks that an employee would otherwise perform.
  • Unpaid interns should not be guaranteed a job at the end of the internship.
  • It should be clearly documented that the intern is not entitled to, or expecting any wages for time spent for the internship.
  • Unpaid interns should also work under close supervision as opposed to being left to work freely on their own.

Even if an employee is properly classified as an unpaid intern, they are still protected against harassment or discrimination under the Fair Employment and Housing Act.

Employers who use any unpaid interns should closely scrutinize their program with the assistance of counsel to determine whether those interns should be treated as employees.

In Coffee Break episode 26, Chris and Jennifer explain employers' limitations and obligations when using unpaid interns.