I’ve been noticing an interesting trend among my fellow small business owners. Many are interested in hiring interns as they expand and grow their businesses. Paid internships should be treated like any other employment relationship and should follow the same wage and hour laws. Make sure you have workers compensation for your interns and withhold the appropriate payroll taxes. If you are a California employer thinking of hiring unpaid interns, here are some things to keep in mind.
A new ruling last April by the California Labor Commissioner adopted a six-factor test used under the Fair Labor Standards Act (April 2010) to determine if an internship can be unpaid in the “for-profit” sector. If an employer can abide by the 6-factors then the intern may be exempt from being paid wages and overtime pay in California. Otherwise, an intern in the “for-profit” private sector, who qualifies as an employee rather than a intern, typically must be paid at least the minimum wage and overtime compensation. Here are the criteria:
1.) Training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school.
2.) The training is for the benefit of the interns or students
3.) The interns or students do not displace regular employees, but rather work under their close supervision
4.) The employer derives no immediate advantage from the activities of the interns or students, and on occasion the employer’s operations may be actually impeded
5.) The interns or students are not necessarily entitled to a job at the conclusion of the training period
6.) The employer and the interns or students under that the interns or students are not entitled to wages for the time spent in training
For further information, check-out the California Department of Labor (Fact Sheet #71).
California employers need to consider several things before deciding to work with an unpaid intern. Is the internship experience more beneficial to the employer or is it a benefit for the intern? Interns should not be used as “free” labor. An internship should be a learning experience for the student or intern, with no expectation of a job at the end of the internship. An internship shouldn’t be used as a way to “test” a potential employee. This is very important: make sure the intern understands upfront they will not be paid for their time. I recommend that the terms and conditions of the internship be written down and reviewed by a California employment law attorney.
One final note: there may be an exception for individuals who volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations. Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. If you are not sure if you fall under this exception, seek advice from a California employment law attorney.
I hope this information is helpful. If anyone has questions of a general nature regarding this topic, please feel free to contact me. For specific legal advice, contact a California employment law attorney.
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