Can I hire an unpaid intern?

Takeaway: Technically, yes, but practically, no. In order to hire an unpaid intern in compliance with the Department of Labor’s regulations, the internship must be similar to training they would get in an educational environment and must be for the benefit of the intern - usually startup internships fail one or both of these tests.

In general, startups should be cautious when hiring unpaid interns. The US Department of Labor has specific criteria that must be met in order for an internship to be considered unpaid. If the internship does not meet these criteria, the intern may be considered an employee and entitled to minimum wage and overtime pay.

Here are the criteria for an unpaid internship:

  1. The internship must be similar to training that would be given in an educational environment.

  2. The internship must be for the benefit of the intern.

  3. The intern must not displace regular employees.

  4. The employer must not derive immediate advantage from the intern’s activities.

  5. The intern must not be entitled to a job at the conclusion of the internship.

  6. The employer and the intern must understand that the intern is not entitled to wages.

If all of these criteria are met, then an unpaid internship may be permissible. However, if any of these criteria are not met, the intern should be considered an employee and paid at least minimum wage and overtime pay. The most common issues that startups run into with correctly classifying an intern as unpaid are that (i) internships with startups are typically not similar to the training the intern would be given in an educational environment and (ii) startups generally derive an immediate advantage from the intern’s activities in the form of the work that the intern does.

It’s important for startups to carefully evaluate the nature of the work that the intern will be doing and ensure that it meets the criteria for an unpaid internship set forth by the US Department of Labor. In general, it’s a good idea to pay interns at least minimum wage, even if the internship could technically be unpaid, in order to avoid any legal issues or negative public perception.