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Business risks with paid and unpaid internships

Internships are a rite of passage for college students and business professionals who want to gain experience and make valuable business connections. If interns are paid, the internship typically functions like an entry-level position with an expiration date. However, it can get a little trickier for companies that hire unpaid interns, since different rules apply. Are unpaid internships legal? In order to be classified as an unpaid internship, federal law requires that a position must involve strictly educational tasks that benefit the intern more than the company. This means an unpaid internship is legal – as long as the business hiring the intern follows this rule. Where companies tend to run afoul of the law is when they assign tasks to interns that are normally handled by paid employees. Fox Searchlight Pictures wound up in court for its use of unpaid interns during the filming of the movie “Black Swan.” In the case of Glatt v. Fox Searchlight Pictures, a New York federal judge ruled that two production interns should have been paid as Fox employees for their work on the Oscar-winning film. The ruling stated that the interns’ work (which involved getting lunch, filing paperwork, running errands, delivering paychecks, etc.) included tasks that displaced a paid employee. This marked the first time a “modern” internship was deemed illegal in court. Fox Searchlight Pictures appealed to a higher court, which overturned the ruling. However, the court did agree in part with the initial decision, which stipulated that unpaid internships needed to primarily benefit the intern, not the company. Federal guidelines for unpaid internships The U.S. Department of Labor has guidelines that businesses must follow in order to legally offer unpaid internships. Here’s a checklist business owners can follow to ensure that their internship program is legal: The internship is structured like a class or other educational training program, and it corresponds with the academic school year. The intern is entitled to academic credit upon completing the internship. The internship provides significant educational benefits. The intern’s work complements, not displaces, that of a paid employee. There is no promise of a…

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