The cost of unpaid internships

July 13, 2012
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With employment opportunities somewhat stagnant, the number of job-seekers willing to accept unpaid internships is on the rise. With this rising number has come increased scrutiny as to the legality of such programs.

Unpaid internships can present significant risks to for-profit companies, especially considering the substantial amount of gray area as to what constitutes a fair and legal arrangement.

“It can be a slippery slope,” said Elizabeth Skaggs, a partner at Varnum Law. “Making copies a couple times a week probably isn’t going to create a situation where the internship needs to be paid, but what if they start making copies every day?”

Skaggs believes a good rule of thumb in determining the legality of an unpaid internship is that “the more the employer benefits from the intern’s presence, the more likely it is the employer needs to pay that intern.”

The U.S. Department of Labor is extremely skeptical of for-profit companies offering unpaid internships. Jennifer Fields, a manager at the Wage and Hour Division of MIOSHA, commented on the particularly long statute of limitations on such cases in Michigan.

“Employers need to be aware that while everything may be fine now, interns are able to claim unpaid wages for up to three years after the work was performed,” said Fields. “It is extremely hard for a for-profit company to have someone work for them without getting paid.”

Skaggs said that in addition to unpaid wages, companies are liable to pay double the liquidated damages, including attorney fees, in such cases.

“The laws haven’t changed; awareness of the law within companies has,” said Skaggs in regard to the changing culture of internships. “Our business clients want to make sure they’re being mindful and in compliance with those laws.”

Employers that do decide to utilize unpaid internships can make sure that their programs are in compliance with the law by following specific criteria put forth by the DOL:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees, but works under close supervision of existing staff.
  • The employer derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded.
  • The intern is not necessarily entitled to a job at the conclusion of the internship.
  • The employer and the intern understand that the intern is not entitled to wages for time spent in the internship.

Even in situations where both an employer and intern agree at the onset that the intern is not entitled to compensation, the internship can be found illegal if the other criteria are not met.

Beth Cok, an internship manager at Calvin College, encourages students to use discretion in choosing to accept an unpaid internship. “Will it help them get a full-time position? Will it give them the experience they need to be hired? Sometimes students’ situations are such that they have to think in the short term. They have to earn money to stay in college in the first place.”

Cok said as the economy improves, she hopes to see a rise in the number of paid internships in the area.

“Many (unpaid student interns) are doing professional work that’s adding value to these companies,” said Cok. “For an internship to be successful, it should be valuable to both parties.”

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