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After the [Unpaid Interns] of Summer Are Gone

Now that summer is here, many companies have brought in the annual crop of summer interns.  It is likely that at least some of these interns are unpaid, working for the privilege of gaining experience or a foot in the door that might lead to a paying position. 

A Federal District Court in Manhattan ruled this week that Fox Searchlight Pictures violated federal and New York minimum wage laws by not paying production interns.  In the decision (Glatt v. Fox Searchlight Pictures), the Court held that two interns on the movie “Black Swan” were essentially regular employees and should have been paid as such; the Court also certified a class action. 

Like many interns, the interns in the so-called “Black Swan case” performed basic administrative work such as organizing filing cabinets, tracking purchase orders, making copies, drafting cover letters and running errands.  The decision is notable because it endorses the U.S. Department of Labor’s guidance on the issue of unpaid interns.  The DOL uses a six-part test to determine whether an intern must be classified as an employee and paid at least minimum wage and overtime:

(1) the internship is similar to training given in an educational environment;
(2) the internship experience is for the benefit of the intern;
(3) the intern does not displace regular employees;
(4) the employer derives no immediate advantage from the intern’s activities;
(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.

If the internship does not meet each of these criteria, the intern must be paid as any other employee.  Employers who fail to do so may be liable for payment of all unpaid wages, liquidated damages, attorney’s fees and DOL fines.  Some media reports have declared this decision “the beginning of the end of unpaid internships.”

However, it is worth noting that the Sixth Circuit Court of Appeals has rejected the DOL test as “a poor method for determining employee status in a training or educational setting,” calling it “overly rigid.”  Moreover, last month a federal court rejected efforts by a former Harper’s Bazaar intern to bring a class action against Hearst Magazines based on claims that she regularly worked 40 to 55 hours a week without being paid. 

What does this mean for employers?  At best the law is unsettled and employers who provide unpaid internships need to exercise caution and candidly evaluate their programs to gauge the risk involved.  The issue is not one that will go away.  In fact, one plaintiff’s firm that specializes in these cases has a dedicated website to attract clients with the less than subtle name – unpaidinternlawsuit.com.  

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