Internship Programs: Rite of Passage, or Right to Pay? The Issue Deserves Continued Monitoring by Employers

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With the start of the New Year, many employers are gearing up for their internship programs, which often coincide with academic semesters and summer recesses beginning in May. Such programs, though, have become a source of much attention in the media, courts, state and federal agencies, and even legislatures. Front and center in this debate is whether interns must be paid. It is no secret that within the past few years, unpaid interns have filed suits against businesses, claiming violations of wage and hour laws, sometimes seeking millions of dollars. Especially given the continued rise in these types of claims, employers should carefully evaluate their internship programs and remain current with legal developments.

One such development employers should continue to track is two wage-and-hour lawsuits filed by unpaid interns that the Second Circuit recently decided to review. The first is a putative class action lawsuit against Fox Searchlight Pictures, Inc. and Fox Entertainment Group, Inc. (“Fox”) lodged by former unpaid interns, including interns involved in producing the film Black Swan. The interns contended that Fox violated federal and state law by treating them as interns, not employees. In a decision issued this past summer, a federal district court judge agreed, finding that the interns should have been paid. The judge relied on the U.S. Department of Labor’s six criteria as to whether an internship must be paid, and among other things, observed that the interns were “providing an immediate advantage to their employer and performing low-level tasks not requiring special training.” In addition, the judge certified a class of unpaid interns.

In contrast, the other case the Second Circuit is to consider came out in favor of the defendant. There, former interns with various magazines owned by the Hearst Corporation, including Harper’s Bazaar Magazine, Cosmopolitan Magazine, Marie Claire Magazine, Esquire, and Seventeen, alleged that they should have been paid under federal and state law, as they were employees. In May 2013, a federal judge denied plaintiffs’ motion for summary judgment asserting that they were “employees” as well as their motion for class certification. In reviewing this decision as well as the one against Fox, the Second Circuit will have an important opportunity to weigh in on the standards for whether interns are “employees,” and wage and hour class certification.

In addition to the Second Circuit’s upcoming rulings in these two cases, there are other considerations and laws employers should continue to keep their eye on with respect to interns. Indeed, states may have different legal standards for determining whether an intern will be considered an employee for purposes of wage and hour law. For example, the New York State Department of Labor takes the position that eleven factors apply in making such an assessment in the for-profit sector.

Moreover, as we previously reported here, interns may be considered “employees” for purposes other than wage and hour law—most notably, for purposes of antidiscrimination laws. While some courts have found that such laws do not currently protect interns (as we reported here), some state legislatures have taken steps to see that they do. In addition to New York, New Jersey legislators, for example, introduced a bill last month aimed at extending antidiscrimination laws to protect interns. Meanwhile, employers should be mindful that the tests used to determine whether interns are employees for purposes of pay may not be the same tests used to determine their status for purposes of other employment-related laws, and may vary by state.

The bottom line remains that when it comes to interns, simply acting in line with industry standards may not keep employers safe from potential liability.