By Amy Traub and Desiree Busching

On February 1, 2012, a former intern of the Hearst Corporations’ Harper’s Bazaar filed a class action lawsuit on behalf of herself and others similarly situated. The lawsuit alleges that the company violated the Fair Labor Standards Act (“FLSA”) and applicable state laws by failing to pay minimum wage and overtime to interns. The use of unpaid interns is a widespread practice, especially in the retail, publication, and real estate industries, as well as in Hollywood. In fact, in September 2011, a similar lawsuit was filed against Fox Searchlight Pictures, Inc., claiming that the company used unpaid interns so it could make the film “Black Swan” more cheaply.  As reported in the book Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy, internships save firms roughly $600 million every year. 

Aside from the prestige that may accompany an unpaid internship for a dream employer, recession markets lead many job seekers to try to get their foot in the door by interning without pay.  Similarly, companies often view unpaid internships as a win-win: they get additional staffing without increasing their budgets and can train them for possible future employment without incurring any costs, while the interns get field experience to help them land a paying job.  As the complaint against the Hearst Corporation asserts, “[u]npaid interns are becoming the modern-day equivalent of entry-level employees.” 

But as the recent complaints against the Hearst Corporation and Fox Searchlight Pictures, Inc. demonstrate, companies utilizing the services of unpaid interns must tread carefully or they could face significant wage and hour liability, especially in light of the increased focus on unpaid interns in the legal arena.   Federal and state wage and hour laws provide multi-factor tests to determine whether an intern is actually an “intern,” or if he/she should instead be classified as an “employee,” and thus entitled to compensation.

The U.S. Department of Labor (“DOL”), for example, uses the following six-factor test to determine whether such an individual qualifies as an “intern” under the FLSA:

  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.

If the above factors are met, then the intern is not entitled to minimum wage or overtime under the FLSA.  However, many states have their own wage and hour laws with additional factors to consider in determining whether a worker is an “intern,” and thus not entitled to compensation, or an “employee,” who must be paid in accordance with minimum wage and overtime laws. For example, New York utilizes an 11-factor test, and California, which also previously had an 11-factor test but departed from that precedent in April 2010, now employs a 6-factor test similar to that used by the DOL.

Therefore, in order to protect themselves from wage and hour liability for use of unpaid interns, employers must be sure to check both federal and state wage and hour laws, and should speak with counsel if they are unsure if interns are being assigned appropriate work or are otherwise classified appropriately under applicable laws.

Back to Wage and Hour Defense Blog Blog

Search This Blog

Blog Editors

Related Services

Topics

Archives

Jump to Page

Subscribe

Sign up to receive an email notification when new Wage and Hour Defense Blog posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.