Unpaid interns may seem like a great way to get some additional help without breaking the budget. Recent lawsuits, however, reveal the danger in having unpaid interns perform work that otherwise would be done by paid employees. If interns do not fall within the “trainee” exception to the Fair Labor Standards Act (FLSA) and analogous state laws, you could be liable for unpaid wages and overtime, liquidated damages and civil penalties. Willful violations can be prosecuted criminally, with possible imprisonment for repeated willful offenses. Take note of lessons to be learned from these high profile cases so that you don’t find yourself in court and in the news.
Judge Rules Movie Interns Are Employees under the FLSA
Unpaid interns who worked for Fox Searchlight Pictures, Inc., a movie production company, sued the company alleging that they were “employees” under the FLSA and the New York Labor Law (NYLL) and were entitled to be paid minimum wage and overtime for all hours worked. They asserted that they worked approximately 95 days for the company, and sometimes worked up to 50 hours per week. The interns stated that they performed “routine tasks” including various administrative duties that otherwise would have been performed by paid employees. The company argued that the interns were not “employees” as defined by the FLSA and the NYLL.
A federal district judge in New York ruled in favor of the interns. Judge Pauley found that the interns did not fall under the “trainee” exception to the FLSA as established by a 1947 U.S. Supreme Court case and reinforced by the U.S. Department of Labor, Wage and Hour Division (WHD), which enforces the FLSA. The judge granted the intern’s motion to certify a class action under the NYLL on behalf of all unpaid interns who worked for four Fox Entertainment divisions between September 2005 and September 2010 and conditionally certified a related FLSA collective action.
Interns File Lawsuit against Magazine Publisher for Minimum Wage Violations
Additional intern wage cases in the news include a new class action lawsuit filed this week by two former interns of W Magazine and The New Yorker, both published by Conde´ Nast, alleging that the publisher failed to pay them minimum wage for their summer jobs. Although one intern received $300-$500 for the summer and another received $12 per day, both allege that such sums amounted to less than $1 per hour for their hours worked. The lawsuit seeks class certification to recover unpaid wages, interest and attorneys’ fees and costs on behalf of all interns who worked for certain departments at the magazines from June 2007 until the date of final judgment in the lawsuit.
Unpaid Interns Must Fall Within Narrow FLSA Trainee Exception
So must all interns be paid? Generally, yes, unless they fall under the narrow exception for “trainees.” The WHD publishes a Fact Sheet that describes the test for unpaid interns under the FLSA, which was relied on in the Fox Searchlight case. The Fact Sheet specifies that the facts and circumstances of an internship or training program must be evaluated to determine whether the program meets the “trainee” exclusion from minimum and overtime protections under the FLSA, applying the following six criteria:
1. 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;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. 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;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Bottom Line: Pay Interns Who Do Not Meet FLSA “Trainee” Criteria
Only if all of the above criteria are met will the FLSA exclusion apply, meaning that an internship may be unpaid. The more that the internship is structured around an academic experience where the intern learns skills that can be used in multiple employment settings, the more likely it can be an unpaid internship. If, however, the intern is performing productive work for your benefit, such as writing letters, filing, answering calls, assisting customers, etc., the fact that he or she learns new skills or improves work habits will not be sufficient to exclude the intern from the FLSA’s wage and hour protections. Moreover, if you are using interns to avoid hiring additional employees or requiring existing workers to put in more hours, your interns will likely be viewed as employees and are entitled to compensation.
Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.