Two former interns recently sued the producer of the Oscar-winning film “Black Swan” for minimum wage and overtime law violations, hitting headlines nationwide. The case is a good illustration of some of the inherent dangers of taking on interns.
Although internship programs offer employers obvious benefits, especially in tight budgetary times, it’s critical that you strictly adhere to federal and state requirements.
The ‘Black Swan’ Case
The interns claim that Los Angeles-based Fox Searchlight Pictures did not provide them with the kind of educational experience that would exempt their work on the film from wage and hour laws. Instead, they assert, the company had the interns perform the types of menial work that paid employees should have done.
Their complaint alleges that by misclassifying the interns, Fox Searchlight denied them “benefits that the law affords to employees”—including unemployment and workers’ compensation insurance, protections from discrimination and sexual harassment, and “a fair day’s wage.”
The interns seek class action status for more than 100 unpaid interns who worked on various Fox Searchlight projects.
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The Federal Exemption for Internships
Employers that provide interns with training for the interns’ educational benefit may be exempt from minimum wage and overtime requirements in the federal Fair Labor Standards Act (FLSA).
The “Black Swan” interns are bringing their claims under the FLSA (in a federal district court in New York, where the interns worked in the film’s production office).
According to a U.S. Department of Labor (DOL) fact sheet, an internship program must satisfy the following requirements to qualify for the exemption:
- The internship, even though it includes actual operation of the employer’s facilities, is similar to training that would be given in an educational environment.
- The internship experience is predominantly for the intern’s benefit.
- The intern does not displace regular employees but works under the existing staff’s close supervision.
- The employer that provides the training derives no immediate advantage from the intern’s activities, and its operations may actually be impeded on occasion.
- The intern isn’t necessarily entitled to a job when the internship ends.
- The employer and the intern understand that the intern is not entitled to wages for time spent in the internship.
The DOL fact sheet provides guidance on some of the most commonly discussed criteria:
1. Similar to an educational environment. Generally, the more an internship program is structured around a classroom or similar academic experience—rather than the employer’s operations—the more likely it will be considered an extension of the intern’s educational experience. Ideally, a college or university will oversee the program and provide educational credit.
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The “Black Swan” interns allege in their lawsuit that they didn’t receive training similar to what they would receive in a vocational school or academic educational instruction.
2. For the predominant benefit of the intern. Interns benefit more directly from acquiring skills that can be used in multiple employment settings than skills that are tailored to the employer’s operations.
And interns who engage in the employer’s operations or who perform productive work (for example, clerical work or assisting customers) won’t be excluded from the FLSA’s requirements if they receive some benefits in the form of a new skill or improved work habits. The business should not depend on the intern’s work.
The interns in the Fox Searchlight case claim that they functioned as production assistants and bookkeepers and performed secretarial and janitorial work that benefited Fox Searchlight.v
3. Displacement of regular workers and supervision. Interns should be paid at least minimum wage and overtime if the employer uses them as substitutes for regular workers or to augment the existing workforce for specific time periods (for example, during the busy season when the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work).
If, however, the employer gives the interns job shadowing opportunities that let them learn certain functions under the close and constant supervision of regular employees—and the interns perform no or minimal work—the activity is more likely to be considered an educational experience.
When interns receive the same level of supervision as the employer’s regular workforce, it’s more likely to be employment than training.
4. Job entitlement. Internships should run for fixed durations that are established before they begin. Employers must not use an internship as a trial period for individuals seeking employment after the internship period. An intern placed with the employer for a trial period, with the expectation of eventually being hired on a permanent basis, would be considered an employee receiving compensable training.
Tomorrow, a look at the California wage/hour rules relating to interns.
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One of the practical problems is the interns’ expectations vs. the DOL’s expectations. Many interns WANT real hands-on experience and/or to learn new skills–to them, that’s the point, and they’re willing to forgo monetary compensation. But that type of opportunity seems to violate items 1 and 2 above.
One of the practical problems is the interns’ expectations vs. the DOL’s expectations. Many interns WANT real hands-on experience and/or to learn new skills–to them, that’s the point, and they’re willing to forgo monetary compensation. But that type of opportunity seems to violate items 1 and 2 above.