For many nonprofits, the savings that comes from not paying wages, benefits and taxes provide a great incentive to classify workers as interns or volunteers. But for the nonprofits that inappropriately classify workers as interns or volunteers, those misclassifications can lead to serious – oftentimes financially crippling – penalties. Among other things, penalties typically include back wages, interest on those wages, liquidated damages (meant to punish employers for non-compliance), attorneys’ fees, and unpaid taxes and unemployment insurance contributions, not to mention criminal charges for nonprofit executives and those making personnel decisions. With federal and state agencies paying close attention to these issues, now more than ever is the time for nonprofits to ensure that they have properly classified their workers as interns or volunteers.

Workers as “Interns”

Many nonprofit organizations offer unpaid internships to students seeking entry into the workforce or the nonprofit sector. Under federal wage and hour law, there is no blanket provision exempting all interns or nonprofits from the law’s grasp, yet unpaid interns abound. This begs the question: Should unpaid interns really be paid? The answer in some instances is, yes.

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