Even though I have previously written about it, I keep
getting many questions regarding whether unpaid interns can work for a
for-profit business. My conclusion is YES BUT... it can be risky for the
business. In New York, interns can do an unpaid internship under two
circumstances: (1) if the intern is a student obtaining vocational experience
for school credit, or (2) if the intern satisfies the 11 criteria
for a "trainee" who is not in an employment relationship. Interns who do not
fit within either of the two categories are in an employment relationship and,
according to the New York State Minimum Wage Act and the related Orders, must
be paid at least a minimum wage. I would also like to add that even if the
intern is getting school credit, it is still important to satisfy the 11
criteria listed below.
Here is a brief discussion
of the criteria (starting with the six federal ones first):
1. Training Similar to an Educational Environment. The training, even
though it includes actual operation of the facilities of the employer, is
similar to that which would be given in a vocational school (the student is
under continued and direct supervision by employees of the business). An unpaid
internship must serve as an educational exercise that applies old and new
skills to real-world scenarios. As such, businesses offering unpaid internships
should create an instructional environment that offers interns opportunity to
learn skills, without necessarily completing integral business functions. The
program should welcome participants to take their time understanding and
completing their tasks, while also learning from their mistakes. Internships
that offer educational credits, whether through third party or in-house
classes, as well as instructional supervision of interns while they complete
tasks, comply with this first criterion.
2. Benefit of the Trainee. The training is for the benefit of the
interns. Such placements are not made to meet the labor needs of the business.
The unpaid intern must be the primary beneficiary of the internship, while the
employer may get some tangential benefits. If the employer's sole focus is on
the intern's development throughout the training program, then the second
criterion is met. Moreover, an intern's receipt of college credit is a strong
indicator of the beneficial aspect of the internship program.
3. Displacement of Regular Employees and Close Supervision. The trainees
or students do not displace regular employees, employees have not been relieved
of assigned duties, and the students are not performing services that, although
not ordinarily performed by employees, clearly are of benefit to the business.
Any work they may do is performed under close supervision. In determining
whether an internship program is lawful, the NY Department of Labor may compare
the supervision given to employees with that given to the interns. If the
supervision is heavier on the interns and significantly lighter on the
employees, then the program will pass this criterion. Furthermore, an
internship that involves job shadow opportunities, where interns can closely
observe how employees work, will be evidence of a lawful unpaid internship.
4. Employer Advantage. The employer that provides the training derives
no immediate advantages from the activities of the trainees or students, and on
occasion, operations may actually be impeded. The employer's motivation for offering
the unpaid internship must not be premised on acquiring a benefit or advantage.
Instead, the employer must be willing to dedicate its resources for providing a
benefit to the trainee in the form of developing the trainee's work skills or
substantive knowledge. Tangential benefits that an employer may get are fine,
so long as they result from the employer's efforts to train the interns.
5. Job Entitlement. The trainees or students are not necessarily
entitled to a job at the conclusion of the training period and are free to take
employment elsewhere in the same field. An unpaid internship program should be
of fixed duration, and cannot foster an entitlement to a salaried job after
completion of the program. The interns should sign a contract acknowledging
that they do not expect future employment. Although written agreements are
given little weight by the NY Department of Labor, they can help satisfy this
6. Wage Entitlement. The trainees or students understand and have been
notified in writing that they are not entitled to wages for the time spent in
training and are not considered to be employees for minimum wage purposes.
Prior to commencement of the internship, all interns should be given a written
notice that the internship is unpaid.
The New York Department of Labor has added five more criteria to the list,
requiring that all of the federal plus the five New York criteria be satisfied:
7. Knowledge and Expertise of Trainers. Any clinical training is
performed under the supervision and direction of individuals knowledgeable and
experienced in the activities being performed. Additionally, the employees must
be competent enough to provide instruction and training to the trainees, as
would a teacher in a classroom.
8. Employee Benefits. The trainees or students do not receive employee
benefits. Benefits include, but are not limited to, health and dental
insurance, pension or retirement accounts, or discounted or free employer goods
or services. If the internship is affiliated with a third party instructional
program, then a weekly stipend is permissible.
9. Generalized Training. The training is general, so as to qualify the
trainees or students to work in any similar business, rather than designed
specifically for a job with the employer offering the program. To comply with
this requirement, the training should be general enough to allow the intern to
obtain work in the same field with a different employer in the future.
10. Screening Process. The screening process for the internship program
is not the same as for employment, and does not appear to be for that purpose,
but involves only criteria relevant for admission to an independent educational
program. The employer's screening process cannot resemble the process by which
it would choose employees. Instead, an applicant for the internship program
must be a good trainee candidate in that the employer feels comfortable
instructing him or her, rather than placing the applicant within a certain role
in the business. The intern recruitment process must be completely independent
from the employer's employee recruitment.
11. Advertisements, Postings, and Solicitations. Advertisements for the
program are couched clearly in terms of education or training, rather than
employment, although employers may indicate that qualified graduates may be
considered for employment. Any advertising or solicitation conducted by the
business for the internship program must clearly indicate, so as to avoid any
misunderstanding, that the program is educational and only offers a training
opportunity. Any incidental stipends generally should not be included in the
advertisements, postings or solicitations.
If all eleven criteria are met, the individual is an intern, gaining valuable
hands-on experience and is not an employee. However, in practice, some of these
criteria are hard (if not impossible) to meet. In my opinion, #4 above may be
the most difficult one to satisfy once the results of on-the-job training start
to materialize. The federal Department of Labor has confirmed that in these
difficult economic times their particular focus is on preventing employers from
taking advantage of the unemployed, who are often willing to work for free just
to get "a foot in the door." Therefore, extreme caution should be exercised
when hiring unpaid interns.
Read more commentary from Arina Shulga on the
legal aspects of operating new and growing businesses at Business Law Post.
This article is not
a legal advice, and was written for general informational purposes only.
For more information about LexisNexis
products and solutions connect with us through our corporate site.