Unpaid Internships – Worth the Risk?

by Butler Snow LLP
Contact

Over the past few years, the number of college undergraduates and recent graduates engaging in unpaid internships has grown dramatically.  One expert estimates that there are between 1 and 2 million internships each year, and that in about half of these the interns are unpaid or paid less than the minimum wage. Another source estimates that up to 30 percent of college undergraduates do an unpaid internship at some point during their education.

There are several reasons for this increase.  Even assuming that many such internships are well-designed and executed to stay within the law, it cannot be denied that some firms would find that they simply cannot resist having eager young aspirants willing to work for nothing – especially in these economically-parlous times. The aspirants, too, often desperately seek these positions because they are generally thought to be essential résumé ingredients, especially in some of the so-called “glamour” industries, such as fashion, films, and publishing.

Until very recently, the firms who utilize such programs have almost always found that there is no real price to pay—either for the interns’ time and work or to the regulators because this issue has historically been well down the priority list of the Wage and Hour Division. That may, however, be changing, not only because of a new emphasis by the Department of Labor, but also because private lawsuits under the Fair Labor Standards Act (“FLSA”) offer rich rewards to imaginative and energetic plaintiffs’ lawyers.  This change could also, perhaps, be due to fewer young people who can afford to go without income for an extended time and are willing to sue to get paid.

The Wage and Hour Division’s current guidance, Fact Sheet #71, lists six criteria to be used in analyzing whether an internship is properly classified as unpaid, all of which must be satisfied:

     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; and

     6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Some courts have been loath to apply these criteria, relying instead on what they have called a “primary benefit test.”  Under this test, the question is whether the employee/intern is the primary beneficiary of the work being performed. The application of this test, by its nature somewhat hazy and ambiguous, has resulted in unpredictable and inconsistent results.

The sea may, however, be changing, shifting to the somewhat less employer-friendly standard set out in Fact Sheet #71. A number of lawsuits seeking payment of back wages under the FLSA have recently been filed, most in the “glamour” industries, and almost all seeking certification as class or collective actions.  In the most significant decision in these cases so far, Judge William H. Pauley III of the Federal District Court in Manhattan found that former interns working on film production crews for Fox Searchlight Pictures were in fact employees and not properly classified as unpaid interns. Judge Pauley extensively and carefully analyzed the facts before him in the light of the criteria established by the Wage and Hour Division and found that these interns were entitled to be paid.  Just as significantly, the judge certified the claims of one of the interns as a class action under New York law and conditionally certified the case as a collection action under the FLSA. This, of course, multiples the potential damages many times and, for this reason, makes it worth the plaintiffs’ lawyers’ time and effort.

Well, you may say that this is just one case and one judge. True enough, but it is a persuasively-written opinion by a judge on an influential and high-profile court in a case involving a high-profile industry and defendant.  Because of the “easy pickin’s” and high potential returns, the cases are attractive to plaintiff’s lawyers, and the issue is being pushed by the administration. All of this augurs trouble ahead for those who have unpaid internship programs. Unless these programs are carefully planned and administered, they are fraught with potential pitfalls.  The usual cost of litigation of these cases is exacerbated by the fee-shifting provisions in the FLSA (loser, if the employer, pays) and by the almost certain imposition of liquidated damages, thereby doubling the back wage amount.

If your business is in the sights of those who bring these cases, you should assess what you are doing very carefully and decide whether saving a few bucks on an intern is really worth it. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Butler Snow LLP | Attorney Advertising

Written by:

Butler Snow LLP
Contact
more
less

Butler Snow LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!