UNPAID SUMMER INTERNS CAN BE HAZARDOUS TO YOUR BUSINESS
Last Wednesday, Sirote & Permutt hosted a seminar that addressed issues surrounding the legality of unpaid summer interns. On Friday, Roy Williams, with the Birmingham News, published a story entitled "Grads may face hard lesson as they join job market", writing that "Continued weakness in the entry-level job market could force many newly-minted grads to accept lower-paying service sector positions or forsake income entirely by volunteering or accepting unpaid internships, according to" Challenger Gray & Christmas, a Chicago based outplacement firm.
Last month, the Department of Labor published Fact Sheet 71, entitled "Internship Programs Under the Fair Labors Standards Act". The fact sheet sets forth the test for unpaid interns in the for profit sector:
1. The internship, even thought 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 all 6 factors are met, the intern can be an unpaid "trainee". The DOL takes the position that if ALL 6 factors are not met, the person is an "employee" and should be paid at least minimum wage pursuant to the FLSA.
There have been a great number of articles published about summer internships and whether or not they should be paid. In the New York Times , Nancy Leppink, the acting director of the DOL's wage and hour division, was quoted as saying "If you are a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law." The article notes that at Stanford University, there were 643 postings for unpaid internships for this past academic year, more than triple the number posted 2 years ago. In 1992, 9% of graduating students held internships, compared to 83% of graduating students in 2008. It is estimated that 1/4 to 1/2 of the internships are unpaid. Two examples of questionable unpaid internships set forth in the New York Times article are:
1. "One Ivy League student said she spent an unpaid three-month internship at a magazine packaging and shipping 20 or 40 apparel samples a day back to fashion houses that had provided them for photo shoots"; and
2. "At Little Airplane, a Manhattan children's film company, an N.Y.U. student who hoped to work in animation during her unpaid internship said she was instead assigned to the facilities department and ordered to wipe the door handles each day to minimize the spread of swine flu."
An interesting rebuttal to the DOL's position was published in Swarthmore College's Daily Gazette. Soren Larson wrote that "It definitely makes me feel all fuzzy inside to know that people at the Labor Department believe that someone in the world should pay unpaid interns a living wage. But the Labor Department has no business telling young Americans that they cannot exchange free labor for profitable market skills, connections, and impressive resume filler vital for getting that next job."
Articles on this topic have also been written in Time, The Wall Street Journal, and USA Today. The Beasley Allen law firm, based out of Montgomery, in it's most recent "The Jere Beasley Report", May 2010, had an entry entitled "Having unpaid interns is not always legal". In this entry, the firm states: "The abuses we are seeing is where an intern is hired and is doing the exact same job that other paid employees are doing. In fact, many of them are separately assigned work and have minimum oversight. Similarly, if an intern is simply making coffee, running errands and cleaning all day, without receiving any educational experience, then the internship probably violates federal law and should be paid." Beasley Allen is one of the most successful plaintiff's firms in Alabama, and is apparently trying to generate interest in handling these types of cases.
Practice pointer. The issue of unpaid interns is high on the list of the DOL. It is also generating interest in the plaintiff's bar. Most interns and most companies will not complain to the DOL or to a law firm: both receive benefits from the relationship. But with numerous employers posting unpaid intern positions in public places, such as college campuses, it is easy for the DOL to determine which companies are using unpaid interns. Also, some of the unpaid interns may become disillusioned with the position, such as those mentioned above, and may actively seek out legal advice. With all the publicity about this topic in numerous publications, I anticipate that there will be an increase in FLSA claims over the unpaid intern issue.
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