Unpaid Interns: What You Need to Know

Sign on door saying "Employees Only"

Many companies – especially startups – like the idea of using interns as free labor. This post discusses whether and how a California company can use unpaid interns.

Overview

If individuals are interns under California law (as discussed below), then they need not be paid, and they are not subject to other employment protections, because they are not employees. If, on the other hand, individuals are determined to be employees, then they must be paid at least minimum wage.

Details

California follows federal law in analyzing six factors, all of which must be satisfied for a position to be considered an internship rather than employment:

  1. The training, even though it includes actual operation of the facilities of the business, is similar to that which would be given in a vocational school.
  2. The training is for the benefit of the trainee or student.
  3. The trainee or student does not displace regular employees, but works under close observation.
  4. The business that provides the training derives no immediate advantage from the activities of the trainees or students and on occasion its operations may actually be impeded.
  5. The trainee or student is not necessarily entitled to a job at the completion of the training period.
  6. The employer and the trainee or student understand that the trainee or student is not entitled to wages for the time spent in training.

Companies should evaluate these factors carefully, because that is what the Division of Labor Standards Enforcement will do if this matter comes to its attention. If a company will using the individuals’ services as a way to save money, rather than as a bona fide training program, then the individuals should not be considered interns. Instead, they should be considered employees and should be paid at least minimum wage.

Photo credit: Josh Klute via stock.xchng

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

One comment

  1. Quora says:

    Is there a conflict for people on H1B doing unpaid work for startups?…

    The issue isn’t whether there is a “conflict” or the arrangement is “feasible”. The issue is whether he can do so legally. The short answer is “no”. First, he can work only for his H-1B employer – he cannot work legally for any other company in …