Unpaid internships are not illegal, but there are very strict guidelines that employers must adhere to.   Even if a student worker receives academic credit for an internship, it does not mean that can they work for free.  Read on to learn when an internship can be unpaid and how to stay within the law when employing student workers.

Understanding the law

The basic principle behind a legal unpaid internship is simple - unpaid interns cannot do any work that contributes to a company's operations.   This includes any tasks that help you run your business, like documenting inventory, filing papers, answering emails, etc.

So, legally, what can an unpaid intern do?  Unpaid interns can shadow other employees and perform duties that don't have a business need.  For example, a bakery may allow an apprentice to decorate a tray of cookies that will not be sold to customers.  Because the task was only a training exercise for the apprentice and the bakery did not receive any benefit from that work, the bakery would not have to pay that student worker for their time.

For more on this topic, see Employing Young People in the Workforce.

Rules for employers - When are unpaid internships legal?

If you're thinking about offering an unpaid internship, the Department of Labor has applied the following guidelines to help you stay within the law.  ALL must be met in order for an internship to be unpaid:

1. 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;
2. The training is for the benefit of the trainee;
3. The trainees do not displace regular employees, but work under close observation;
4. The employer that provides the training derives no immediate advantage from the

   activities of the trainees, and on occasion the employer's operations may actually be impeded;

5. The trainees are not necessarily entitled to a job at the completion of the training period; and

6. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

Benefits for employers

Despite the limitations on the duties unpaid interns can perform, many small businesses find them valuable.  For employers, an internship allows you to audition potential employees without having to invest in labor or benefits.  

However, if you want to hire workers to help offset your workload, you can still offer an internship, but it can't be unpaid.  Employers that can afford to offer paid student internships often benefit from the arrangement.  The flexibility of internships can free you of long term employment commitments, an especially important factor for seasonal businesses.   Paid internships can also help you acquire a specialized skill at a good price - if you need assistance with marketing or setting up a website but can't afford a professional, students looking to boost their resume are often a good bet. 

For more on this topic, see Business.gov's guides on wage and hour laws for small businesses and child labor laws.

Related Resources:

• Employment and Labor Laws for Small Businesses
• 10 Regulatory Steps for Hiring Your First Employee
• Employer's Guide to Fair Wages
• Online Legal Tools for Employers