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How to (Legally) Hire Interns

How to (Legally) Hire Interns by Galia Aharoni Schmidt

It’s the end of summer, which means intern season is wrapping up for many (I’m looking at you, architects and tech startups!). But many businesses don’t realize that there are surprisingly stringent rules about how to hire and treat an intern, and these businesses might be opening themselves up to lawsuits– even when they didn’t even realize they were doing something wrong.

There are two ways for a for-profit company to hire an intern: paid or unpaid/underpaid. The rules are different for each, so let’s break it down.

Unpaid Interns:

There is an almost bottomless list of rules that apply to employees, such as rules about minimum wage, breaks, overtime, and ensuring an environment free of harassment and discrimination. If an intern qualifies to be an unpaid intern, most of these rules do not apply. However, it’s a surprisingly hard hurdle to pass, so before hiring an unpaid intern, make sure the intern meets the following test:

  1. The internship must be similar to training that would be provided in an educational environment. So running errands?  Probably wouldn’t count as educational. But shadowing someone, or doing academic work, would both qualify as educational.
  2. Must be primarily for the benefit of the intern. The more time the intern spends on your regular business, the more they look like an employee. If they’re filing papers, dealing with customers, running errands, acting as an administrative assistant, that’s really benefiting the company, not benefiting the intern.
  3. Intern must not displace regular employees, and must work under close supervision of existing staff. You can’t use an intern to do work that a current, or even a theoretical employee would or could do. If you’re using interns to fill gaps or filling in during a busy season, that’s a no-no. If they receive the same sort of supervision as a regular employee, that also makes them an employee.
  4. Employer gets no immediate advantage from the intern’s work, and may, on occasion, find its operations impeded by the internship. Not only is it supposed to be primarily for their benefit and not for your benefit, it might even be WORSE for you to have them! This includes having the intern participate in things like extra training, special learning opportunities, and additional supervision or guidance that takes more of your time.
  5. The intern is not entitled to a job once the internship ends. Otherwise, it just looks like a trial period for their employment.
  6. Employer and intern both understand that the intern is not entitled to wages for time spent. If the intern thought they’d get paid, the company has to pay them.

If you’re planning on having an unpaid intern or paying anything less than minimum wage, your intern must satisfy all of these requirements. Otherwise, you have to treat them like a regular employee and abide by all of the required employment laws. If you don’t, you run the risk of lawsuit, or at the very least an audit from the Labor Board who’ll slap you with unpaid wages, unpaid overtime, and penalties.

One way to strengthen the chances of your intern meeting this test is by hiring the intern through their school, particularly if the school will provide them with school credit in exchange for their internship. If you hire an unpaid intern outside of their school system, make sure to do all you can to create an environment that is more about their learning experience than your need to get help with your work.

Any time you have an unpaid intern, we recommend having a written agreement with them that includes provisions that cover the above requirements, including that they are not guaranteed to a job after, that they will not get paid, and that they are an intern and not an employee.

Paid Interns:

If the intern doesn’t meet the test for an unpaid internship, the intern is an employee, fair and square. While the relationship can be limited in time, hours, and duties, they are still considered an employee under the law, and must be treated as such. This means you have to abide by minimum wage, breaks, overtime, discrimination, and harassment laws, and provide them with workers compensation insurance.

Whether your interns are paid or unpaid, you must proceed with caution to make sure you don’t break rules you didn’t know exist. If you need help determining whether your intern can be unpaid, or need help drafting agreements for your paid or unpaid interns, contact us. Questions about having volunteers for your business? Maybe this article will help! We’re also holding a free Working with (or as) a Contractor, Intern, or Volunteer workshop on Saturday, 10/13/19 as part of the SF LGBT Center’s Small Business Day. 


Photo by Matthew Henry from Burst