Are Unpaid Interns Entitled to Wages? Maybe.

Given the increasingly competitive nature of the job - and college and graduate school admissions - markets, students and graduates often want or feel the need to gain experience in the field of their interest by taking unpaid internships. There are even firms that advertise assistance in procuring such stints. Similarly, employers can find it both good and good for them to offer such opportunities. (On a personal note, I can say that my (paid and unpaid) internships were great steppingstones and provide great memories.)

As always, there's a catch. Employers should be alert as labor authorities are escalating scrutiny of work-based training arrangements. However tempting it is to say that no good deed goes unpunished, there is a potential concern that internships can present an issue under the federal Federal Labor Standards Act ("FLSA"). If an intern looks and acts basically like an employee, and not much like a student, then it probably is illegal to not pay him or her, as reported in a recent New York Times article.

Federal guidance on the subject provides a relatively stringent test for concluding that no wages are required: "The U.S. Department of Labor Wage and Hour Division established criteria based on U.S. Supreme Court interpretations of the FLSA for determining whether work is employment or training. In general, persons performing work will be deemed to be trainees not covered by the FLSA if all of the following criteria are met:

* the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

* the training is for the benefit of the trainees or students;

* the trainees or students do not displace regular employees, but work under their close observation;

* the employer that provides the training derives no immediate advantage from the activities of the trainees or students; and on occasion the employer's operations may actually be impeded;

* the trainees or students are not necessarily entitled to a job at the conclusion of the learning experience (though employers may offer jobs to students who complete training); and

* the employer and the trainees or students understand that the trainees or students are not entitled to wages or other compensation for the time spent in training (though a stipend may be paid for expenses).

In the event that any one of these criteria is absent, the work performed by the student will likely constitute employment subject to the provisions of the FLSA." [Emphasis added.]

Accordingly, even though the probability that an unpaid internship not intended to take advantage of an intern ever would lead to a wage claim is low, care should be taken to make sure that there are substantial educational aspects to the experience. Further information is available from the Wage and Hour Division. And, of course, do not hesitate to contact our Chicago business and employment lawyers for assistance.