Unpaid Internships for Start-Ups

Can we?  As a technology start-up company with a start-up company's bootstrapped budget, can we ask an intern to work for us for free?  After all, they're just doing it for the experience, right?  They'll get to add working at our cool start-up to their résumés, no prob. That's great for them – and legal, too, right?

A technology start-up company's budget I Googled that question.  I'm not alone in asking it.  The New York Times currently is covering the topic in The Unpaid Intern, Legal or Not and Unpaid Interns, Complicit Colleges. Yikes.

For legal questions, I've learned to turn first to Google for background, then to Ken Maready, the entrepreneur's entrepreneur, and attorney with Hutchison Law Group

Ken replied:

Here is the U.S. Department of Labor's fact sheet on internships (.pdf), and the tests that apply to determine whether wage and hour laws apply (i.e., whether you have to pay them).
The main criterion that typically provides the biggest hurdle for start-ups is number 4:  "The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded."
So, for interns working at start-ups, it is typically the case that the start-up does actually expect some advantage from their work, and the better route is to pay them minimum wage, either as an employee or, if possible, as a consultant.

Yes, from an intern I expect the advantage of their cutting-edge, state-of-the-art knowledge from a top university to be at work for the advantage of my company.

The U.S. Department of Labor also offers a guide to Minimum Wage Laws in the States.  I'll be familiarizing myself with that.  Thanks, Ken.

Ken Maready will do a talk on the "Basics of University Start-Ups" on Tuesday, April 26, 2011 at the Virginia Tech Corporate Research Center, in Blacksburg, Virginia, USA. Please click here for more information. 

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NewVa Corridor Technology Council 2011 TechNite Award Nominees


  1. I am glad you came to this conclusion, because I believe it is the accurate legal answer, but also the right one regardless.

    In my opinion if a problem needs to be fixed or a job needs to be done it is worth money. If it is not worth paying someone, it is not worth having them do the work. Period, end of discussion. This applies to everything from VAs to design work to interns. Every business that would ask people to work for free would also laugh if a client asked them to do the same.

    I have known people to do unpaid internships, and each time they were expected to make a positive impact on the business. College students do not deserve to be taken advantage of any more than anyone else.

    Thanks again for posting this, I think the legal focus was the right way and this is a subject that needs to be talked about more.

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