Beware of “Unpaid” Interns

Unpaid interns are a common fixture in many businesses, but a recent ruling out of the United States District Court for the Southern District of New York is giving many employers pause about their use of such interns.  In Glatt v. Fox Searchlight Pictures, Inc., several unpaid interns filed a lawsuit on behalf of themselves and other unpaid interns for their work on the Fox Searchlight Films “Black Swan” and “500 Days of Summer,” claiming that they were entitled to payment for their work under the Fair Labor Standards Act (“FLSA”); which requires that employees be paid at least the national minimum wage and be paid time-and-a-half for hours worked over forty in a week. 

Unpaid interns on the films performed duties such as obtaining personnel files, picking  up checks for co-workers, tracking and reconciling purchase orders and invoices, and traveling to get the signatures of managers on documents; as well as administrative tasks such as drafting cover letters, organizing filing cabinets, making photocopies, and running general errands.  They received no formal training or education during the internship.

The unpaid interns’ employers argued that these and other unpaid interns did not qualify as “employees” under the FLSA, but were rather “trainees” who are exempt from the FLSA’s requirements.  The employers claimed that unpaid interns qualified for the exemption because interns gained knowledge and on-the-job experience of how production and accounting offices operated and obtained valuable references for future jobs.

In a key ruling issued June 11, 2013, a federal judge denied Fox’s motion to dismiss the case and determined that many individuals Fox had deemed “unpaid interns” were in fact employees entitled to minimum wage pay under the FLSA for the time they worked on these films.

Looking to a past decision of the United States Supreme Court and the Department of Labor’s “fact sheet” on determining whether a worker is a true “intern,” the court listed the following factors:

  1. The internship is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern (rather than the employer);
  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 automatically entitled to a job at the conclusion of the internship; and,
  6. The employer and intern understand that the intern is not entitled to wages for the time spent in the internship.

Another factor emphasized was that if the unpaid interns did work which otherwise would have required a paid employee, there was a strong suggestion that the intern was performing compensable work for which he or she should have been paid.

The New York Court noted that the FLSA did not prevent employers from providing, free of charge, the same type of “instruction as a vocational school at a place and in a manner which would most greatly benefit the trainee.”  However, it stated that “[w]hile classroom training is not a prerequisite; internships must provide something beyond on-the-job training that employees receive.”

McMahon Berger routinely advises clients on the requirements of the FLSA and similar state wage and hours laws across the country. Our attorneys assist clients in determining whether employees are exempt from its requirements and ensure compliance with the wage and hour laws where their clients do business.

Contact McMahon Berger Today Regarding FLSA Cases

Call (314) 567-7350 to Schedule a Legal Consultation

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