It is estimated that between 1 and 2 million Americans go to work as interns every year, and their numbers are on the rise. According to one recent study, only 17% of students who graduated college in 1992 reported having worked an internship prior to graduation. By 2008, that number had risen to 50%. And many of today’s interns are unpaid.

But are unpaid internships even legal? And, if not, what’s the danger to employers who haven’t paid their interns? The answers to these questions may signal the next big wave in wage and hour litigation.

For any questions about a particular internship, or if you would like to know more, please contact us by submitting the form below or by calling our office at 213.533.4101.

Do interns have to be paid?

The US Department of Labor (“DOL”) has taken the position that internships for non-profit employers (including the government itself) need not be paid. However, for-profit employers must pay their interns unless certain specific criteria are met – and the truth is, most unpaid internships with for-profit companies don’t meet those criteria. This could mean big dollars for interns who were improperly denied wages.

Under both federal and California law, a for-profit employer must pay their interns at least the minimum wage unless they can show that all of these six criteria are met:

  1. The internship must be similar to the actual training given in an educational environment;
  2. The internship must be for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer gets no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded by having the intern;
  5. The intern is not necessarily entitled to a job with the employer at the conclusion of the internship; and
  6. The employer and the intern have a clear understanding that the intern is not entitled to wages for the time spent in the internship.

Every internship is different, and figuring out whether all six of those factors apply to a particular internship can be tricky. However, many unpaid internships are illegal because they violate at least the third and fourth of these criteria.

What are some signs an unpaid internship might be illegal?

Although none of those is necessarily determinative on its own, many illegally unpaid internships will exhibit one or more of the following characteristics:

  • The interns mostly perform simple tasks requiring no special skill or training (filing, making copies, answering phones, etc.)
  • When the interns are absent, the same tasks performed by interns are performed by regular employees.
  • The business depends on the work of the interns.
  • The employer makes comments to the interns like, “We don’t know what we’d do without you.”
  • The interns complete most tasks on their own with minimal or no supervision.
  • Training does not continue throughout the course of the internship.
  • The employer does not ask that interns receive academic credit in association with the internship.

What if the intern receives academic credit for the internship?

There’s a common misconception that an employer doesn’t have to pay an intern just because the intern gets academic credit for the internship. That’s not the rule under either federal or California law. Unpaid internships can be illegal where academic credit is provided, and vice versa.

What if there is an agreement that the internship will be unpaid?

If an intern is owed wages under the law, an agreement not to pay those wages doesn’t make a difference. Look at it this way – suppose you worked as an apple picker, and the owner of the orchard told you she’d pay you a dollar an hour for all your work. Even if you agreed, the agreement wouldn’t hold up in court, because the agreement was to pay less than the minimum wage. The same principle applies to unpaid internships that don’t satisfy all of the six factors listed above.

What is the statute of limitations for unpaid internship claims?

Under California law, the statute of limitations for unpaid wages claims is three years. However, employers who wrongfully denied pay to interns would likely be found to have engaged in “unfair competition” against other employer. As such, the statute of limitations would likely be held to stretch to four years, which is the statute of limitations under California’s Unfair Competition Law.

The statute of limitations for wage claims under federal law is either two or three years, depending on whether the employer’s conduct is determined to have been “willful.”

What is owed to an improperly unpaid intern?

To start, an intern who was not paid the wages they were owed is entitled to recover the minimum wage for every hour they worked, plus interest. In addition, under California law, the intern would be able to recover overtime premium pay for hours worked over 8 in a day or 40 in a week. Assuming the intern was not paid within 30 days of the ending of the internship, they could also be entitled to “waiting time” penalties under California law equal to 30 days wages. To the extent the intern suffered any other wage and hour law violations (missed meal or rest breaks, unreimbursed business expenses, etc.) during their internship, they could also recover appropriate wages, expenses and penalties.

Perhaps most significantly in many cases, under California law, an intern who successfully sued and recovered unpaid wages is entitled to recover their reasonable attorneys’ fees.