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Home Publications Blogs CEPR Blog Young College Graduates: Unpaid Internships

Young College Graduates: Unpaid Internships

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Written by Will Kimball   
Monday, 20 May 2013 13:30

Internships can be great opportunities for undergraduates or recent college graduates to gain career-related experiences or skills. Additionally, these learning experiences can improve trainees’ chances of future employment as they develop networks and connections. But, the widespread use of unpaid internships also raises legal and ethical questions, especially in the for-profit sector. Unpaid internships at non-profit organizations and government bodies also deserve attention, but these programs are not subject to the same rules as at for-profit, private businesses because interns can be considered “volunteering” their time.

The Obama administration had considered cracking down on illegal unpaid internships, which perhaps prompted the Department of Labor’s Wage and Hour Division (WHD) to release a memo that clarifies what constitutes a legal unpaid internship with a six-part test.

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training, which would be given in an educational environment;
  2. The internship experience is 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 that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Recently, over 3,000 former unpaid interns of the Hearst Corporation filed a class action lawsuit against the magazine business. The former interns argued they had been doing the work of paid employees and the “unpaid” classification was misused and illegal.  The lines between a mutually beneficial learning experience and free labor have thus become increasingly blurred as more businesses have adopted unpaid internships in recent years. It appears likely that many other for-profit organizations either openly ignore the six-part test or bend the rules in order to avoid paying for work or any other benefits.

The phrasing of the law is vague and has allowed for misuse or misguided interpretations by many businesses in an effort to obtain free labor. If a for-profit employer creates a position that does not adhere to any one of the six qualifications, the position cannot be considered an “internship” and is therefore subject to the Fair Labor Standards Act (FLSA). In other words, the firm will have to pay the individual for their work. For the most part, the controversy lies in parts two, three and four of the test.

Certainly, part two allows for a wide range of interpretations in how internships “benefit” the intern. As Kathryn Anne Edwards and Alexander Hertel-Fernandez of the Economic Policy Institute found in a report, the law itself has proven to be difficult to interpret for both businesses and the Department of Labor. Many for-profit businesses with unpaid interns violate one or more of these qualifications knowingly and unknowingly. In practice, Edwards and Hertel-Fernandez reported that the WHD has allowed for interns to be unpaid if the training devoted to the intern (part two) outweighs the work produced by the intern (part four). Yet, WHD’s memo does make it explicit that unpaid interns cannot be performing productive (e.g. clerical work, assisting customers) on a “regular basis”, even when accompanied with training and other benefits to the intern. Part three is also very difficult to prove but it really complements the other two provisions in that if the internship is of greater benefit to the intern; it is not likely that they are displacing a regular employee. Regardless of these issues of interpretation, enforcement of the law has largely been ignored or even rebuffed by congressional leaders (Eisenbrey, 2012).

Unpaid interns are also left in a legal gray area where they are not protected under workplace discrimination or harassment laws because they are not employees. As a result, employers are not liable for any reports of discrimination or sexual harassment against young, vulnerable unpaid interns (see Evans v. The Washington Center for Internships and Academic Seminars). Some states have moved to address this issue by ensuring that even unpaid interns are protected in the workplace, but it remains an issue in much of the country. The tough job market and limited work experience of young adults also put them in an awkward position when confronting harassment or illegal unpaid internships. Young adults may not report these abuses because they do not want to be perceived as “troublemakers” or endanger any job prospects. As it is now, the system for unpaid internships leaves many young adults open to abuse and exploitation.

Tags: employment | internships | jobs | labor market

Comments (1)Add Comment
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written by watermelonpunch, May 21, 2013 8:06
This is oppressive. But not surprising sadly.

I'm surprised some shrewd & unscrupulous business hasn't devised a way to nearly completely staff their company with unpaid interns & people with disabilities paid less than minimum wage.

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