Avoiding Employer Liability for (Mis)Using Unpaid Interns

Unfortunately, unless strict requirements are met, unpaid internships can violate state and federal laws, exposing unwary employers to substantial liability risks, including for unpaid wages, unpaid overtime, rest and meal breaks, unreimbursed expenses and waiting time penalties.

The following are the federal and state standards for when an employer can legitimately use unpaid interns. As with all employment laws, California employers must comply with both federal and state-specific law.

The federal law derives from the Department of Labor (DOL)’s unpaid internship rules, which require the employer to ensure that:

1.     The intern knows that the position is unpaid.

2.     The training is similar to training received at an educational institution.

3.     The internship is tied and integrated to the student’s educational program or degree.

4.     The intern only works during periods that do not conflict with academic commitments or the academic calendar.

5.     The internship only lasts for a period of time in which it imparts beneficial learning upon the intern.

6.     The intern’s work does not replace existing employees’ work while providing significant educational benefits.

7.     The intern understands that this internship does not provide entitlement to a job.

In addition to the DOL test, California courts tend to apply the following criteria in evaluating when an unpaid internship is lawful:

1.     Whether the internship is part of an educational curriculum which requires the participation of a school or a similar institution.

2.     Interns cannot receive employee benefits, such as medical insurance and workers’ compensation.

3.     The training must be general enough so that the intern can work for any similar business, rather than just for a specific company.

4.     The screening process for the internship cannot be the same process used for regular employees.

5.     Advertisements for the internship must clearly indicate that the internship position is educational and not for paid work.

Employers considering unpaid interns are encouraged to contact us to ensure their program complies with the law and will not expose them to liability.