Do you really need to pay your interns?

Looking for a cheaper alternative to paying employees to get the job done? Then you’re probably not looking for an intern.

I say this confidently because the Department of Labor (DOL) recently updated guidance on how to identify whether an internship truly qualifies to be unpaid. If you’re working with interns, it’s a must-read.

The emphasis isn’t to meet each criterion, but to determine who benefits more from the internship: the employer or the intern. If the employer is the primary beneficiary, then the intern should be paid as an employee, making at least minimum wage and able to earn overtime wages.

How to Determine if an Internship Qualifies as Unpaid

If you’ve hired an unpaid intern, then most (if not all) of the following conditions need to exist:

1. There is clear understanding from both parties that the intern is not entitled to compensation.
2. The internship is similar to training that would be given in an educational environment (including clinical and other hands-on training).
3. The intern receives academic credit for the internship.
4. The internship accommodates and corresponds with the academic calendar.
5. The internship does not extend beyond educating the intern.
6. The work of an intern does not replace a paid employee, but instead provides significant educational benefits.
7. There is no expectation of a paid job after the internship ends.

What about class credit? It can’t be substituted for wages. The DOL also recommends any employer wanting to offer an internship consult with legal counsel to design and implement an acceptable program.

Legally, what happens if you misclassify someone as an unpaid intern?

Let’s say you hire an intern anyway and incorrectly classify them as “unpaid” — what would happen? According to the DOL, you’ll be paying the wages retroactively, which would likely include penalties for late payments.

Advice for Employers with Interns

If your company is planning to hire (or already has hired) an intern, consider paying them at least minimum wage. An internship should never be used as a trial period, and all hours worked must still be recorded. If you plan to continue with an unpaid internship, be sure it has a strong educational component that has been coordinated or approved by a school for academic credit, and that you have followed advice from legal counsel.

Tired of reading? Author Brad Fagergren, SPHR, also put together a short video that covers the rules of paying intern in detail. You can watch it here.