Internships in California must comply with federal and state labor laws. The U.S. Department of Labor has defined the criteria for unpaid internships to meet legal requirements. The California Division of Labor Standards Enforcement reiterated federal policy in its 2010 opinion letter concerning how employers can use unpaid interns. This letter explained how unpaid interns can be exempt from the Fair Labor Standard Act, which established minimum wage.
California law requires that college credit be given to college interns in exchange for unpaid work. According to legal expert Catherine Ruckelshaus of the National Employment Law Project, "it's almost always going to be proper that it's an unpaid internship" if college credit is awarded to students. Many businesses, however, have violated federal and state laws in an effort to cut costs by gaining free labor. Following a crackdown by the Labor Department, employers have tightened requirements for internship programs to comply with labor and minimum wage laws. College credit, however, does not always satisfy internship requirements.
Unpaid training offered as an internship program must meet standards set forth by the Department of Labor. The training must reflect what is taught in a vocational school and must be for the trainee or student's benefit. The intern must also work under close observation of employees without displacing them. The intern's work cannot create immediate advantage for the employer, such as work that leads to a financial gain. Students and trainees must also be aware that no job is guaranteed following the training period and that they are not entitled to wages during the training period.
Internships permitted by law in California are closer to "dummy jobs" than meaningful positions that affect a business. If the internship is exceptionally meaningful to the company's revenue, but it's still an unpaid position, the company may be in violation of labor laws. The entertainment industry gives interns hands-on experience by having them read already-rejected scripts that do not affect any current business decisions. Martial arts schools use interns as part of a student's advancement that includes teaching others.
Employers improperly using unpaid interns may face steep penalties for not complying with state and federal labor laws. If an employer fails to pay the minimum wage to a misclassified intern, the employer could be liable for overtime and various other penalties, including failing to pay on time. Tax liabilities owed to government agencies may also be added to the list of penalties. The Private Attorney General Act allows any employee in California to sue his employer for violating labor laws, regardless if he was affected by the violation.