Dangers of hiring unpaid interns

by Heather L. Devine

Recent cases call attention to the risk of using unpaid interns. Employers that aren’t cautious may be found in violation of the Fair Labor Standards Act (FLSA).

Recent decisions
In a case many of you may have heard about, a U.S. district court judge concluded on June 11, 2013, that Fox Searchlight Pictures violated minimum wage and overtime laws when it failed to pay production interns who worked on the Oscar-winning movie Black Swan. The interns performed basic work such as answering phones, taking out the trash, and picking up lunch orders. According to the judge, “Searchlight received the benefits of their unpaid work, which otherwise would have required paid employees.”

That decision appears to have opened the door for more lawsuits. On June 13, former interns at W magazine and The New Yorker sued Conde Nast, claiming the publisher paid them less than $1 an hour. On June 17, a former Atlantic Records intern filed a lawsuit against Warner Music Group demanding unpaid wages for office work performed from 2007 to 2008.

Six-factor test
In 2010, the U.S. Department of Labor (DOL) issued “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act.” The fact sheet lists the following six-factor test for determining whether an internship in the private for-profit sector can be unpaid. Under the test, an employer can escape the requirement of paying wages if all of the following criteria are met:

1. The internship, even though it includes actual operation of the company’s facilities, 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 advantage 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 the intern is not entitled to wages for the time spent in the internship.

This test, along with the recent successful claim by the Black Swan interns, may signal the end of unpaid internships in the for-profit sector. Internships have frequently been used by interns as a way to get a foot in the door, even if the work itself wasn’t very educational. That’s particularly true in certain industries involving sports, news, and entertainment, seen as “glamour industries.” Now, however, it’s the rare internship that will meet the DOL’s test because most for-profit employers aren’t able to spend time training and supervising an intern without getting a benefit in return.

Bottom line
In most cases, for-profit employers should be paying interns the minimum wage. If you don’t, you run the risk that a disgruntled intern will file suit under the FLSA. Another option is to try to prevent interns from becoming disgruntled in the first place by providing them with quality experiences and assigning them better work, rather than asking them to perform menial tasks that others are paid for, and providing the type of training outlined in the DOL fact sheet.

Heather L. Devine is an associate who works on a broad range of litigation and transactional matters for Sulloway & Hollis, PLLC, in Concord, New Hampshire. She may be contacted at hdevine@sulloway.com.