Many organizations bring unpaid interns into the workplace because it seems like a win-win relationship: the organization gets “free labor” and the intern is happy for the opportunity to work in a particular industry. Unfortunately for employers, the interns don’t always stay so happy once they find out that the law often requires them to be paid as employees. When that happens, employers spend thousands of dollars defending litigation and face costly monetary liability to the would-be interns, stiff fines from the Department of Labor and even potential criminal penalties.
The legal definition of who constitutes an “employee” – and therefore needs to be compensated in accordance with minimum wage and overtime laws – is very broad. The U.S. Department of Labor and courts around the country use a six-point test to determine whether your interns should really be classified as employees.
If you can agree with each of the numbered statements below, you have yourself an intern. If not, you should confer with an employment and labor lawyer very soon.
Your internship looks like training that would be given in an educational environment. To answer yes, you need to be able to show you provide something beyond the usual on-the-job training that any typical employee would receive by virtue of working at your organization. It does not have to be a formal training program, but it must be something more than the incidental learning any employee enjoys.
Your internship experience is for the benefit of the interns. While it is not imperative that you have a formalized internship program, to agree with this statement you must be able to demonstrate that this internship is structured to benefit the intern beyond the usual resume-building that any employee would get from working there.
Your interns work under the close supervision of existing staff, but do not displace regular employees. If your employees are performing tasks that you would otherwise have to hire employees to do, you likely cannot agree with this statement.
You derive no immediate advantage from the intern’s activities and your operations actually are impeded on occasion due to the use of the intern. Even when an intern’s work is menial and “beginner level,” you likely are deriving immediate advantage from their efforts if those tasks had to get done and you would have otherwise paid an employee to do those tasks.
Your interns are not entitled to a job at the end of the internship.
Your organization and the interns both understand that the interns are not entitled to wages for the time spent in the internship. Bear in mind that if your worker likely is an employee based on your answers to the other factors, the mere fact that an intern agreed to not be paid does not mean you are off the hook. The law does not allow true employees to waive their right to compensation.
Should an intern or former intern become disgruntled for any reason, or simply learn that they should have been classified as an employee, you could quickly have a lawsuit on your hands. If you are found to have misclassified interns, you will be liable for extensive monetary damages, fines from the Department of Labor, and possible civil and criminal prosecution.
In short, unpaid interns may be a very risky choice. If your organization intends to use them, you must fashion a proper internship program that allows you to agree with the six statements above. Running this analysis and taking some modest steps to do so will allow you to benefit from the advantages of unpaid interns without inviting legal risk and expense.

Tracy Thomas Boland is a partner with the Boston-based employment law firm Morgan, Brown & Joy. She may be reached at tboland@morganbrown.com or (617) 788-5052.