Earlier this month, the New York Times published an article noting an increase in the number of unemployed adults accepting unpaid internships as part of their strategy to retool their skills for a new career. The article touched upon, but did not discuss in depth legal issues that such internships could cause for employers.
The Fair Labor Standards Act significantly restricts the circumstances under which unpaid interns are exempt from minimum wage requirements. In order to be exempt, the internship must (1) be a requirement of an academic program leading to a degree; and (2) must be largely educational in nature. This second requirement means that the intern must spend his or her time observing and not engaging in productive work of value to the company. This requirement avoids situations where employers use unpaid interns to displace work from employees.
For decades, these rules have been largely ignored by employers. Observational internships may be ineffective in allowing a prospective employer to determine an intern's skills and talents. Enforcement actions have been few because unpaid interns rarely complain about the lack of pay.
The Times article speculated that as these adult internships become more common, DOL may begin questioning employees about the specific tasks performed by the interns, and whether or not they were paid. Employers can avoid these FLSA issues by formally employing the interns at minimum wage.