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Have Unpaid Interns? Better Make Sure You Are Following These Rules

June 21, 2017

 

 

Have unpaid interns? Treat your interns like employees? Make sure you check out this brief post to ensure you are not running afoul of the strict laws governing interns and their pay (or lack thereof).

 

Outside the world of charities or government agencies, there is no sure thing when it comes to unpaid interns or volunteers. To be safe, just say everyone.

 

Unfortunately, there will always be a risk when hiring unpaid interns or volunteers. If someone wants to work for your company on an unpaid internship, be careful. Without the proper setup and knowledge regarding these laws, you could be on the hook for unpaid wages, overtime, Social Security, etc. if the relationship goes sour. You may also be liable for failure to properly withhold taxes and possible other penalties. 

 

Additionally, you have to consider the implications on the intellectual property that is created by the intern while with your company. Say that your unpaid intern develops an app for your company, or creates a marketing video for it. If this intern has not been paid, you may not be able to count on any intellectual property assignment agreements between the intern and the company because the company has not provided any “consideration” in return. You could potentially lose this valuable IP in addition to the claims for unpaid wages, etc. 

 

There is an exception (a very limited one) under the federal and state wage and hour laws governing when companies may use unpaid student interns. 

 

Employers must meet the following 5 conditions to safely categorize someone as an unpaid student intern:

  1. The intern must receive on-the-job training similar to that which would be provided through a university/school;

  2. The primary benefit of the internship must be for the intern only;

  3. The intern must not displace regular paid employees;

  4. The employer must reach an understanding up front with the individual that the intern is not entitled to pay or benefits during the internship or a job at the end—savvy businesses require interns to sign a statement that documents their status and acknowledgement that they are not entitled to compensation or a job position at the end of the internship;

  5. The employer gets no immediate advantage from the intern’s activities—in fact their presence is supposed to impede the businesses’ operations on occasion, based on the assumption that management/supervisors or other personnel are spending time training and educating them.

 

Interns are an incredible way to teach young students about the industry you are passionate about, to improve your brand’s presence, and to groom potential future employees/team members. You must keep in mind, however, that if you do not comply with these requirements, it could come back to haunt you should you ever have a falling out with an intern. 

 

Speak with one of our business and employment lawyers today. 

About the Author:

 

 

Dallas P. Verhagen is a business attorney and a partner at Verhagen | Bennett LLP.  To learn more about Dallas, please click here.

 

For questions or comments about this post, please email Dallas directly at: Dallas@VerhagenBennett.com

 

To make suggestions about future posts, please email:  Info@VerhagenBennett.com

 

© 2017 Dallas P. Verhagen — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

 

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