Unpaid Interns-- Ideal but Risky for Business Owners

An ever-popular method for small businesses to acquire some extra—albeit temporary—hands on deck is to hire interns. Typically college students with similar career aspirations are eager to gain some real life experience, or at minimum a few lines for the old resume. So, with motivated college students at the ready to perform some of the more mundane tasks that small businesses have to deal with, owners are understandably eager to jump at the chance to bring in some free—or at least low cost—young workers.

But, as good as that may sound, business owners need to remain ever-mindful of the potential risks inherent in hiring unpaid interns. While still technically legal to hire unpaid interns, the structure of the employee-intern relationship must be carefully considered in order to stay out of hot water with state and federal regulators.

The Department of Labor has developed a test to determine whether an intern can be unpaid (or paid less than minimum wage).

If all of the following six criteria are met, the intern does not need to be compensated:

1)     The goal of the internship is to train the intern similar to how he or she would be trained in an educational environment.

2)     The primary beneficiary of the internship is the intern.

3)     No employee is replaced by the unpaid intern; he or she is closely supervised.

4)     The employer receives no immediate benefit from hiring the intern; in fact, their operations may sometimes be impeded by the intern.

5)     The intern is not entitled to a job at the completion of the internship.

6)     The intern is fully aware that he or she will not receive a salary.

A loaded test? Absolutely. But, it’s important for all employees considering potentially bringing on interns to consider if they really meet the requirements. Otherwise, they can face stiff penalties at the local, state and federal level.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website atwww.thevirtualattorney.com.

The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance.


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