Hiring Interns? Yeah There's a Law for That

The decision to hire interns can be a complicated one, especially when trying to navigate the legality of unpaid versus paid internships. Are unpaid internships ever legal? If so, when? If the internship has to be paid, how much should you pay the interns? It’s a lot to consider.

But the truth is, internship programs are something every company should be seriously thinking about. The popularity — and necessity — of internships is booming. 55% of the class of 2012 had an internship during college, according to a study by the National Association of Colleges and Employers. A 2013 survey by Internships.com revealed that 67% of the class of 2013 had completed at least one internship during college.

These growing numbers demonstrate how important internships have become with regard to getting a job. They’re so important, in fact, that a 2014 Bloomberg Businessweek study showed students with internship experience are up to 43% more likely to get jobs out of college than those without.

Whether you already offer internships or are just getting started setting up a program, there are a few things you should keep in mind. Below is information regarding the laws surrounding unpaid vs. paid internships, as well as resources explaining a few other details regarding the hiring of interns.

The Only Way an Unpaid Internship is Legal

Debates surrounding the legality of unpaid internships seem never-ending. They also seem to be without rhyme or reason. The truth is, the U.S. Department of Labor (DOL) has laid out very specific laws to determine the legality of unpaid internships. Those laws are contained in Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act.

The fact sheet identifies six criteria an unpaid internship in the for-profit private sector must meet in order to be legal. If the internship doesn’t meet all six standards, the intern must be paid “at least the minimum wage and overtime compensation for hours worked over 40 in a workweek” — just like a regular employee (Note: This applies only to for-profit private sector internships. A note at the bottom of the fact sheet explains that the FLSA makes a special exception for unpaid internships in the public sector and at non-profits; interns are considered volunteers and therefore aren’t legally required to be paid.).

The six criteria for unpaid internships, as written by the DOL, are as follows:

1. The internship, even if it includes actions and responsibilities full-time employees would perform, is considered training
2. The internship experience is for the benefit of the intern, not the employer
3. The intern does not replace regular employees, but works under close supervision of existing staff
4. The employer that provides the training should see no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded (a.k.a. the business should not rely on interns to perform vital operational functions that impact revenue and/or performance)
5. The intern understands he/she is not entitled to a job at the conclusion of the internship
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship (a.k.a. get it in writing that it's an unpaid internship)

In general, the more an internship mirrors an academic experience, the more likely it will fulfill the six criteria. That’s not as easy as it sounds, however. Basically, the law holds that if an intern is engaged in any way with the operations of the business — clerical work, assisting customers, answering phones, etc. — then they are entitled to the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.

Similarly, if you plan to use interns as substitutes for regular workers or to augment your existing staff during specific time periods — tax season, for example — then the interns should be paid. Another way to look at it: If you would have hired additional employees or required existing staff to work additional hours had the interns not been there, then the interns are viewed as employees under the FLSA.

As for the legality of internships being “paid” for in school credit, no hard-and-fast rules exist. Recently, however, major schools such as Columbia University and New York University decided to no longer offer undergraduate students registration credits in exchange for internship experiences. Other schools that don’t grant credit for internships include Dartmouth, Yale, and Harvard.

Given these specific-yet-wide-reaching requirements, most interns at for-profit businesses should legally be paid at least the minimum wage and be treated as temporary employees with respect to labor law

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So You Want to Hire an Intern

As we’ve already established, interns in most cases should be treated as temporary employees, unless you meet the six criteria to legally have unpaid interns (or work for a company in the nonprofit or public sector). And the criteria should not be taken lightly, either: In 2011, two interns who worked on the movie Black Swan sued Fox Searchlight Pictures for having them do work that should have been done by paid employees. In June 2013, the court sided with them, ruling that they deserved minimum wages in exchange for their work.

The lawsuit sparked an array of copycat suits filed by interns from such companies as NBCUniversal, Rolling Stone magazine, and CBS Corp. These suits and others like it have led some companies (Fox Searchlight, The Nation magazine) to restructure their internship programs to include minimum-wage pay, and made others, like Conde Nast, to cut their internship programs altogether.

But the issue of paid vs. unpaid internships is still in limbo. While the Fox Searchlight interns won their court case, eight former Hearst Corporation interns who filed in 2011 with similar claims — in the same district court (Manhattan) — did not. A case filed in the Second Circuit Court of Appeals in Manhattan in January 2015 will seek to address that inequality and answer the question: Is an intern an employee?

Until then, assume that all interns should be treated as regular employees. That means you treat them just like any other employee you would hire. Notify them when running a background check. Avoid asking illegal interview questions (some of which are easy to ask by accident). And yes, pay them at least minimum wage if you're filling a role at a for-profit company.