Have you ever met a paid intern at a startup? Chances are you have not, and chances are the startup is in violation of US Department of Labor laws. All interns must be paid at least minimum wage (and overtime when applicable) under the Fair Labor Standards Act (FLSA) unless all six of the tests below are met.
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Here is the US Department of Labor Fact Sheet on the subject.
Using my intern as an example, he began his unpaid internship with my company by first learning about my business model and client pricing strategies. At that time, I was beginning to use Asana for monthly recurring client tasks. He learned the Asana software by helping set up the taks. He then began learning the QuickBooks accounting software by my training him directly and by him completing data entry and bank reconciliation tasks on his own. He and I reviewed his work, and I gave him feedback and notes. After he mastered these tasks, I trained him on exporting QuickBooks data into Excel reports I designed especially for each client. Although he used Excel extensively in school, he said he learned a lot of new things about Excel during that training.
While all this was going on, he performed scanning and filing tasks. I paid him for these tasks because they did not meet the criteria above. Because my intern has now learned the tasks in which he was trained, if he continues to do these tasks for me, I will have to pay him. Our relationship no longer meets all six of the criteria above. My next step is to help him obtain an internship at a local CPA firm.
Another important point related to interns is to make sure to classify paid interns correctly with regards to the employee vs. independent contractor rules. The fact that a worker is an intern does not automatically qualify her as an employee or independent contractor. The same rules apply relative to degree of control and independence.