Lately, many regulators have begun to scrutinize unpaid internship programs. For years, unpaid internships provided students and other individuals entering the workforce with an opportunity to learn about a business. However, with the recession, employment agencies have been checking whether an unpaid internship is really a job in disguise. Regulators are very concerned about circumstances where an unpaid intern is displacing a paid worker and the intern is not receiving any substantive training or educational benefit.

In general, it is typically acceptable if the employer derives some advantage from the individual’s service as long as the internship is more of a training or learning experience, rather than a job. It is paramount that the internship be predominantly for the benefit of the individual and not the employer (See Department of Labor Guidelines for unpaid internships). For example, the California Division of Labor Standards Enforcement recently issued an opinion letter about an unpaid internship in California utilizing the Department of Labor’s guidelines and emphasized that substantial structured supervision and informal observation of interns by other workers may offset any advantage perceived to be received by the employer. (See NYT Article discussing California unpaid internship question.)

If the intern position does not qualify as an unpaid intern position under the Department of Labor guidelines, employers should pay interns at least minimum wage to avoid any potential claims by the interns or investigations by employment agencies. Many times, employers believe that if a position is called an internship, employment agencies will accept these classifications without question. However, employment agencies do not have to subscribe to these position classifications and may not agree with the employer.

If your company expects to hire unpaid interns, you should ensure your internships are in compliance with the Department of Labor guidelines. If they are, you may want to consider sending an offer letter to the prospective intern advising the intern that the position is an internship position that offers an educational or training opportunity and is not a job. The offer letter may also advise that the intern position complies