The Ethics of Unpaid Internships

When are unpaid internships legal?

In an economy where companies and organizations often can't afford to hire, bringing an intern on board has become common practice. New graduates often jump at these opportunities even if the internship doesn't include a paycheck, because paid jobs that offer relevant work experience are few and far between in this struggling economy.

But how many of these opportunities are legal? When it is acceptable to "hire" an intern without pay?

[See 10 Tips to Get the Most Out of Your Internship.]

Unpaid internships must meet Labor Department guidelines, although state and local government agencies and non-profit organizations are exempt, and employers are allowed to offer college credit in lieu of pay. Here's the six-point test for unpaid internships that the Labor Department issued more than a year ago (or read them in full):

-- The intern must benefit from the internship

-- The intern must receive training that's similar to what an educational environment would offer

-- The intern must not displace regular employees, but should work closely with staff

-- The employer must not derive "immediate advantage" because of the intern's work

-- The intern must not be entitled to a job afterward

-- Both the intern and the employer must agree the intern won't be paid

But critics say those criteria aren't specific enough, and that the "immediate advantage" reference raises questions. "What is an immediate advantage?" asks Mimi Collins, director of communications for the National Association of Colleges and Employers. "That's where it's a little bit vague."

The Labor Department has agreed to consider clarifying how those guidelines apply to public and nonprofit sectors, but a spokeswoman for the department declined to say when that guidance might be provided. "We are a law enforcement agency that will enforce the test as laid out by the Supreme Court," that spokeswoman wrote in an email.

Unpaid internships have long been a point of contention, with critics saying they put students who can't afford to work for free at a disadvantage. But the debate has picked up a notch during the last few years, largely because the recession has left so many young workers jobless and facing a common quandary: Work for free to gain experience, or get a paying job that doesn't necessarily bolster the resume?

That was the question before Sarah Crosbie of Haddonfield, N.J., when she couldn't find the type of job she was looking for, working for an advocacy or lobbying group. A year and a half after graduating from Rutgers--New Brunswick, the 23-year-old accepted an unpaid internship with the Camden Area Health Education Center, where she coordinates health fairs on a part-time basis. She's now looking for a part-time waitressing job to pay the bills and plans to live with her parents until she has enough work experience to qualify for positions with advocacy groups in Washington, D.C.

"They're giving me a ton of experience and a ton of responsibility, so I'm happy to have that," Crosbie says. "But at the same time, it's really frustrating to not get paid for your work."

And yet, like many students eager to gain real-world smarts, Crosbie calls her internship a win-win. "I'm getting out of it what I want, and they're getting what they want," she says. "Frankly, there's so many people out there that are willing to work for free ... that businesses would be crazy to not take advantage of that."

[See What to Consider When Evaluating an Internship.]

Plenty of businesses and organizations do use that demand to their advantage. According to a recent survey by Intern Bridge, an organization that works to create paid internships across the country, 46 percent of university career centers reported more unpaid internship postings during the most recent calendar year compared with 2009-2010. About 38 percent reported more paid internship postings.

But who decides whether those unpaid internships are legal or--to add another layer of complication--ethical? Most career centers leave it up to the student to determine whether an opportunity abides by the Labor Department's guidelines, but it often behooves students to accept internships even if the company or organization doesn't follow the letter of the law. "If a student makes any kind of trouble, saying this is unfair and illegal, [they] are jeopardizing the relationship [they] could have with that employer," says Tom Fitch, associate dean for Career Services & Employer Relations at the University of Virginia's McIntire School of Commerce.

Some universities don't support internships that aren't paid. While Florida International University's College of Business Administration doesn't go that far, associate director of career management services John Nykolaiszyn says he does encourage employers to offer a paycheck if their internship doesn't meet Labor Department guidelines. Having paid opportunities is particularly important for students who work to support themselves while earning a degree, he says, and many of his students fall into that category. "They're working full time. They're going to school full time," he says. "They're hustling. They can't afford to [work for free]."

[See Why New Graduates Should Consider Entrepreneurship.]

And yet, Nykolaiszyn acknowledges that it's easy for companies to skirt around the Labor Department's guidelines. "[The guidelines are] confusing," he says, especially the fourth point that prohibits the employer from gaining immediate advantage from the intern's contribution. "If you ... have an intern, of course [you] want to benefit from their work."

Of 20,000 graduating seniors who participated in a recent survey by National Association of Colleges and Employers, more than half held an internship sometime during their college career, and half of those internships were paid. About 60 percent of students who did a paid internship in the for-profit sector received a job offer by graduation, while only 38 percent of students who'd participated in an unpaid internship in that sector had an offer by then.

agrant@usnews.com