Internships provide recent college graduates and those transitioning to new careers with the opportunity for real-life job training and can even lead to full-time jobs. College students, meanwhile, often receive class credit for internships. Employers can use internship programs to scout out new talent and get temporary help without committing to permanent new hires. But business owners who view interns as free labor or potential hires need to know that federal labor laws require payment in most circumstances. That's not to say employers can never have unpaid interns; they're just not very common, at least legally. State laws may also apply, but the Fair Labor Standards Act (FLSA) governs how interns must be compensated under federal law.
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Six-Part Test for Unpaid Internships
The vast majority of interns working at for-profit organizations must be paid at least the minimum wage and any applicable overtime. Technically, paid interns are temporary employees and treated virtually the same as regular employees with respect to labor law. But you may legally hire an unpaid intern if the following six criteria are met:
Common Factors to Consider for Internship Programs
Employers who register with the U.S. Department of Labor may pay individuals who are at least 16 years of age 75 percent of the applicable minimum wage. These so-called "student-learners" also must be receiving instruction in an accredited school, college or university and work on a part-time basis. If you would like to apply for authorization to employ a student-learner at below the minimum wage, you must fill out and submit a form to the Wage and Hour Division of the U.S. Department of Labor (PDF).
Make Sure Your Internships are Properly Implemented: Talk to a Lawyer
If your company is planning to take on interns, make sure you fully understand the legal requirements. Internships are a great way to help college students and recent graduates get started on their careers, while also providing employers with a chance to cultivate talent. But employers who violate the law can face stiff penalties. Contact a local employment law attorney to ensure that you handle this and other small business employment issues with confidence.