Rethinking how unpaid interns are used

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The time of year (i.e., graduation and summer vacation) and the economy (i.e., tepid job market and struggling recovery) have created what would appear to be a win-win situation.

Students, grads and others who have not found regular employment are “volunteering” to work as interns for a variety of companies and nonprofit organizations.

To be sure, internships can be a great way for the unemployed to fill what would otherwise be gaps in their resume, as well as for students and others to gain meaningful hands-on training and experience that will give them the tools they need to secure future employment in this still-tough job market. Internships also can provide employers with an opportunity to get to know and assess the talents of future job prospects.

However, recent changes in government enforcement of existing laws, and an uptick in the pursuit of claims by interns for alleged nonpayment of wages, should prompt conscientious business owners and managers to rethink whether and to what extent they can offer or continue their unpaid internship programs.

ENFORCEMENT

Over the last few years, the United States Department of Labor repeatedly expressed its intent to more strictly enforce federal laws and regulations utilizing six criteria which must be satisfied before an internship can be unpaid.

Individuals who work as “interns” in programs that do not comply with these criteria can be deemed “employees” entitled to wages.

Over the same time period, a wave of lawsuits has been filed by former interns against employers claiming that they were unlawfully deprived of wages during their internships, including several high-profile actions.

For example, in separate lawsuits, two unpaid interns who worked on the movie “Black Swan” sued Fox Searchlight for wages and several former interns at Hearst Corp. sued the media company using unpaid interns at its magazines (including Harper’s Bazaar and Cosmopolitan).

And a former intern sued television host Charlie Rose on behalf of herself and 188 other interns who say they worked on his PBS program without pay.

SIX CRITERIA

For employers, the scariest parts of these lawsuits are that they are often filed as class actions, and an employer’s failure or ability to prove that all six criteria are met can lead to liability for substantial unpaid wages, liquidated damages and attorneys’ fees and costs.

Therefore, to avoid potential liability, an employer must either pay each intern at least the minimum wage, plus overtime where applicable, or satisfy each of the following six criteria:

(1) The internship, even though it includes actual operation of the facilities of the employer, is similar to training which 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.

Practically speaking, many employers find it most difficult to comply with the fourth criteria. Indeed, often employers view interns as a free or inexpensive way of getting necessary work done.

However, by doing so, those employers risk lawsuits and liability for unpaid wages, attorneys’ fees and more.

For these reasons, before hiring or engaging high school, college or graduate school students or others as unpaid interns this summer, employers should carefully review the nature of their current unpaid internship programs and make modifications to either satisfy the six required criteria or convert them to paid internships.

In addition, employers should consider implementing a written policy regarding unpaid internships that complies with the six criteria, and require affected unpaid interns to acknowledge and agree, in writing, to the policy and their status as unpaid interns.

Jacob M. Sitman is a shareholder in the human resources and employment law group of Fitzpatrick Lentz & Bubba, P.C. He represents public and private employers, counseling them on employment and labor-related laws and regulations. He can be reached at 610-797-9000 or jsitman@flblaw.com.

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