It is fall in New England, and the students have returned to school. College and high school students who are looking to gain a career advantage are submitting applications for unpaid internships for the school year and the summer of 2013. Companies tempted to use unpaid interns to gain an edge against their competitors by reducing their labor costs could find themselves in a costly legal battle.

The U.S. Department of Labor and the Massachusetts Office of the Attorney General have stepped up enforcement efforts against for-profit companies that run afoul of the legal requirements for unpaid interns. Interns have also filed suits against companies that have violated the law by depriving them of their wages. Some interns have sought to file a class action suit against their employers for failing to pay them for their internships. Most notably, former interns of Fox Searchlight Inc., the Hearst Corp. and Charlie Rose on PBS have filed class actions against these media and entertainment companies for misclassification, alleging the companies should have classified them as employees and paid wages to them for the hours that they worked as interns. If found liable, each of these companies could be ordered to pay more than $1 million in damages to their former interns. The U.S. Department of Labor and the Massachusetts Office of the Attorney General are also able to levy significant fines against employers for violating these laws.

Federal law requires that a company classify its interns as employees and pay them at least minimum wage for their time unless the company has an internship program that meets the U.S. Department of Labor's six criteria for unpaid internships:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that 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 by the intern;
  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.

Massachusetts has adopted the same criteria for determining whether an individual participating in an internship program is exempt from coverage by the Massachusetts minimum wage laws. The Massachusetts Attorney General will scrutinize the nature of the intern's tasks and the purpose of the company's internship program. Does the employer's program prepare the intern for the workplace? Alternatively, does the program require the intern to perform the same or similar tasks as the employees who work for the company that is sponsoring the program?

Accordingly, companies would be wise to examine their programs and the tasks they require the interns to perform before they offer an internship to any students. Although the students are eager to accept unpaid internships to gain valuable work experience, their viewpoint might change quickly when they learn that their employers were legally required to classify them as employees and pay them for their time.