Unpaid Interns: What You Need to Know

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

Paid or Unpaid Interns vs. Employees

If individuals are interns under California law (as discussed below), then they need not be paid. Furthermore, 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.

Requirements for Interns

California follows federal law. There are 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 unpaid interns. Instead, they should be considered employees and should be paid at least minimum wage.

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April 24, 2014 update: In an article published earlier this week (Colleges, Employers Rethink Internship Policies), the Wall Street Journal highlighted a recent increase in lawsuits filed by unpaid interns. The plaintiffs allege that they did not gain educational experience – they merely provided unpaid labor.

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June 29, 2015 addition: Similar, but slightly different, provisions apply to unpaid volunteers.

California follows federal law with respect to unpaid volunteers.

• Individuals who volunteer or donate their services, usually on a part-time basis, for public service, religious or humanitarian objectives, not as employees and without contemplation of pay, are not considered employees of the religious, charitable or similar non-profit organizations that receive their service. Individuals typically may volunteer services to public sector entities, as well.
• However, individuals may not volunteer their services to for-profit private-sector entities.

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.