Interns: To Pay or Not To Pay

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Interns: To Pay or Not To Pay

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This is a special blog article written by the new Law On The Runway’s intern, Waqas.  In honor of the internship, Waqas has chosen to write about labor laws, specifically relating to interns. At Law On The Runway, we occasionally have clients wanting to hire interns, but with limited startup budgets, they hope to find ways of alternative compensation. Often, we have to inform these clients that when expecting employee-like work from an intern, the intern must receive monetary compensation from the company.  This blog post is meant to be general information, and not legal advice. Should you have any questions regarding this blog post or hiring interns, please email Rachel at  

Shakespeare found himself in a dilemma in the 16th many ways today. To do or not to do. In today’s innovative century we not only want to find, we want to be found. In this journey, countless Hamlets join fashion houses, corporations, and the latest trend, startups for internships to progress their dreams. But the relationship between these startups and interns has become nothing short of Hamlet and Uncle Claudius.

Today, courts are hearing an astronomical amount of Hamlet’s seeking revenge from Uncle Claudius for murdering their dreams. It has become far too common for corporations to hire interns not for the cliché coffee making,  but for employee level tasks, and unfortunately treating them worse than the coffee bags at the end. Startups have been trending in most metropolitan cities around the country as they bring an entirely new approach to not only the market they serve but the work environment they create for their employees. Occasionally, startups are running solely on unpaid hard working interns being overworked for often mere college credits. Thus, these interns have been coming back well after the internships and seeking compensation for all of their work.

The Fair Labor Standards Act has been actively regulating minimum wage and overtime for U.S. workers which is inclusive of the mere overlooked interns. With that in mind, the Department of Labor has set a list of criteria that must be met by companies with unpaid internships.

(1) The internship is similar to the training received in an academic environment

(2) It is for the benefit of the intern more than the company

(3) The intern does not displace paid employees

(4) The company does not benefit from the work the intern is doing

(5) The intern is not promised a job at the end

(6) Both the intern and their supervisor understand it is an unpaid position

The Black Swan ruling in New York shed light to the issue of paying interns with academic credit for their services which is what many startups have been doing, as well. Silicon Valley has been a gold mine for innovation, with most students joining the startup world as mere interns hoping to progress into one day starting their own company, or joining the permanent team of a startup. This clash of young emerging talent with revolutionary corporations being born everyday meets at the intersection of none other than compensation and value. In this era of sky rocketed unemployment numbers and cash-strapped startups attempting to revolutionize lives the best short-term option for both may seem like an unpaid internship, but in the process much is lost.

Most interns feel they deserve to be paid for the work they do while commonly pulling more weight than originally planned, which is often the case for everyone working at a startup.  For the common startups taking place in Silicon Valley, California state laws reign. The Division of Labor Standards Enforcement within the California Department of Industrial Relations has taken the federal standards further with additional requirements that California employers must meet:

(7) The training should be a part of an educational curriculum.

(8) The students should not be treated as employees for such purposes as receiving benefits.

(9) The training should be general in nature, so as to qualify the students for work for any employer.

(10) The screening process for the program should not be the same as employment screening.

(11) Advertisements for the program should be couched in terms of education rather than employment.

The point of concern then becomes not whether the interns are getting underpaid or whether employers are unfairly benefiting but whether these interns are actually learning from what they are practicing. With most startups being extremely hands on, it is safe to assume interns are learning on a daily basis but it is also necessary for startups to create a structural internship plan that revolves around not just the intern but the intern’s academic needs.

Ultimately, the issue of paying interns is not solely the enforcement of regulations but rather a medium for the mutual benefit of both the interns looking to learn more about the careers they want to follow and startups looking for revolutionary talent to bring more ideas to the table. Compensation ranges from a mere incentive for interns to work harder and bring talent to the table to startups saving themselves from legal liabilities while raking in talented potential employees before big companies take them. Although the standards for California startups are much more stringent than those of the federal law, they are tailored to specifically advance the startups, the students, and the state as a whole.

All Hamlet wanted at the end of the day was fairness from uncle Claudius.