Nearly all companies that take on unpaid interns are most likely “breaking the law”, even if that law is ignored, antiquated and almost never enforced.

For the past several weeks, SkilledUp has been conducting research into the role that unpaid internships play in the lives of people beginning their careers. It’s no secret that unpaid internships have been on the rise over the last few years, and understanding them is crucial to understanding the changing education and employment landscapes. This investigative post is divided into four parts.

Part 1: Unpaid Internships and the Law

Ironically, the legal precedent for unpaid internships comes from the same piece of legislation that established the minimum wage-The Fair Labor Standards Act of 1938. Under this law, unpaid internships must meet six criteria in order to be considered legal:

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.

Think for a moment- how many of your friends’ unpaid internships fit all six of these qualifications?

A quick review of entry-level job postings reveals that unpaid internships pay no regard to the letter of the law. Consider this recent Craigslist post:

This fairly common Craigslist post for an unpaid interns highlights how silly, and potentially damaging, this ignored law can be.

This unpaid internship quite clearly breaks all of the first 4 criteria for unpaid internships listed above. First, the internship seems to bear no resemblance to a training program- in fact, the posting requires that applicants already have experience. Second, given the lengthy list of duties and the nonexistent list of rewards, the internship is clearly for the benefit of the employer, not the intern. Third, it’s difficult to argue that the intern doesn’t replace a paid research position.  Fourth, again, the internship is explicitly for the benefit of the employer- unless, of course, the filmmaker’s work is impeded by a deluge of research reports.

All of this may sound obvious, and this listing is by no means unique. Of course an employer, especially an individual financing his or her own project, wouldn’t offer an internship if they didn’t derive some gain from it. However, the fact remains that internships like these are technically against the law.

In recent years, a few ambitious interns decided to sue their employers under the law. The cases were settled quickly, as the employers were more interested in avoiding the PR fallout than anything else, but the damage has been done. Few medium or large businesses would jump headfirst into an unpaid internship program and risk the reputation hit if the intern decides to sue. This leaves the unpaid internships to startups, small businesses, and those that believe (correctly) that they are likely too small to attract attention for hiring an unpaid worker.

Yet our argument is not that the federal government begin prosecuting every business taking advantage of untrained workers who may be developing a job skill over time. Rather, we suggest that the internship clause of the FLSA be revisited in order to reflect the situation that interns and employers currently face. By amending a toothless and unrealistic law,  the government can better enable interns, their employers and society at large to maximize the benefits and keep it in the “legal” space.

We at SkilledUp don’t just talk the talk. We’ve written letters to many members of Congress and gathered signatures towards amending this law. Our recommendation: interns can spend a limited time with a given company, some form of payment credits are issued towards job training and educational materials (perhaps from government), and that companies hiring unpaid interns according to the law can receive a payroll deduction if they decide to hire these workers. These simple steps might help pick up a generation of 20-somethings living on their parents couches and put them to work — but it will do so in a way that provides some guaranteed benefit to interns, and incentivizes companies to bring on interns that they have a high probability of hiring at the end of a predefined period.

In the next installment of this series, we’ll discuss unpaid internship trends in particular industries. While it’s true that some industries, such as film, have used unpaid interns for decades, the practice is now seeping into other industries. The numbers we discuss will point towards the future of entry-level employment.