Unpaid jobs: The new normal?

With nearly 14 million unemployed workers in America, many have gotten so desperate that they're willing to work for free, and companies that have used free workers say it can pay off when done right. "People who work for free are far hungrier than anybody who has a salary, so they're going to outperform, they're going to try to please, they're going to be creative," says Kelly Fallis, chief executive of Remote Stylist, a Toronto and New York-based startup that provides Web-based interior design services. In the last three years, Fallis has used about 50 unpaid interns for duties in marketing, editorial, advertising, sales, account management and public relations. Why do people work for free? The benefit unpaid labor offers to a business is pretty clear, but it can also give employees needed experience, a reference letter or even a self-esteem boost in a depressing economy. Sometimes, gratis work can lead directly to a paid opportunity. There are strict federal and state rules that workers must be paid the minimum wage and paid for overtime, and must abide by other provisions in the Fair Labor Standards Act, which applies to about 135 million people working for 7.3 million employers. Unless someone is an intern, trainee or independent contractor, he or she has entered into an employment relationship when starting to work for a company.The Labor Department has a strict six-point test to determine whether someone is an intern or trainee and separate guidelines for independent contractors. "If a person has entered into an employment relationship with a company, they need to be paid for their work," a U.S. Labor Department spokesperson says. Companies that are found violating the law will likely have to provide back pay, monetary penalties up to $1,100 per violation and damages that equal the amount of wages.