U.S. businesses are benefiting from a huge pool of unemployed workers who are willing to work for free to gain experience. The rise of unpaid labor has some analysts concerned that the phenomenon will further undermine the anemic labor market. However, the Labor Department has strict rules about unpaid internships that bring legal risks to companies who benefit from desperate people who will work for free.
Desperate people will work for free
Unpaid internships aren’t just the realm of recent college graduates anymore. With the economy only creating enough jobs for one-sixth of the nation’s nearly 14 million unemployed, seasoned workers are joining the ranks of unpaid labor. Although there are few official statistics about unpaid labor, all it takes is a quick look at the job listings on Craigslist to see that businesses are exploiting workers ranging from accountants to nurses who will work for free now in hopes of a paying job later. Unpaid workers can gain valuable experience, references and avoid a glaring gap in their resumes, but some businesses get what they pay for. Without careful screening, unpaid workers can be difficult to manage, and some companies could be better off simply paying an employee.
Are unpaid internships getting out of hand?
The rise of illegal unpaid labor in the aftermath of the recession has raised red flags with the federal government. “Not So Equal Protection — Reforming the Regulation of Student Internships,” is a report issued by the Economic Policy Institute last April. The report calls for more federal regulation of unpaid internships. According to the institute, current regulations controlling unpaid internships must be reformed, not only for the protection of unpaid workers, but to maintain a healthy labor market and prevent any further decline in wages, which have been sliding for 40 years. In the report, the institute contends that the present lack of clear regulations exposes unpaid labor to workplace discrimination and encourages businesses to replace paid positions with unpaid internships.
Current regulations for unpaid labor
Despite the institute’s call for more government regulation, federal and state rules require that workers must be paid the minimum wage and overtime. Larger companies planning to take advantage of unpaid labor must follow provisions in the Fair Labor Standards Act. Under the FLSA, an unpaid internship must primarily benefit the intern, who must be closely supervised and not replace a paid position. Companies violating the law often must provide back pay, pay fines up to $1,100 per violation and damages that equal the amount of wages not paid. But the FLSA doesn’t apply to small businesses — companies with less than $500,000 in annual revenue — the sector that does most of the hiring in the U.S. However, if small businesses engages in interstate commerce, which can be as innocuous as accepting credit cards or placing phone calls to another state, they forfeit the exemption from the FLSA.