By: Oyvind Wistrom

The filing of several recent lawsuits has focused increased attention on the advisability and legality of using unpaid interns under the Fair Labor Standards Act (“FLSA”).  With the tight labor market, students and recent graduates have become increasingly eager to accept unpaid positions or internships just to get their foot in the door or to gain some much needed experience for their resumes.  Employers are also looking at ways to boost productivity without additional expense.  The legal risks are slight when employers offer an unpaid internship through a program in partnership with an institution of higher learning.  However, when employers seek to use unpaid interns in lieu of a paid employee, or when the employer derives a direct economic benefit from the use of the unpaid intern, the arrangement may violate the FLSA.

The FLSA defines the term “employ” very broadly as including to “suffer or permit to work.”  Anyone “suffered or permitted” to work generally must be compensated under the FLSA for the services they perform for an employer.  This means that employees typically are entitled to be paid at least the minimum wage and overtime compensation for hours worked in excess of forty hours in a workweek.

A narrow exception has been carved out for training programs and internships which allows an individual to participate in a for-profit private sector internship or training program without compensation.  The U.S. Department of Labor has identified six criteria for internships eligible for this exception:

• 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;
• The internship experience is for the benefit of the intern;
• The intern does not displace regular employees, but works under the close supervision of existing staff;
• The employer derives no immediate advantage from the activities of the intern and, on occasion, its operations may actually be impeded;
• The intern is not necessarily entitled to a job at the conclusion of the internship; and
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

While no  single factor is determinative, courts will look at the totality of the circumstances to determine whether an internship qualifies for this exception and whether the internship is truly for the benefit of the intern.

Several recent lawsuits highlight the potentially problematic nature of using unpaid interns.  In Wang v. the Hearst Company, the company sought to utilize unpaid interns to perform tasks at its multiple magazines, including coordinating picks-ups and deliveries; maintaining records relating to the magazine’s sample trunks and fashion closet; providing on-site assistance during photo shoots; and managing corporate expense reports and processing reimbursement requests.  A class of former interns now claims that they were entitled to compensation for their work.

A similar lawsuit was filed last year.  In Glatt v. Fox Searchlight Pictures, Inc., two former interns who worked on the film Black Swan also sued claiming they were misclassified under the FLSA. They claim that they should have been paid for their time working on the set performing tasks that they characterize as “secretarial and janitorial” in nature and included making coffee, taking lunch orders, taking out the trash and cleaning up the offices.  This case is in the discovery phase and a final decision has not yet been issued.

In each of these cases, the employer’s liability could be significant.  A violation of the FLSA exposes a company to back pay liability, as well as liquidated damages in an amount equal to the back pay award, attorney fees and costs.  Formal internship programs through educational institutions, where the student receives credit for the internship, are relatively safe and permissible under the FLSA.  However, employers using unpaid internships to perform meaningful work that would otherwise be performed by regular employees must evaluate their program in light of the six-factor test developed by the Department of Labor.  For additional information, or if you wish to discuss your particular situation, please contact Oyvind Wistrom at Lindner & Marsack, S.C. by email owistrom@lindner-marsack.com or by telephone at (414) 273-3910.