With Memorial Day over and summer unofficially here, the media has run a number of stories on summer interns. Interest is high this year because, “as the job market dwindles, unpaid interns are flooding the work force” [“The Full-Time Non-Employee,” by Laurie Pike, Entrepreneur, April 2010]. Although internships can prove valuable for both interns and employers, Pike cautions employers that they should only offer internships after they have thought through all of the consequences. She writes:

“The Department of Labor’s rules on unpaid interns are brief and vague; the agency has little on the books because it oversees paid work, and it hasn’t addressed the issue of the nation’s growing unpaid work force. Employment lawyers interpret the rules differently–though they generally agree that full-time open-ended internships are legally dicey. Meanwhile, there are more interns available than ever, and businesses are relying on them for concrete help on entry-level tasks, plus the less tangible benefit of youthful energy and ideas around the office. … More companies are banking on unpaid interns to the point of building that labor option into their business model. No agency collects national statistics on intern numbers, but the consensus among the largest job placement websites, such as Internships.com and CareerRookie.com, is that they are on the rise. USA Intern–which has more than 10,000 registered interns on its site, USAIntern.com–saw a spike in 2009, when the economy was melting down. There is further evidence in the growing number of intern sites, including UrbanInterns.com, which launched last year and counts several thousand registered users. Of course, the flood of free talent is a boon to businesses managing a big workload with a small staff (some interns even pay middlemen to secure them an unpaid slot). But most businesses are unaware of what legally constitutes an internship and what’s acceptable to ask an intern to do.”

Pike notes that the concept of internships hails back centuries when apprenticeships first began. Historically, apprentices and interns have been young and unskilled; but, today interns can be “older, more experienced and more desperate.” That’s because high unemployment has forced older, experienced workers to look for new careers. Although unpaid work may sound demeaning, serious job seekers generally “agree that a few months of unpaid work is worth the return of a fattened portfolio and Rolodex.” Pike continues:

“If you own a business that could use an extra hand but doesn’t have an extra source of revenue to pay for it, the intern boom may sound too good to be true. And that’s because it is. The Department of Labor has but one document on the legality of this sort of unpaid help, and the language is vague. It’s a 2006 opinion letter on an apprentice program set up by an unnamed university, and it states that interns are not employees and therefore are not covered by wage laws, if six guidelines are met. One of those specifications is: ‘The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion the employer’s operations may actually be impeded.’ In short, the Department of Labor appears to view internships as benevolent education programs, not as the I’ll-scratch-your-back,-you-scratch-mine scenario that defines them today. The wording is key to Michael Tracy, an employment lawyer in Irvine, Calif. To him, a volunteer answering phones or filing papers or creating proposals gives a company an ‘immediate advantage.’ ‘The practice isn’t legal,’ Tracy says. ‘It gives companies an unfair business advantage. It is the same as companies that pay people sub-minimum wage, or make people work unpaid overtime.’ To operate within the letter of the law, he adds, an internship must be a sort of dummy job or an observation-only program.”

Frankly, it is hard to imagine many unpaid intern positions that don’t provide some immediate value to the companies that offer them. “In the private sector, most of the unpaid internships are illegal because most don’t involve a structured environment, and many don’t provide any advantage to the students,” claims Economic Policy Institute vice president Ross Eisenbrey. “They don’t get paid for the work they are doing when, in many cases, they ought to be paid at least minimum wage [“Experts: Unpaid internships may violate federal standards,” by Katie Shoultz, statepress.com, 28 April 2010].” Understanding the law is important. According to Shoultz, “Under standards set by the federal government, interns must be closely supervised, receive training similar to that of a vocational school or other academic institution and must not displace regular employees or immediately benefit the company.”

Companies continue to get away offering these positions because the Department of Labor must assess each position on a case-by-case basis and it isn’t manned to handle the workload. There is also a growing understanding that even if interns do provide immediate value to a company, the internship also provides valuable benefits to the intern. As Pike reports, “That is one of the reasons many employment experts believe that a firm simply needs to create programs that benefit the intern first and foremost.” Pike notes that “only the government and nonprofits, such as the L.A. Stage Alliance, which has a full-time unpaid intern, are free to use unpaid trainees long-term and full-time without worry.” She concludes:

“Although it would seem that hiring from the intern pool is the best reward a company could give volunteers, an internship program cannot be structured as an audition. For that reason, sometimes common sense alone isn’t enough to guarantee that your own internship program is aboveboard. Even if you plan to use interns in a company about to be launched, it isn’t wise to put that into the business plan, because it will appear as if you are looking for free labor. There is no free lunch, as the saying goes, but there is free help–with plenty of caveats.”

Even with all of those caveats, there are times when offering internships make sense [“When Interns Make Sense,” by Louise Lee, Wall Street Journal, 17 May 2010]. Even Lee, however, admits that most interns provide immediate value to companies, so beware about getting too enthusiastic about them. She writes:

“Interns also present a tremendous opportunity to entrepreneurs. Precisely because the business is so small, interns can have a real impact on the operation, contributing to important projects and bringing a fresh perspective and energy to old routines. Not to mention that businesses get all that free of charge, or at a fraction of the market cost. So, how can you get the most out of your interns—and make a demanding management chore worth the effort? Here are some strategies from experts and entrepreneurs. Start by spelling out clearly the kind of performance and behavior you’ll expect. … Be sure to address basics—everything from the dress code to how much heads-up you need before the intern takes time off. To stress that you expect professionalism, make your interns feel like part of the company—an easy task in a small firm. Giving them their own desk, computer and phone, and adding their name and photo to the company website can quickly create a sense of belonging. Next, find out the interns’ expectations and focus them. ‘Some come with broader ambitions that are misguided,’ says Noah Lapine, president of Lapine Inc., a 60-person distribution and promotions firm in Stamford, Conn. Interns, for instance, might think that because your firm is small, it’s simple enough for them to run a department. Mr. Lapine recalls one college intern who declared vaguely that he wanted to be ‘a senior manager.’ After some questioning and prodding, Mr. Lapine realized that the intern was in fact seeking broad exposure to the company’s operations, so Mr. Lapine put him to work in several areas, including marketing, logistics and production.”

Lee notes that “deciding where your interns should work and exactly what they should do can be the most challenging part of the process.” She is correct because doing what is best for the intern is the surest way that a company has of staying out of trouble with the law. Lee continues:

“If your interns are earning class credit, make sure you follow the school’s requirements—both to be fair to the interns and to encourage the school to keep referring students to you in the future. For instance, some schools specify that interns spend no more than 20% of their time doing clerical tasks such as filing. School requirements can also give you ideas about how to use your intern: If the school says it will ask interns to describe what they learned about marketing, you’ll want to put them in that area for at least part of the summer. If your interns appear to be able to communicate effectively with customers, go ahead and let them do so. That task will give them actual experience in customer relations while helping you keep in touch with clients. At Lapine, interns have worked the phones to contact small accounts that are ‘low risk and low opportunity’ but are nevertheless worth checking on, says Mr. Lapine. Other Lapine interns have made weekly reports to clients to update them on the status of lengthy projects.”

Although some customer relations work could straddle the legal line, Lapine clearly understands that letting interns deal with customers is risky — which complies with the Labor Department’s ruling that “the employer’s operations may actually be impeded” by an intern’s activities. Lee continues:

“Some interns can help with research. Ms. Rice has interns call potential venues for clients’ fund-raising events to ask about rental cost, availability or the size of the ballroom. Besides obtaining necessary information, Ms. Rice says, the intern learns to be thorough and think quickly enough to ask follow-up questions. Simply observing you in action can be valuable to interns, so bring them with you to trade shows and let them attend meetings with your staff, customers or outside partners. If interns are shadowing you for the day, you can help them learn even when you’re doing desk work. If, say, you’re reviewing a contract, ‘describe everything you’re thinking’ out loud to give the intern a sense of what you’re looking for, says Helen Thompson, chief executive of T2 Complete Business Services, a small-business consultancy in San Francisco. Even if one of your staffers is supervising interns day to day, you as the top dog should carve out time to sit down with them regularly and discuss what they’re learning, says David Lewis, CEO of OperationsInc, a human-resources consultancy in Stamford. The head of a big company probably doesn’t have time to visit with interns, but in a small firm, the owner can and should be closer to them. ‘Your title means something to the intern,’ says Mr. Lewis.”

If your company is interested in establishing an internship, Jenna Johnson reports that the Department of Labor recently published “a fact sheet that clarifies exactly what constitutes a fair, unpaid internship at a for-profit company” [“Campus Overload,” Washington Post, 26 April 2010].

“For an unpaid internship to be legal, there are six criteria that must be met:

1. 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;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under close supervision of existing staff;

4. 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;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.”

Although there can be benefits to both a company and an intern, I hope it’s clear that avoiding all of the pitfalls associated with internships is not easy. Christie Garton provides one final note of caution, even if you are paying your interns: “When interns are expected to take on professional tasks far above their pay grade (if they’re getting paid) leads to overworked subordinates producing marginal work product that, in the end, could hurt the company’s bottom line.” Enough said.