Companies need to make sure that their use of employees, contractors and interns comply with both state and federal law.

Companies may be surprised to learn that the use of unpaid interns is in many instances unlawful. Many industries (entertainment, for example) have long used unpaid interns as part of the “training” process by which young entrants gain experience and make connections in order to find more fulfilling opportunities.

Yet industry customs may not in fact be compliant with law. Under California law (and every state law may have its own quirks) the use of unpaid interns may be permitted under the following specific circumstances, as stated in this letter memorandum by the California Department of Labor Standards Enforcement:

(1) The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;

(2) The training is for the benefit of the trainees or students;

(3) The trainees or students do not displace regular employees, but work under their close observation;

(4) The employer derives no immediate advantage from the activities of trainees or students, and on occasion the employer’s operations may be actually impeded;

(5) The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and

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

In short, interns have to be receiving a bona fide educational experience when working at a Company. There should also be links, if possible, to an educational program from a sponsoring school or university, such as the possibility of obtaining school credit.

Note that non-profits are permitted in certain circumstances to permit volunteers to contribute to the organization, but may be prohibited from doing so when the non-profit is engaged in commercial activity. The DLSE discusses that in this letter.

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