Nonprofits in the News: Alert to Nonprofits Using Unpaid Interns

Nonprofits in the NewsIn his Social Enterprise and Nonprofit Law blog this week, Seth Perlman provides a useful heads-up to employers—including nonprofits—that use unpaid interns in their organizations. Perlman reports that the Department of Labor intends to step up investigations of for-profit employers who may misclassify workers as independent contractors or as exempt from minimum wage or overtime pay rules. Perlman writes:

The use of unpaid interns is also under scrutiny.  The fragile economy has made the practice of using unpaid interns more common. Although not necessarily unlawful, the DOL considers a series of factors when assessing the legality of such arrangements. In particular, the criteria include whether the internship provides training similar to that provided at an academic or vocational school; displaces a regularly paid worker; and whether the employer derives any immediate advantage from the intern’s activities . . . The DOL, along with State Labor commissions, have issued rules and guidelines for companies and organizations that employ unpaid interns. Organizations that offer unpaid internships to young workers should consider creating written policies incorporating the federal DOL criteria.

The footnote of The Department of Labor’s free Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act notes that,

[The Wage and Hour Division] also recognizes an exception for individuals who volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations. Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.

State and federal labor departments do tend to provide leeway to nonprofit organizations in the use of volunteers and unpaid interns. However, that does not permit a nonprofit organization to misclassify paid employees as independent contractors, or as exempt when they should have nonexempt status. As always, be sure to confer with an attorney on legal matters.

10-Minute Board Discusion

Do our governance policies give the CEO appropriate guidance as to what the board considers unacceptable regarding the use and treatment of volunteers and unpaid interns?


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