Paid vs. Unpaid Internship - Rules and Regulations

Every summer, there is a usual scramble by many college students to find summer internships opportunities. In recent years, internships have largely been used as a platform by college students to learn valuable skills in the business world. It helps them gain needed experience to increase their chances of landing a job in the future. Nowadays, the scenario of internships is changing. Internships are no longer for college students only. With the high rate of unemployment across the country, many adults are taking on internships for various reasons, such as learning and developing new skills for landing the ideal job.

Summer is a great time to discover potential employees. Many companies allow employees a chance to get free hands-on-training for the company benefit. However, unpaid internship may put company in a serious risk of legal issues and class action lawsuits. Legal issues can occur if employers do not follow internship legal regulations to avoid turning an intern into an unpaid employee, instead of giving interns a true learning experience. For example, if an employer hires an intern for an unpaid internship with the expectation that the intern will then be hired permanently, the intern will generally be considered an employee under The Fair Labor Standards Act (FLSA, 2010).

According to US Department of Labor, employers or companies are required to follow certain standards when taking on unpaid interns. The rules guiding unpaid internship are listed below*:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the above criteria are not met, the intern is deemed a legal employee who must be paid the minimum wage and be protected by federal laws on employment. Thus, to hire intern, all the internship legal regulations must be observed.

*Cited from http://www.dol.gov/whd/regs/compliance/whdfs71.pdf