UNPAID INTERNSHIPS-THE FEDERAL LABOR CODE REQUIREMENTS
Introduction:
With workplace experience a vital factor in obtaining employment, more and more high school, college and even graduate students are seeking summer or yearlong internships with various companies, knowing that the resume’ will be greatly improved with the internship among that qualifications.
Recognizing this trend, there has been a significant increase in internships offered by companies from the largest to relatively small ones and the average company will receive numerous applications for internships, often from students abroad.
While training can be an expensive added expense for the company, quite often a day or two of training can result in an intern capable of providing valuable support, especially in administrative functions, and quite often the intern is offered no compensation whatsoever, the company management claiming that the experience alone justifies the free work.
Other companies claim that the internships are simply a new form of “slave labor” in which the student, desperate for experience, will work for free to gain the resume’. This is not new and recurs in bad times when unemployment is high. Indeed, this writer’s father worked for free for the first year of his law practice during the end of the Depression and was glad to get the “work.” When a fellow graduate working at the same firm asked for some compensation since he was getting married, he was fired. That was in 1937. Today, some firms are tempted to offer the same “work experience” for those desperate to build their resumes’.
The Federal government, as well as most states, have created criteria for when a true internship may exist as opposed to a company merely exploiting the aspirations of a desperate applicant. This article lists the Federal requirements. The reader should also be sure to review the requirements of the State in which the work is offered. Some states go far beyond the Federal government in imposing requirements upon employers.
The Basic Law:
Unpaid internships offered by for-profit companies are subject to the U.S. Department of Labor’s Fair Labor Standards Act (FLSA), which establishes minimum wage and overtime standards. The company may be exempt from FSLA regulations only if the internship program offers educational experience for the benefit of an intern under a “trainee” exemption.
Note that unpaid internships offered by non-profits and government agencies are also exempt.
The FLSA’s six-point test first promulgated in 1938 (during the last Great Depression, note) is still used today for hiring unpaid interns.
To be compliant with FLSA, an unpaid internship must conform to the following requirements:
- The internship must be for the benefit of the intern
- The internship must provide similar training that would be given in an educational environment
- The employer should not derive any immediate advantage from the intern
- The intern must not displace regular employees, and should work under close supervision of existing staff
- The intern is not entitled to a job at the end of the internship
- The intern understands that he/she is not entitled to monetary compensation
For employers considering offering internships, compliance with FLSA is required by law. The following issues must be confronted:
1. Paid or Unpaid? Internship programs are changing as a result of recent lawsuits by unpaid interns. Although these cases usually concern compensation, to reduce the risk for litigation, companies should carefully and fully consider how to treat interns considering anti-discrimination and anti-retaliation policies, handling grievances and other protections offered to the other employees. The intern is almost certainly entitled to all the protections applicable to employees in terms of protection from discrimination, sexual or other harassment, whistle blowing, etc.
2. Work Hours? Different states have different definitions of adequate compensation or hours worked. Employers must be aware of state wage and hour laws. This includes such issues as over time, safe working conditions at night, meal breaks, rest breaks.
3. Program Information? Interns, like any other employee, should be provided with a detailed description of the internship, training experience and a statement that indicates that an internship program is compliant with labor laws. It should be assumed that sooner or later hostile plaintiff’s counsel will be examining the materials, so legal review should be obtained.
4. Role of Training. To simply drop interns into filing duties or ordering lunches for executives will not fulfill the role of training duties that may expand work skills and the wise company will institute an actual training schedule and assign personnel to educate to avoid later claims that the internship was actually a method to obtain free low-end help.
Risks of False Internships:
Some interns have retaliated against their employers claiming their rights are violated. Their efforts have met with mixed results.
For example, former intern Wang for fashion magazine Harper’s Bazaar filed a class action lawsuit against the publishing company Hearst Corporation, seeking damages for five months of unpaid labor for her work in the magazine’s accessories department.
Wang claimed that her work of 40 to 55 hours a week as a “head intern,” supervising eight other unpaid workers, violated her rights under FLSA, as the group served as merely a messenger service for the magazine, carrying bags of clothes and accessories to and from PR firms. According to Wang, the work did not constitute an internship because of its lack of educational value.
Hearst, on the other hand, maintained that the internship was legal. The publisher issued a statement claiming that their internships are designed to enhance the educational experience for students who receive academic credit for their participation.
Wang had already graduated from Ohio State when she began the internship, and received course credit by contacting the university, and ultimately paying approximately $700 for two credit hours to be added to her transcript.
On May 8, 2013, however, the court denied the class certification, siding with Hearst. Judge Harold Baer, Jr., of the U.S. District Court for the Southern District of New York, determined that four of the six factors of the FLSA were inconclusive, making the summary resolution of the case inappropriate. He also stressed the importance of the primary recipient of benefits from the relationship between employer and intern. This ruling seems to provide employers with considerable freedom in the design of unpaid internships.
A contrary result was found in a case against Fox Searchlight.
Interns Glatt and Footman, who worked on a film, won their court battle against the film’s production company, Fox Entertainment Group.
The interns first launched their civil action case on behalf of themselves and more than one hundred other Fox Searchlight interns in September 2011. Federal District Court Judge William H. Pauley III ruled that the production company should have paid their employees because the intern’s status was equivalent to that of a regular employee.
According to the ruling, the internships did not foster an educational environment and the studio, not the interns, received the primary benefits of the work. Mr. Glatt and Mr. Footman cited that their work on the film included chores such as taking lunch orders, answering phones, arranging travel plans, taking out the trash and assembling furniture. These tasks are usually undertaken by paid employees.
“Undoubtedly Mr. Glatt and Mr. Footman received some benefits from their internships, such as résumé listings, job references and an understanding of how a production office works,” Judge Pauley wrote. “But those benefits were incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them. Searchlight received the benefits of their unpaid work, which otherwise would have required paid employees.”
Another lawsuit due to “un-educational” free labor was filed by Salaam against Sean “Diddy” Combs’ record label Bad Boy Entertainment.
Salaam claimed that her tasks were menial, consisting of answering phones, picking up lunch or bringing coffee to paid employees, making deliveries, giftwrapping and decorating the office for holidays.
This case comes after the Fox Searchlight lawsuit, which was largely considered to be a watershed moment for cases involving internships and violations of the FLSA. Free labor that cannot be constituted as “educational” violates the stipulations of the FLSA and since the Fox lawsuit, academic credit alone is no longer an acceptable policy for justifying unpaid internships.
Since the lawsuit against Diddy’s Bad Boy Entertainment, several other record labels, including Warner Music, Columbia and Atlantic Records have been subject to similar class-action lawsuits. All these cases are ongoing as of the date of this article.
Conclusion:
Class action labor claims are becoming increasingly common and the cost of defense is so major that defendant settlement offers are both common and an incentive for yet more such actions to be filed. It is not surprising that they have now begun concentrating on internships as another means to make allegations of violations of fair labor standards and there can be little question that some entities do exploit rather than train interns.
That said, the creation of a training program and assignment of appropriate personnel, plus at least a stipend should eliminate any real danger of complaint and most companies enjoy the enthusiasm and innovation that interns can bring to internal organizations. As one client told the author, teaching a new mind is the best way he knows to learn more himself.