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Unpaid internships: Why they aren’t a good idea for most companies–or you (in most cases)

In the past week, there has been a lot of press around the editor-at-large for Sheryl Sandberg’s non-profit organization, Lean In, posting an opening for an unpaid internship on Facebook. Controversy erupted around why an organization spearheaded by Sandberg, who made $91 Million from Facebook stock sales last week, would be offering an unpaid internship. Isn’t that counter to the organizations purpose, many asked?

For Lean-In, a registered non-profit, this might have been legal. In the for-profit world, however, unpaid internships are most often illegal. And this is why the story is important to you, dear readers.

If you’re a recruiter who has a client that wants to post an unpaid internship at your for-profit company, or if you are offered an unpaid internship, scrutinize the request or opportunity very carefully.

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The US Department of Labor established new guidelines for Internship Programs under the Fair Labor Standards Act in 2010. In this document, they established a test for whether an internship should be paid or unpaid. They are:

  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;
  1. The internship experience is for the benefit of the intern;
  2. The intern does not displace regular employees, but works under close supervision of existing staff;
  3. 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;
  4. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  5. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

I’ve bolded a couple of points that I consider most salient. In essence, an unpaid intern is on premises effectively for co-op educational experience. They may not produce any work that could benefit the employer–which is to say, most anything. And in some cases, normal business operations may actually be impeded through having the unpaid intern on premise.

Seems pretty clear, right? Unfortunately it doesn’t seem to be for a lot of employers. Fox Searchlight was sued–and had judgement awarded against them–by unpaid interns that had worked on “Black Swan“. And this is simply the highest profile case of many where former unpaid interns have been awarded back wages. Warner Brothers/Atlantic Records was sued by a former unpaid intern in June.  The Charlie Rose show was ordered to pay back wages to unpaid interns in a court judgement to approximately 190 former interns earlier this year.

But what about if you’re receiving academic credit? Doesn’t that give the employer a free pass? Not according to judicial precedent. The “Black Swan” ruling stated that receiving academic credit was of little importance in determining whether the interns should have been paid.

In essence: Internships in for-profit businesses should be paid. It needs to follow the concept of consideration. If an intern produces work of any value to the organization, they need to be paid a satisficing amount in consideration of that work.

I’ve been approached by hiring managers who know of a smart college student who is hungry for experience who would like to hire them as an unpaid intern. I get it: they see an opportunity for a cheap (read: free) resource to get some basic work done that they’d otherwise have to hire a temp to complete. I’ve had many educational conversations as to why doing this would place the organization at legal risk.

Recruiters: Have you run into this with hiring managers? How did you handle it?

Job seekers/students: Have you considered an unpaid internship? Did you end up doing it?

End note to the Lean In story: It was announced at the end of last week that Lean In will be doing a paid internship program. Amazing what a little press coverage can do.

August 2013
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