Are unpaid internships being used as free labor?

With job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor.

Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers. New York's then-labor commissioner, M. Patricia Smith, ordered investigations into several firms' internships last year. Now, as the U.S. Labor Department's top law-enforcement official, she and the wage and hour division are stepping up enforcement nationwide.

Many regulators say that violations are widespread, but that it is unusually hard to mount a major enforcement effort because interns are often scared to file complaints. Many fear they will endanger their chances with a potential future employer.

Federal labor officials say they are not only cracking down on companies that fail to pay interns properly but expanding efforts to educate companies, colleges and students on the law regarding internships.

"If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law," said Nancy J. Leppink, the acting director of the federal labor department's Wage and Hour Division.

Leppink said many employers fail to pay even though their internships do not comply with the six federal legal criteria that must be satisfied for internships to be unpaid. Among those criteria are that the internship should be similar to the training given in a vocational school or academic institution, the intern does not displace regular paid workers, and the employer "derives no immediate advantage" from the intern's activities — in other words, it's largely a benevolent contribution to the intern.

In 2008, the National Association of Colleges and Employers found that 83 percent of graduating students had held internships, up from 9 percent in 1992. This means hundreds of thousands of students hold internships each year; some experts estimate that one-fourth to one-half are unpaid.