DISCLAIMER: This post is intended only as general information regarding internships and New York employment laws. It is not legal advice and does not establish an attorney-client relationship. If you need specific legal advice regarding your internships, please contact an attorney in the jurisdiction(s) where your interns work or where you are interning.
It’s internship season. But that doesn’t mean its time to take advantage of “free labor.”
I understand that business leaders are constantly pressured to do more with less and why it can be tempting them to consider an internship program to cut costs. Not-for-profit businesses regularly use the services of volunteers to further artistic, charitable, educational, humanitarian, and other non-profit motives. But if your organization is in business to make money, the law requires you to pay for the labor that generates the money.
Unethical or illegal internship programs are unsustainable for small business owners and department heads in larger employers. They only look like they’re inexpensive.
The $550 Billion Friction Point
Workplace conflict and disengagement cost the U.S. economy more than $550 billion annually. When you bring an intern into your ecosystem without a clear, legal, and ethical framework, you aren’t saving money. You are inviting friction.
An unpaid internship often fails to meet all three elements of the HAQ (Humane, Affordable, Quick) standard:
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It’s not Humane. It excludes talent that cannot afford to work for free, narrowing your candidate pool. These candidates are often women and members of other historically marginalized groups who have lower socioeconomic status.
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It’s not Affordable. One DOL audit or misclassification claim can cost tens of thousands of dollars in back wages and penalties—far exceeding a seasonal salary or stipend. The DOL can also look back several years to ensure long-term compliance. If you have a history of using unpaid interns or volunteers, you might not be able to pay the penalties.
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It’s not Quick. The time spent looking over your shoulder or mediating resentment from unpaid staff is time taken away from your high-level strategy. The internship will go more smoothly for everyone when it is carefully planned to meet mutually beneficial goals that also consider the impact on others in the organization.
Top 3 Justifications for Unpaid Internships (and Why They Fail the Partnership Test)
In my employment law and mediation practice, I often hear the same three excuses for not paying interns:
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“They are getting college credit.” Under the Department of Labor’s “primary beneficiary test,” college credit is only one factor. If your business is the one primarily benefiting from the work, the law sees an employee, not a student.
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“We are a small business [or startup] and can’t afford it.” If the business model relies on free labor to survive, it is, by definition, unsustainable. Transitioning to a partnership model means valuing every contribution fairly so the business can scale healthily and sustainably.
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“I did it for free when I was starting out.” As Rolf Dobelli discusses in The Art of Thinking Clearly (which I cite in my upcoming book, Unsustainable: Why Our Workplaces Aren’t Working and What to Do About It), this is a cognitive distortion often referred to as “effort justification bias,” and it does not build conflict-resilient workplaces.
None of the above excuses are valid defenses to unpaid internships. They actually increase your risks of conflict, if not legal action.
7 Economic Reasons to Pay Your Interns Today
If the legal risk isn’t enough to convince you to pay your interns, consider the positive economic impact a paid internship could have on your brand and operations:
- Avoid the “Misclassification Tax.” Payroll taxes and workers’ compensation insurance are cheaper than litigation. If your intern gets mad at you, quits, and files an unemployment insurance (“UI”) claim, you will likely lose any challenge to the claim, leaving you with hefty costs like back wages, overtime pay, penalties, and interest.
- Simplify Onboarding. Treating interns as employees from day one creates a cleaner administrative trail.
- Reduce Middle-Management Friction. Your team can delegate real tasks to a paid professional that is unlawful to assign to a “volunteer.”
- Attract Diverse Innovation. Pay allows you to recruit based on talent, not socioeconomic status.
- Protect Your Reputation. In the age of Glassdoor, your “ethical footprint” is your best recruiting tool.
Creating a Conflict-Resilient Internship
Before you post that next “opportunity,” ask yourself:
Is this a partnership, or is this an extraction?
If you aren’t sure where your program stands—or if you’ve realized your current setup is creating more friction than value—let’s talk. My goal is to help you protect your business and your legacy by building workplace structures that actually work.