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Are Unpaid Interns Putting Your Creative Business At Risk?

Many creative businesses are started by solo entrepreneurs, they are one-woman or one-man shows. As their businesses begin to grow, however, many owners eventually reach a point when they realize that they can no longer do it all by themselves and need some help. Eventually administrative duties, including marketing and social media, taking and processing orders, bookkeeping, and communicating with customers becomes the creative business owner’s full-time job, leaving little time for creating the very product or service they are selling.

And instead of hiring an employee, many creative businesses bring on interns to fill this gap, some of which may be unpaid. At first glance, unpaid interns seem like a great option. They work for free, they are eager to learn, and if the business is near a college with an arts or design department, then there is likely a large pool of individuals interested in gaining some insight into how a creative business is run.

Bringing unpaid interns on, however, can put a business owner at risk of violating federal and state employment laws, particularly if an unpaid intern is spending most of his or her time performing routine administrative tasks.


How to Legally Make Unpaid Interns a Part of Your Creative Business?


But what if you genuinely want to pass along the craft and give back to the creative community? Unpaid internships, if structured correctly, can be a great way to do just that. The key is to make sure the internship truly benefits the intern and is not just a way to avoid hiring an employee.

 In California, you can have unpaid interns as a for-profit business as long as you comply with the criteria used by the United States Department of Labor and California Department of Industrial Relations, Division of Labor Standards Enforcement:

  • The training is similar to what would be given in a vocational school.
  • The training is for the benefit of the intern.
  • The intern does not displace other employees, and works under close observation.
  • The employer derives no immediate advantage from the activities of the intern, and the intern may at times actually impede.
  • The intern is not necessarily entitled to a job at the conclusion of the internship.
  • The employer and the intern understand that the intern is not entitled to wages for the time spent participating in the internship.

As can be seen from the criteria, the more the intern “gets in the way” the better. Having a curriculum for what the intern will learn during the internship may also help. Once an intern is able to perform a particular task well, he or she should be moving on to learn a new part of the creative process or aspect of the business.

UPDATE: On July 2, 2015, the Second Circuit Court of Appeals concluded in Glatt v. Fox Searchlight Pictures, Inc. that the proper question in determining whether an unpaid intern is correctly classified as such or should be classified as an employee depends on whether the intern or the employer is the primary beneficiary of the relationship. The Court provided a non-exhaustive list of factors to consider, that although similar to the 6 factor test above, places more emphasis on the relationship to the internship and the individual’s education.

Although this is decision is not binding in California, it could give employers a little more flexibility if viewed as persuasive by state and federal courts in the state.

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