February 06, 2012
Unpaid Student Internships, Price Controls and Rationing
Posted by Christine Hurt

The NYT is having a discussion forum today on unpaid student internships.  For those of you who have not had this topic on your radar, here's a brief catchup:  Internships have become increasingly prevalent for college students, business school students and law students.  For law schools, internships and externships provide students with the practical experience that they need, supervised by folks who do this full-time.  However, the Labor Department has issued guidance on these internships that some people pay attention to and others don't.  I'll detail the guidance criteria below.  The debate is whether these criteria (and their enforcement) are beneficial in that they protect students from exploitation or whether they hinder students from obtaining useful work experience and career contacts.

According to a January 2010 memo from the U.S. Department of Labor, an intern may be considered an "employee" for purposes of the Fair Labor Standards Act unless the worker is a bona fide "trainee."  If the intern is an employee, then minimm wage and overtime provisions apply.  The memo then lists six factors to consider, including these two:  "training is for the the benefit of the trainees" and "the employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer's operations may actually be impeded."

So, in the context of a law school internship, to meet the criteria, the school would not be able to recruit employers by emphasizing the benefit the employer would get from our smart, go-getter students and the employer would not be able to profit from the student's labor (i.e., bill out the work).  According to the memo, "if the workers are engaged in the primary operations of the employer and are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits is unlikely to make them trainees given the benefits receied by the employer."  In other words, if it's a good deal for the employer, then it probably will not qualify as an unpaid internship.  Because of this, many law school internships are with nonprofits, who don't have to worry about this.  But, there are only so many nonprofits and some students would like (ahem) transactional experience in a corporation or a law firm.

The discussion is mostly about undergraduates, but Above the Law's David Lat weighs in from the legal training side.  His take is basically the same as mine.  These internships are valuable.  Everyone is making a rational choice.  They probably do not shut out those seeking paid work, but even if they do, so does the minimum wage that would otherwise apply.  If companies were not allowed to offer unpaid internships, then they would offer a much smaller number of paid internships (maybe zero). 

Some critics complain that the explosion of unpaid internships hurts those who are not in a financial position to take them.  This may be true.  Students from poorer backgrounds may not be able to pad their resumes with activities and volunteering, may have to work during college instead of studying 24/7, and may find unpaid internships pose a financial hardship on them.  No laws can change the myriad ways in which those with financial and social capital have advantages.  But, I think we should also ask "compared to what?"  I don't think there is a parallel world of thousands of paid internships that would instantly bloom if unpaid internships were outlawed.  I think the choices would then be between a small number of paid internships in a student's desired field compared to finding wage-earning employment in retail, food, etc.  For law students, paid internships and clerkships are at historical lows.  Liberalizing unpaid internships is more likely to get more law students more experience than convert all of those choice gigs into unpaid slave labor.

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