California Laws Regarding Unpaid Internships

Internships can be a true win-win situation: Companies get an opportunity to utilize unpaid labor and find their employees of the future. And interns get to learn the ropes, gain real-world experience, and build up their resumes for the post-graduation job search.

While internships have numerous advantages, employers who hire unpaid interns might face legal battles and class action lawsuits. If you don't follow the rules to make sure an internship is a true learning experience, that intern starts to look a lot like an employee who just isn't getting paid. And that's when the wage and hour problems begin.

California vs. Federal Rules for Unpaid Internships

These days, California and federal rules for unpaid internships are the same. California used to have a longer list of requirements employers must follow to stay out of legal trouble. However, the state's Department of Labor Standards Enforcement abandoned this approach in 2010, when it issued an opinion letter stating that it would abandon its extra criteria and simply follow the federal test.

At the time, some commentators stated that this might make California a more lenient place for internships. However, it can still be challenging for an employer in private industry to develop an unpaid internship program that will meet the federal and state standards.

"Primary Beneficiary" Test for Unpaid Internships

According to the U.S. Department of Labor and the California Department of Labor Standards Enforcement, the "primary beneficiary" of the internship must be the intern, not the employer.

Courts have used a seven-part test to determine whether the intern is the main beneficiary. These requirements are intended to ensure that the intern is really receiving a valuable learning experience in exchange for free labor.

Unless all of the following criteria are met, the intern is legally an employee, who must be paid the minimum wage, earn overtime, and receive all of the other protections guaranteed by state and federal employment laws.

1. The intern understands that the position is unpaid.
2. Training is similar to that received at an educational institution.
3. The internship is tied to the student's educational program.
4. The intern's work doesn't conflict with academic commitments.
5. The internship lasts for a limited period of time.
6. The intern's work does not replace existing employees' work.
7. The intern agrees that the internship does not provide entitlement to a job.

This test is flexible and no single factor is determinative. Ultimately the determination of whether an internship exists will depend on the specific facts of the case.

Are Unpaid Interns in California Eligible for Workers' Compensation Benefits?

Unpaid interns aren't considered employees in California, so they aren't eligible for workers' compensation benefits.

However, if your company isn't following the rules regarding unpaid internships, you might be classified as an employee under the law. That would entitle you to workers' comp benefits, the minimum wage, and a host of other workplace protections.

Legal Issues for Employers

While internships provide various benefits to employers and students, unpaid interns are quickly becoming the modern-day equivalent of entry-level employees, and are being taken advantage of financially. Employers who exhibit a failure to fairly compensate employees for their work are at risk of legal repercussions.

If you're an employer wondering whether you're internship program is legal, or you're an intern and your employer isn't following the law, consider contacting an employment lawyer in your area.