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The federal Department of Labor's Fact Sheet #71, Internship Programs Under the Fair Labor Standards Act, covers the details of how and why internships are legally unpaid work experiences. Deviation from these rules does result in lawsuits in which the companies pay much more than they saved by employing free labor. The bottom line is that the internship is for the benefit of the intern, not the employer.
1. Educational Experience
The internship must afford the intern training that is similar to that which may be offered in an educational environment. The benefit of the internship is that the learning happens in a real-world environment; however, it is still a learning experience.
2. No Displacement
The unpaid intern must not displace regular employees. If the intern is absent on a given day, this should not increase the workload for paid employees. Paid jobs must be regularly performed by paid employees.
3. No Benefit
The internship is for the benefit of the intern, not the company. Sometimes, the presence of an intern may actually impede operations as managers and supervisors take the time to explain and teach.
4. No Promised Job
A real internship does not carry the promise of a future job. A company should have the paid workers it needs to operate. The internship has a fixed beginning and end point. When one intern leaves, another may take his place, but the internship does not turn into a job.
However, it is legal to offer a former intern a job at the company. It should not, however, be doing exactly what he did as an intern. It should be a job that carries responsibility.
The supervisor and the intern must both understand before the internship begins that hours spent as an intern will be unpaid.
As long as these five requirements are met and the internship is designed to benefit the intern, not the company, then it is legal under the FLSA that the intern not be entitled to wages and overtime pay.
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