What's not to like about getting an intern? A small business gets a little free help and a willing student or former student learns how the business works. Some interns even end up with good jobs after learning valuable skills. What a great concept!
But here's the unfortunate reality, especially for California employers: The unpaid intern is largely a myth, because if your business benefits from their labor, you have to pay at least minimum wage. If you don't and your happy intern becomes a disgruntled plaintiff, you face double damages, penalties, interest, attorney fees, even the shutting down of your business or a misdemeanor conviction. Such are the penalties for using unpaid labor.
Some rather big players are learning this the hard way. In the last couple of years, interns have filed lawsuits against Hearst, Fox Searchlight Pictures, Cond? Nast, Atlantic Records and others. Generally the claim is, "we worked our butts off for you and should have gotten paid at least minimum wage," even though they agreed to intern for free.
Many companies have now canceled their internship programs, while others have decided to pay wages to qualified candidates and let the rest find another way to "learn the business."
What Happened to the good old-fashioned intern?
Just like "starting out in the mailroom", which I did at CBS long before law school, interning has a long and celebrated history in this country. Programs in competitive industries, fashion, advertising, media, attract many applicants eager to show up every day for nothing just to get a foot in the door, learn and make valuable contacts.
Enter the class-action lawsuit for back wages: Many interns today claim they are being subjected to long hours, harsh conditions and, like Howard Beale in the movie "Network," they're "not going to take it anymore!" Maybe it's Gen Y's entitlement syndrome, but no matter, the law is on their side.
A Narrow Legal Window
The rules permit unpaid internships, but only under limited conditions. Both state and federal authorities will consider these six criteria to decide whether they're truly exempt from minimum wage:
1. The internship is similar to training the individual would get in a school, even if it involves actual operations of the employer.
2. The experience is for the benefit of the intern, not the company.
3. The employer gains nothing from the intern, and in fact the operation may be impeded.
4. The intern does not displace regular employees.
5. The intern is not necessarily going to be hired at the end of the internship.
6. It's agreed that no wages will be paid.
For most small businesses, these criteria are the opposite of what the business needs. They need a mutually beneficial arrangement where the student learns while the business gets cheap or free labor. Yet that's precisely the situation that will likely lead your small business down a painful road to damages, penalties and attorney fees.
Pay to Play
The safer practice is to pay inexperienced workers minimum wage and treat them as employees. If the math doesn't support the position, don't hire.
When clients ask me about unpaid internships, my advice generally is, "don't." It's a rare case that fits the rules, and with so many college grads looking for fewer jobs, and the minimum wage going up, the setting is ripe for more of these "free workers" to end up at the labor commissioner's office or in court.
You don't want to be the employer on the other side of the room.
Lou Storrow can be reached at [email protected].
But here's the unfortunate reality, especially for California employers: The unpaid intern is largely a myth, because if your business benefits from their labor, you have to pay at least minimum wage. If you don't and your happy intern becomes a disgruntled plaintiff, you face double damages, penalties, interest, attorney fees, even the shutting down of your business or a misdemeanor conviction. Such are the penalties for using unpaid labor.
Some rather big players are learning this the hard way. In the last couple of years, interns have filed lawsuits against Hearst, Fox Searchlight Pictures, Cond? Nast, Atlantic Records and others. Generally the claim is, "we worked our butts off for you and should have gotten paid at least minimum wage," even though they agreed to intern for free.
Many companies have now canceled their internship programs, while others have decided to pay wages to qualified candidates and let the rest find another way to "learn the business."
What Happened to the good old-fashioned intern?
Just like "starting out in the mailroom", which I did at CBS long before law school, interning has a long and celebrated history in this country. Programs in competitive industries, fashion, advertising, media, attract many applicants eager to show up every day for nothing just to get a foot in the door, learn and make valuable contacts.
Enter the class-action lawsuit for back wages: Many interns today claim they are being subjected to long hours, harsh conditions and, like Howard Beale in the movie "Network," they're "not going to take it anymore!" Maybe it's Gen Y's entitlement syndrome, but no matter, the law is on their side.
A Narrow Legal Window
The rules permit unpaid internships, but only under limited conditions. Both state and federal authorities will consider these six criteria to decide whether they're truly exempt from minimum wage:
1. The internship is similar to training the individual would get in a school, even if it involves actual operations of the employer.
2. The experience is for the benefit of the intern, not the company.
3. The employer gains nothing from the intern, and in fact the operation may be impeded.
4. The intern does not displace regular employees.
5. The intern is not necessarily going to be hired at the end of the internship.
6. It's agreed that no wages will be paid.
For most small businesses, these criteria are the opposite of what the business needs. They need a mutually beneficial arrangement where the student learns while the business gets cheap or free labor. Yet that's precisely the situation that will likely lead your small business down a painful road to damages, penalties and attorney fees.
Pay to Play
The safer practice is to pay inexperienced workers minimum wage and treat them as employees. If the math doesn't support the position, don't hire.
When clients ask me about unpaid internships, my advice generally is, "don't." It's a rare case that fits the rules, and with so many college grads looking for fewer jobs, and the minimum wage going up, the setting is ripe for more of these "free workers" to end up at the labor commissioner's office or in court.
You don't want to be the employer on the other side of the room.
Lou Storrow can be reached at [email protected].