What Small Businesses Need to Know About Unpaid Interns

Extra help at no extra cost sounds like a dream scenario for any small-business owner – but unpaid interns can land a business in a lot of trouble, according to employment attorney Rebecca Aragon. Aragon, a shareholder at Littler Mendelson, says the Department of Labor’s rules make unpaid internships time-consuming and challenging for businesses.   “The Department of Labor has six factors for unpaid internships,” says Aragon, “and some of them are clear as mud.”

If you want to bring on unpaid interns, here are the rules to follow, according to the DOL:

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

Because creating an internship program that provides an educational experience takes time and effort, and businesses are not necessarily allowed to benefit from unpaid interns’ work, Aragon says unpaid internships are generally not worth it for most small businesses or startups. “[Unpaid interns] really are a detriment to the employer,” says Aragon. “If you’re a for-profit company and you have unpaid interns, the question really is why.” Aragon uses a restaurant as an example: If you have an unpaid intern from a culinary school, you’d be responsible for giving them ingredients, teaching them how to prepare a dish and overseeing the preparation – all in the name of providing an educational experience. “But at the end of the day, if they do it right, you can’t sell it,” says Aragon. These rules, however, don’t apply to non-profit organizations or the government. Aragon says the White House, for example, has an unpaid internship program in which interns are expected to do real work. “The government can get free labor, but businesses can’t,” says Aragon. As a result, Aragon says if you are actually looking for real help at your business, you’ll have to pay at least the minimum wage and comply with state and federal laws regarding minimum-wage workers. In Aragon’s opinion, the only real reason to hire unpaid interns in light of the current law is if you want to build goodwill among students who may want to return after graduation as employees. “However, what’s in it for Wolfgang Puck, say, is if an intern a year later graduates at the top of [his or her] class and wants to be an assistant chef,” says Aragon.