If Your Company Uses Unpaid Interns, You Need To Read This

June 1, 2012

There may be a new trend in lawsuits being brought by employees who worked as unpaid interns.

According to an article on Time.com on May 2, 2012, three interns are currently suing the high-profile companies where they had unpaid internships: Hearst Corporation (which owns Harpers Bazaar), The Charlie Rose Show and Fox Searchlight. As the article explains, “[Even] before the trio of lawsuits, the Department of Labor announced that it was cracking down on unpaid internships by ramping up efforts to educate future interns about their rights and informing employers about federal law.”

Under the federal Fair Labor Standards Act (FLSA), in order to legally employ a worker in an unpaid internship, all six of the following factors must be satisfied:

  1. The internship must be similar to training that would be given in an educational environment;
  2. The internship must be for the benefit of the intern;
  3. The intern does not displace regular employees;
  4. The employer derives no immediate advantage from the intern;
  5. The intern is not entitled to a job at the end of the internship; and
  6. The intern understands that he or she is not entitled to wages.

These six factors are not new (in fact, they’ve been around since the 1930’s), but according to Time.com, lawsuits by unpaid interns have been rare, “likely because former interns are worried that they’ll be ostracized in an industry in which they’re trying to work.” The three lawsuits filed in the last year seem to suggest that has changed. Employers should look at their internship and volunteer programs to avoid problems. Failure to properly classify unpaid interns can have a substantial cost, including unpaid wages for all hours worked (both straight time and overtime), unpaid employment taxes, and attorneys’ fees.

Contact Laura A. Balson or Margaret A. Gisch to learn more about these new developments regarding rules impacting employees.