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Summer Intern Pay Issues: Is Your Company at Risk?

By: Mary Cooper

Submitted by Firm:
Cross, Gunter, Witherspoon & Galchus, P.C.
Firm Contacts:
Abtin Mehdizadegan, J. Bruce Cross, Misty Wilson Borkowski
Article Type:
Legal Update
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Warm weather is here and students are out of school, which means that employers may be considering hiring unpaid interns for the summer. However, if not analyzed carefully, summer internship programs can expose employers to liability under wage and hour laws.

There has been an influx of litigation regarding unpaid internships in recent years, and the number of internship-related lawsuits is expected to continue to increase. For instance, on June 13, 2013, former interns at the New Yorker and W Magazine filed a lawsuit against parent company, Conde Nast Publications. The lawsuit, which seeks class-action certification on behalf of other similar workers, alleges that Conde Nast violated the Fair Labor Standards Act (FLSA) by not paying its interns minimum wage as required under the law. A former intern at Harper’s Bazaar magazine filed a similar case recently against Hearst Corp for wage and hour violations.

The Conde Nast lawsuit comes just days after a federal court in New York found that Fox Searchlight Pictures had violated the FLSA when it used unpaid interns for production tasks on the set of the 2010 film, “Black Swan.” In 2012, PBS talk show host Charlie Rose settled a class-action lawsuit brought by 190 unpaid interns who worked for his television program. While most of these cases have been limited to media companies, the trend is likely to expand into other industries. Employers should examine all aspects of their unpaid internship programs to confirm that the intern positions properly qualify as unpaid and to ensure compliance with other federal and state wage and hour laws. The U.S. Department of Labor (DOL) is aggressively pursuing enforcement to ensure internships comply with the very specific requirements under the FLSA.

The FLSA defines “employ” very broadly as to “suffer or permit to work.” Generally, non-exempt individuals who are “suffered or permitted” to work must be paid at least minimum wage and overtime pay. The FLSA payment requirements do not apply to interns in the “for-profit” private sector only where the individuals are employed by a program meeting specific criteria. (Note: Unpaid internships in the public sector and for non-profit charitable organizations are generally permissible and not subject to the FLSA.) Specifically, the DOL has established six specific criteria that an internship program must meet to qualify as unpaid under the FLSA. An intern will be considered an employee (and entitled to minimum wage and overtime) unless all of the following factors are 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;
  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.

If an employer’s internship program meets all of the factors listed above, then the intern is not considered an “employee” under the FLSA and the Act’s minimum wage and overtime obligations do not apply to the intern. Conversely, an internship that does not meet each of these criteria means that the intern will be considered employee and all FLSA provisions will apply, including minimum wage and overtime requirements.

Employers can reduce the risk of wage and hour lawsuits related to internships by carefully evaluating all aspects of their internship programs using the DOL criteria. For instance, internships should be for a fixed duration, determined prior to the start of the internship. Employers should not use internships as a trial period for possible permanent employment at the conclusion of the internship term. Employers may want to consider having interns sign an agreement acknowledging that, for example, the internship is unpaid, for a limited time period, for the educational benefit of the intern, and that participation in the program does not mean the individual will be considered for permanent employment at the end of the internship period. Of course, it is always important to remember that agreeing to work as an unpaid intern will not prevent an individual from bringing a claim for unpaid wages in the future.