Summer has arrived and many employers have already supplemented their operations with student interns, but the question we see crop up repeatedly is, “do I have to pay interns?” In the last few years, with a more competitive job market and corporate focus on reducing costs, we have seen an increase in the use of unpaid interns. Unfortunately, not all internships can be unpaid.
Several high-profile employers currently face wage and hour collective actions brought by former interns who now claim they should have been paid during their internship. The entertainment industry is currently under attack for its longstanding use of unpaid interns. For example, former interns are currently suing Fox Searchlight pictures for unpaid wages on the set of the movie, Black Swan. See, e.g., Glatt et al., v. Fox Searchlight Pictures Inc., No. 11-6784.pdf (S.D. N.Y. June 11, 2013) (where after analyzing the DOL’s six-factor test and considering the totality of the circumstances, the court determined that some of the plaintiffs were improperly classified as unpaid interns and were “employees” covered by the FLSA and a similar state statute).
While the courts continue to wrestle with how to treat unpaid interns, the United States Department of Labor has provided employers with some guidance. Public employers and not-for-profit entities do not have to pay their interns. On the other hand, private employers, must meet a six-factor test in order for an internship to qualify as unpaid under the Fair Labor Standards Act:
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Is the internship similar to training given in an educational environment?
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For instance, could the intern pay to receive this kind of training somewhere else?
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The more an internship program is built around the classroom or academic experience, as opposed to the employer’s actual operations, the greater the chance the internship will be considered an extension of the student’s educational experience.
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Is the internship experience for the benefit of the intern?
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College credit is a strong indicator that the intern benefits from the experience, but will not be dispositive.
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Does the intern receive a real benefit from the internship (like learning a skill transferrable to other employers)?
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Does the intern work alongside regular employees (and not otherwise displace them) under close supervision of existing staff?
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Interns cannot fill in for regular employees who want take time off or who are on leave and employers cannot use interns to add to the workforce during peak periods.
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Job shadowing where the intern performs little or no work looks like a bona fide training and educational experience.
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Does the intern not provide the employer with any immediate advantages or services?
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Technically, this means that interns cannot perform any menial tasks like deliver mail, sort files, fetch coffees, or run errands.
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This requirement of the test is the most difficult and controversial and a couple courts have rejected it altogether. See Solis v. Laurelbrook Sanitarium & School Inc., 642 F.3d 518 (6th Cir. 2011) (“the proper approach … is to ascertain which party derives the primary benefit from the relationship”); McLaughlin v. Ensley, 877 F.2d 1207 (4th Cir. 1989) (general test in the Fourth Circuit is whether the employee or the employer is the primary beneficiary of the intern’s labor).
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Does the intern understand that they are not entitled to a job at the conclusion of the internship?
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Unpaid internships should have a fixed duration established prior to the start.
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An internship should not be used as a trial or probationary period for job-seekers.
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Do both the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship?
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The label “intern” or “trainee” does not matter under the FLSA and job titles are largely irrelevant—only the duties that persons perform matter.
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A person cannot “agree” to be an unpaid intern.
As a flowchart, the DOL’s test looks like this:
Employer Insight
Given the activity in this area from the plaintiff’s bar, employers should take a hard look at their unpaid internship programs and evaluate them against the DOL’s six-factor test. An internship agreement or acknowledgement form tailored to the factors in the test is a good start, but employers should remember that persons cannot waive the protections of the FLSA. So, an agreement will not necessarily resolve the question. Employers that have come to rely on the contributions of interns each summer or during school semesters will likely have a hard time justifying their internship program as unpaid, even if every other employer in the industry does the same thing.
