As we have reported previously, more and more former unpaid interns are filing lawsuits against employers for being forced to work as a full time employee without being compensated for work performed; thus violating federal and state wage, hour, and tax laws regarding the proper classification of interns vs. workers.

Not only are such lawsuits becoming more prevalent, but even the mainstrem media are reporting on them (with recent articles in the New York Times, Atlantic Monthly Magazine, and more). You know that if an accounts payable related issue is being reported on by regular news outlets then you had better react; as you can bet such issues are a prime focus of federal and state regulators.

The ubiquity of the use of unpaid interns by the "for profit" private sector is unquestioned, and thus the potential compliance risks are enormous. Recent statistics show that of the 10 million students attending four-year colleges in the U.S. at any one time, more than 75% have at least one internship before graduating - with as many as one third of these internships unpaid.

Now, unpaid internships need not be a point of compliance risk regarding the law. However, this is only providing that you make sure that interns are not being used to do work for the "benefit of the employer" rather than work that centers around a "bona fide educational experience", with this definition only understandable in connection with a series of guidelines and standards as promulgated by the United State Labor Department. If these rules - though summarized here in simple fashion the rules and standards are actually far more complex than this and involve a six point test that you must apply to your independent facts and circumstances to see if you have a violation - are not followed and you are bringing on unpaid interns then you are directly violating a slew of labor and tax laws.  Penalties related to these violations can be enormous; featuring not only unpaid wages, but also involve repaying, with interest, unpaid federal and state taxes such as FICA, FUTA, and more.

If you think your organization may be running afoul of labor and tax laws as it applies to misclassifying your workers and/or interns please do not hesitate to seek out competent counsel on this matter. Note that such issues are a core competency of TIR Consulting LLC - either via a subscription to our TIR Answer Center, project-based consulting services, or our unique in-house seminars customized to your specific needs (and providing three months of post seminar question and answer support from attorney's experienced in handling these matters). The point is that you need to review your internship programs and act proactively to determine whether or not you are in compliance.