Beware of Unpaid Internships: Internships May Give Rise to an Employer-Employee Relationship

 July 1, 2013

 

Internships can provide a valuable experience for students to gain experience and can be a tremendous help to employers.  However, employers must take heed of the recent string of lawsuits brought by former unpaid interns.  In a post Glatt v. Fox Searchlight Pictures [i] world, unpaid intern positions may give rise to an employer-employer relationship, thus implicating federal and state employment and labor laws. 

 

Glatt v. Fox Searchlight Pictures

 

 The plaintiffs, former unpaid interns, brought suit alleging violations of the Fair Labor Standards Act (“FLSA”) and state labor laws for their work in the production of the movie, Black Swan.  The plaintiffs argued that they were essentially performing the work of entry-level employees for free and in violation of the FLSA minimum wage requirements.  The court granted summary judgment for the employees, finding that an employer-employee relationship existed. 

 In addressing the question as to whether the plaintiffs were employees of the Defendant, the court looked to the Department of Labor Fact Sheet #71.  Unpaid interns are not “employees” under the FLSA if all of the following six criteria are met.  The six criteria are as follows:

    1. The internship is similar to training that 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 advantages 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;

    6. The employer and the intern understand that he intern is not entitled to wages for the time spent in the internship.

In considering the aforementioned factors, the court looked to the totality of the circumstances to conclude that the plaintiffs were improperly classified as unpaid interns when they were in fact “employees” under the FLSA definition.  In applying the six DOL factors, the court noted that the plaintiffs “worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training.”  Moreover, any benefits received in the form of “knowledge of how a production or accounting office functions or references for future jobs—are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer.”  In reaching this outcome the court emphasizes that unpaid internships with for-profit employers must be designed for the benefit of the interns.  Thus employers trying to assert that a job reference or line on an intern’s resume are adequate compensation to interns are likely to fail as these are benefits incidental to any working experience by any employee.

 

Tips for Employers

 

 For-profit employers are advised to reevaluate their unpaid internship programs and consider paying interns at least minimum wage.  Otherwise, the internship programs could be deemed to run afoul of the FLSA, which provides for, among other things, attorneys’ fees to a prevailing party.   If an employer is still set on maintaining an unpaid internship program, then the employer must be sure to meet all of the criteria of the FLSA intern exemption.  It is important to note that the FLSA’s definition of “employ” is interpreted broadly and thus the intern or “trainee” exemption is quite narrow.  

 With both paid and unpaid internships, it is helpful to establish an internship handbook detailing internship policies as well as having interns sign written agreements noting their acceptance and understating of the internship.  However, having interns sign an agreement accepting an unpaid position does not cleanse the employer of any FLSA violations.  The court in Glatt noted, “the FLSA does not allow employees to waive their entitlement to wages.  Rather this practice would support the policy of treating interns like employees.

 States may impose additional labor requirements so it is important to consult local employment laws or an attorney versed in the laws of the jurisdiction.  Please feel free to contact our office at 484-875-3111 for guidance on structuring internship programs.

 

 Brendan D. Hennessy is an experienced employment law attorney.  His practice represents and counsels employers and employees in employment law matters.  He can be reached at (484) 875-3111 or bhennessy@hennessylawfirm.com.

 




[i] Glatt v. Fox Searchlight Pictures Inc., 2013 U.S. Dist. Lexis 82070, 1 (S.D. N.Y. 2013).

Written by

Brendan D. Hennessy, Esquire is an experienced attorney and provides an assortment of legal services, focusing in the area of Employment Law.
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