Tread very carefully in setting up unpaid intern programs
Summer is approaching, and many companies are looking to welcome college students in as interns. But the Dept. of Labor (DOL) has a warning to those that are: If you misclassify interns, it’ll be costly.
A Silicon Valley venture capital firm was hit with $331,269 in back wages and damages, according to a Wall Street Journal story. . The DOL says it had 56 unpaid interns performing high-level jobs like screening start-ups and sending reports to international investors.
Fenox Venture Capital of San Jose, CA, had interns make up a majority of its investment team and displaced regular employees, the DOL said.
When can internships be unpaid?
The Fair Labor Standards Act (FLSA) will, in most cases, require interns be paid at least minimum wage and of course, time-and-a-half for overtime.
A reminder of the six criteria the DOL says must be met for internships to be unpaid:
- It’s similar to training which would be provided for the individual in an educational environment.
- The experience is for the intern’s benefit.
- Interns are under staff supervision, but don’t replace employees.
- The company doesn’t attain immediate advantage from the interns’ activities.
- Interns aren’t entitled to a job at the end of the internship, and
- The employer and the intern both understand the time spent at the company will be unpaid.
Free Training & Resources
White Papers
Provided by Personify Health
Further Reading
You already understand the need to have new hire paperwork, such as Form I-9, in order. Now with the spotlight on illegal immigration, that...
As a finance pro, you know that FLSA mistakes can be expensive. But even so, the sky-high cost of noncompliance found in the feds’ latest...
IRS told one employer that payments made to employees under its fixed-indemnity health insurance policy were subject to federal income, FIC...
For most employers nationwide, the new salary threshold for who’s exempt from the federal overtime and minimum wage requirements took eff...
As finance and HR leaders develop 2026 salary budgets, errors in payroll execution can quickly undermine the impact of planned pay raises. ...
A $900,000 settlement in Washington highlights the financial impact of pay transparency penalties when employers fail to include required p...