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Austin Startups Summer Internships

June 3, 2015

It Is Intern Season in Startup-Ville Again!

It is summer in a college town known for its start-ups, so what could be wrong with a little free labor?  Lots, actually.

During the recent recession, the Department of Labor really began cracking down on internship programs.  Their labor laws were not changed during this time but, because of financial pressures, lots of companies began using unpaid labor as a crutch.  In response to complaints, the DOL began investigating and charging employers with their employment practices, as they relate to unpaid interns.

The rule could be stated this simply:  If they are employees they must make at least minimum wage.  If they are not employees, you don’t have to pay them.

What Exactly Is An Intern?

Unfortunately, figuring out if an intern is an employee is a bit tricky and calling someone an “intern” just confuses the determination.  The Department of Labor does provide a lot of information on this topic but, in my experience, the most relevant rule is that you cannot get one iota of help from your unpaid intern.  The work of an unpaid intern must be to learn, not to do something you pay other employees to do. If your intern will provide a benefit to your company, you must pay them because they are employees.   Other guidelines are as follows:

  • An unpaid intern’s experience with your company must be like what happens in an educational institution.  Think an on-the-job training or hands-on type school.

  • The unpaid intern, NOT THE EMPLOYER, receives the benefit of the internship.

  • The unpaid intern does not replace an employee.

  • Employers will very likely have expenses, but never profits, from their intern.

  • There is no promise of a job at the completion of the internship.

  • There is a very clear understanding that no wages will ever be exchanged based on the work of the intern. 

Austin Startups Takeaway

The bottom line is that you must pay someone who is helping your company at least minimum wage.  If you have specific legal questions or objectives, please contact NLynch@lynchlf.com to help guide you.