As long as an internship doesn’t consist of coffee-runs, internships usually provide valuable opportunities for developing skills, experience, and networking for young professionals. Still, there is a debate about whether this value can replace a paycheck — the latest story in this discussion being a Manhattan federal court ruling this week that a business which relies heavily on unpaid interns is obligated to pay them.
The Department of Labor has outlined in the Fair Labor Standards Act a series of conditions under which an unpaid internship is sanctioned. All six criteria should be met before an employer should consider creating an unpaid internship program: (1) the internship should be similar to training that would be provided in school; (2) the experience should be for the student’s benefit; (3) the intern should not be a replacement for a regular employee, but instead, should be under the supervision of a regular employee; (4) the employer provides for any training and does not derive an immediate advantage from the intern’s activities; (5) the intern is not entitled to a job at the end of the internship; and (6) both the employer and the intern have an agreement that the intern will not receive payment for work performed.
In Glatt et al. v. Fox Searchlight Pictures Inc., two interns claimed Fox Entertainment violated their right to wages when they worked as production assistants, bookkeepers, and secretaries, among other roles, for the film “Black Swan” in 2009 and 2010. The interns sued for a minimum wage recovery of the hours worked, including applicable overtime payment, as well as for a reimbursement for personal cell phone and laptop computer expenses used for the job.
The court granted summary judgment to the interns, finding that five of the six factors were not met in the Fox Searchlight Pictures internship program. The one factor that was met was that the interns were not expecting to get paid, but Judge Pauley III explained that this factor has little significance because workers cannot waive their right to payment under the FLSA. One of the Fox interns explained the case in terms of bargaining power, saying that “[i]t shouldn’t be up to the least powerful person in the arrangement to have to bring a lawsuit to stop this.”
The court also allowed another class of interns from the Fox Entertainment Group to bring related claims under state law and conditionally certified a national class of interns from the company. Because unpaid interns are commonly used in the film industry, the ruling is a warning sign for those companies as well as the business community at large.
The Department of Labor has created a fact sheet with resources on this topic, which can be found here: http://www.dol.gov/whd/regs/compliance/whdfs71.htm. The case is number 1:11-cv-06784 in the U.S. District Court for the Southern District of New York. For assistance with creating an internship program in compliance with the FLSA, employers should consult with legal counsel.