Many college students need real work experience for school credit or to get a job after graduation, so they may agree to work as interns for free.  But recruiters should warn their clients about this dangerous trap of unpaid internships. 

As a recent case against Fox Searchlight Pictures recently illustrated, internships may only be unpaid in very limited circumstances.  In the Fox Searchlight case, a Federal District Court ruled that interns who worked on the movie "Black Swan" should have been paid because the internsips did not have an educational component and the studio reaped benefits from the intern's work, which goes against two of the Department of Labor's 6 criteria for legally unpaid internships:

  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.

Attorney Lisa Yankowitz discussed this issue in a recent "Workplace TV" video.  In the video, she cited a 2013 survey conducted by the National Association of Colleges and Employers that found that nearly half of all interns are unpaid. Chances are a good number of those internships don't meet the stringent criteria above.  Are your clients part of those statistics? If so, you may clue them in to the risks associated with using unpaid interns.

That doesn't mean your clients should abandon the idea of using interns altogether. After all, internships are a great way of identifing and grooming future star employees.  But extreme caution should be used when deciding whether an intern should be paid or not.  Your clients would probably be better off erring on the side of paying interns since the criteria above is so hard to meet.

A way recruiters can make this a little easier to swallow is to offer interns to clients on a contract basis and outsource the employment of those interns to a contract staffing back-office. With this method, clients eliminate the risk that comes with unpaid interns while still reducing their costs (payroll taxes, benefits, etc.) and administrative burden.

This article is for informational purposes only and should not be construed as legal advice.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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