The Use of Interns in the Workplace ― Not Just Free Labor

February 8, 2010Articles ACC America

Interns, Externs & Trainees: To Pay or Not to Pay?

Hardly a week goes by these days without an email from a friend or a “friend of a friend” attaching a resume and asking me to take on an intern for the summer or semester break. Alternatively, knowing I am an employment lawyer with a direct line to many human resources departments, the emails always implore me to pass along the resume to one of my clients. Without fail most of the resumes are usually outstanding and the students or displaced workplace vets all offer to “work for free” in exchange for the opportunity to “learn” and “demonstrate their stuff.” To employers hardly out of the woods from such a severe recession, these can be magic words: free labor means lower labor costs. However, there’s always a string attached. . .

What’s At Risk?

Unfortunately, it takes more than an individual volunteering to work for free and a designation of this relationship as an “internship” to pass legal scrutiny under federal and state wage and hour laws. Unless the appropriate legal steps are taken prospectively, employers face significant penalties and risk beyond simply back pay. Unpaid internships could lead to legal liability with respect to employee benefits, workers’ compensation, unemployment insurance, anti-discrimination laws and federal and state taxes.

State enforcement has also increased dramatically over the past year with New Jersey and New York’s state budgets particularly hard hit by the recession. Employers have also seen a significant rise in audits for unemployment insurance and state tax contributions. The designation of “interns” are often tested during these audits.

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