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Updated Oct 20, 2023

Work Experience or Free Labor? Learn What Makes Unpaid Internships Legal

Work Experience or Free Labor? Learn What Makes Unpaid Internships Legal

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Siri Hedreen, Contributing Writer
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Internships present students, young professionals and career-changing professionals with opportunities for skills development, networking and hands-on experience in their chosen industries. Likewise, interns offer companies fresh perspectives, varied skill sets and an extra set of hands for new projects. Ideally, the arrangement benefits both parties. However, businesses that choose not to compensate their interns financially and instead opt for unpaid internships face a unique set of legal and ethical challenges.

What are the benefits of unpaid internships? 

Why would someone willingly work as an intern without getting a paycheck? For some college students hoping to launch their careers, meaningful professional experience makes unpaid internships worthwhile. They may view internships as “buying” work experience rather than as offering their labor to a business for free. Robust, internship-filled resumes that stand out, after all, are incredibly valuable for young professionals.

“We’ve found interning marketing majors has become beneficial for both us and the interns,” said Keeon Yazdani, a marketing strategist who has dealt with interns at various companies, including CBD’R US, an online cannabis business. “We provide interns the opportunity to learn about how a small business operates while they provide their insight on social media and how to keep the younger demographic engaged with our content.” [Related article: Social Media for Business: Marketing, Customer Service and More ]

Kristi Porter, a Georgia-based business owner who founded the copywriting consultancy Signify, also found her unpaid internship program to be an overall positive experience for her and the interns she has hired.

“I only require five hours per week, so that’s why it is unpaid,” Porter said. “All of them have been good with our arrangement and, I believe, have had a great time and learned a lot. As a one-woman business, it’s also great to sometimes get others’ opinions and insight.”

Neither Signify nor CBD’R US awarded academic or vocational credit through their internships. “Though I have offered class credit in the past, no one has taken me up on it,” Porter said. “They seem to want the experience more than anything else.”

Did You Know?Did you know
College students who complete internships are 15% more likely to find employment after graduation than their peers, according to Zippia.

What are the risks of hiring unpaid interns?

Unpaid interns can serve your business well while still being considered the primary beneficiaries of the internship, but there are also downsides and risks to hiring unpaid interns.

Legal hurdles

Businesses still keen on hiring unpaid interns should contact their nearest Department of Labor Wage and Hour Division agency to determine whether the FLSA applies to their proposed internship. However, they should expect the answer to be a resounding “yes.”

Even legal unpaid internships tread a fine line of compliance, where failure is costly. While some large companies can game the system by factoring legal fees into the cost of labor (paying an out-of-court settlement to one intern is still cheaper than paying 25 interns’ wages), small businesses do not have such luxuries.

“It is generally cheaper in the long run to ensure that any internship is legally compliant before hiring an intern,” Ruiz said.

Also, when some college students are eager to work for free, it can be easy for small businesses to overlook their legal due diligence. Many well-intentioned bosses may be surprised to learn that their off-the-books internships are breaking labor laws.

Thus, small business owners should err on the side of caution. Though these guidelines are not legally required in every state, the following suggestions may help prevent disputes between your business and an unpaid intern:

  • Put all understandings about compensation and commitment in writing.
  • Ensure that all terms of the internship are signed by both the intern and their supervisor.
  • Keep a log of hours and overtime.
  • Offer college credit when possible.
  • Stick to general, transferable training; do not assign grunt work. Some tried-and-true employee training tactics may be helpful.

Quality issues

Not every unpaid intern is simply ambitious for the cause. The professional experience they’re receiving may be valuable, but without compensation, they may not be motivated to deliver their best work. Unpaid interns may consider their internship less serious than a paid one and, therefore, be less committed.

Some employers find that the quality of talent in a paid intern outweighs the cost-effectiveness of an unpaid intern. The Hire Talent, a company that provides pre-employment assessments to recruiters, came to this conclusion when determining its own hiring process. As such, The Hire Talent opts to pay its interns on an hourly basis instead of offering no compensation.

“This makes us more competitive for the best talent,” said Fletcher Wimbush, the company’s CEO. “For us, it’s a very inexpensive way to… test out new ideas.”

Divorce attorney Russell D. Knight found the same to be true when hiring interns for his Chicago-based family law firm.

“The quality of work is always higher if you’re paying someone even a nominal amount,” Knight said. “If the intern isn’t generating value greater than twice the minimum wage, do you really even want them there?”

Key TakeawayKey takeaway
Keep some practical risks in mind when considering unpaid internships, as both your company and your intern could face substantial legal consequences for any missteps. Furthermore, you might find that unpaid interns do not offer as much commitment as those receiving financial compensation for their work.

What are tips for hiring unpaid interns?

If, after weighing the pros and cons, you decide to develop an unpaid internship program, you’ll need to know how to hire interns and make your program succeed.

Where to find unpaid interns

There are plenty of places to look for new intern hires. In general, internships appeal to young people who are still pursuing education and experience in their chosen field. This means colleges and trade schools are great places to start your search. Both may hold virtual or in-person job fairs. 

The future of recruiting is digital, so be sure to use online job boards, such as Indeed.com, to help with your search. You can also look for industry-specific job boards to improve your prospects. Try marketing your opportunity on LinkedIn, too.

Lastly, your personal and professional networks will be valuable resources for finding interns. Your contacts may be able to connect you with students who are seeking internships, their own prior interns or maybe even their own applicant pool. Direct references, such as connections from your college alumni network, can streamline the recruitment process.

How to develop an internship program

Developing an internship program can be a small or monumental effort, depending on your company’s needs and scale. Identify your specific goals for the internship program. Are you trying to get interns to fill needed roles or complete certain tasks in your organization? Do you want to foster talent for future hires? 

Once you’ve outlined your goals for the program, the next step is to design it. There are a few components that are vital to any successful internship program. First, there needs to be an orientation plan. Interns are not seasoned professionals; they need straightforward communication about expectations and objectives. You should be prepared to work with your interns and make sure they have clear metrics of success at your company. Furthermore, aspects of the internships should be tailored to their own professional goals and interests. They also need good mentors who can ensure they receive the attention they need to succeed not only in this role but in their later professional endeavors. 

TipTip
Developing concrete goals and success metrics for your company's internships, as well as conducting formal exit interviews with your interns, will help you maintain a strong program that serves your business and your interns.

What tasks can unpaid interns perform?

Ideally, interns should do low-risk tasks that relate to their field of study. A writing intern, for example, could conduct research and prewriting for work that will be finalized by a professional. An engineering intern could conduct some fieldwork (with supervision). The work that interns perform for your company should be appropriate for the position and their own professional development. 

Conversely, interns should not be expected to perform grunt labor, run errands or simply pick up the slack in areas that existing employees aren’t interested in. Furthermore, remember that interns shouldn’t be doing the work of a paid employee for free; their contributions should complement the company’s existing work.

Can you profit from unpaid internships?

Legal unpaid internships are rarely profitable, and profitable unpaid internships are rarely legal. Meanwhile, the rare cases in the center of that Venn diagram still have ethical implications. While you may not have to pay wages, you will incur costs elsewhere. Just as there’s no such thing as a free lunch, there’s no such thing as a free intern to fetch you that lunch.

Cailin Potami contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article. 

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Siri Hedreen, Contributing Writer
Siri Hedreen is a graduate of King’s College London, where she wrote for Roar News, London Student and Edinburgh Festivals Magazine. Find her on Twitter @sirihedreen.
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