Unpaid internships can present perils for the unwary employer. Many employers are hesitant to establish unpaid internship programs for fear that they will be found to be in violation of the Fair Labor Standards Act. Conversely, students are eager to learn practical skills in an actual work setting and are motivated to seek internships.  

In the past, employers could simply look at the Department of Labor Wage and Hour Division’s Fact Sheet #71 for guidance on how to establish a program. Recently, numerous federal courts, including the 2nd and 11th Circuits and district courts in Illinois and California, have muddied the waters by implementing a new test for unpaid internships to comply with the FLSA. 

Despite the various tests, employers can still structure an unpaid internship program that is legally compliant. Here are the top 5 factors your unpaid internship program should have: 

1. The intern is the primary beneficiary of the internship, not the employer. Determine if the internship is more about the employer getting free labor or for the intern learning about his/her chosen field of study outside of the classroom. An internship must benefit the intern, it is not for the benefit of the employer.   

2. Provide the intern with training that could be found in an academic setting that accommodates the intern’s academic work and schedule. Savvy employers may partner with the intern’s academic institution to mold a fixed-duration internship that is specifically tied to the intern’s area of study. Avoid providing tasks to the intern that are unrelated to academic training – such as making copies and sorting mail.

3. Provide the intern with a mentor appropriate to the intern’s studies. Mentor will provide guidance, assign relevant projects, and allow the intern to shadow him/her. The intern’s work should not replace or be exactly the same as a paid employee. An unpaid intern’s work cannot displace the regular work of paid employees. 

4. Do not promise a job at the conclusion of the fixed internship period. Instead, focus on providing practical and relevant experience to the intern during the internship.  

5. Clearly articulate all of the expectations of the internship to the intern, including that it is unpaid. Leave no room to the imagination about all of the expectations of the unpaid internship.   

Unpaid internships can be rewarding to both the employer and the intern. With some careful planning, an employer can greatly reduce the legal risk associated with an unpaid intern.