The Law and Unpaid Interns – Richard K. Mahrle, Esq.

As we all know, no good deed goes unpunished. Offering a young person the opportunity to gain valuable experience and build their resumé through an unpaid internship seems like a win-win, but may end up with the employer getting sued under the Fair Labor Standards Act.

The U.S. Department of Labor lists six criteria that must be met for unpaid internships:
⦁ The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
⦁ The internship experience is for the benefit of the intern;
⦁ The intern does not displace regular employees, but works under close supervision of existing staff;
⦁ The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
⦁ The intern is not necessarily entitled to a job at the conclusion of the internship; and
⦁ The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

These factors were recently applied in Glatt v. Fox Searchlight Pictures in the District Court for the Southern District of New York. The unpaid interns had worked on films such as Black Swan and 500 Days of Summer. One had worked in the corporate office.

The Court held that the interns were employees who were entitled to be paid for their work. They said the interns did not receive training similar to an educational environment. (Factor 1) Although the interns obtained resumé listings and job references, the internships were not "intentionally structured to benefit them." The Court also said the interns were displacing regular employees and Searchlight was obtaining immediate advantage from the unpaid work. There was no evidence whether the interns were entitled to jobs at the end of the internships. Finally, even though the interns understood that they would not be paid, the Fair Labor Standards Act "does not allow employees to waive their entitlement to wages."

While the U.S. District Court in New York applied the Department of Labor checklist, it noted that some federal circuits apply a more subjective test called the "primary beneficiary" test for unpaid internships. The "primary beneficiary" test depends on whether the benefits to the intern outweigh the benefits to the business. In other words, no clear guidance is universally available as to whether an unpaid internship program is exempt from the Fair Labor Standards Act compensation requirements.

To make matters worse, the Court in New York also certified the case as a class action, which will result in Fox Searchlight paying out a sizeable sum for its previously unpaid interns.
So, before you implement an unpaid internship program, get some solid legal advice so that you don’t end up with paid employees.