In any internship, employment, or transaction in a capitalist economy, the ideal situation is one in which both parties are be mutually benefited.

However, the scarcity of employment brought upon by our current economy has caused a shift in leverage. Labor cuts and reduced employment opportunities have led to greater power for employers, and as a result many students and others seek any available opportunities in an increasing competitive environment. This has led to a situation in which employers have the upperhand to take advantage of students willing to provide free labor in hopes of greater returns in the future.

However, many of these businesses do not realize they are walking across a thin line with the law. The Labor Department, according to the New York Times, has begun initiatives to investigate firms failing to properly compensate interns and further educate firms on the laws regarding internships. The Department’s Labor Wage and Hour Division (WHD) developed six federal legal criteria that must be satisfied if an internship is unpaid:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;

2. The training is for the benefit of the trainees;

3. The trainees do not displace regular employees, but work under their close observation;

4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;

5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and

6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. 

According to the Employment and Training Administration Advisory System of the U.S. Department of Labor: “If all of the factors listed above are met, then the worker is a “trainee”, an employment relationship does not exist under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the worker.”

Although there is no exact count of the number, there is little doubt among federal regulators that the number of unpaid and underpaid internships is on the rise. Times may be tight, and companies may have to reduce their labor forces within the company, but, unless in accordance with the six factors outlined, this cannot be accounted for through the use of free labor – internship or not.