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:

1. It’s similar to training which would be provided for the individual in an educational environment.
2. The experience is for the intern’s benefit.
3. Interns are under staff supervision, but don’t replace employees.
4. The company doesn’t attain immediate advantage from the interns’ activities.
5. Interns aren’t entitled to a job at the end of the internship, and
6. The employer and the intern both understand the time spent at the company will be unpaid.