June 13, 2012

Seeking a valuable learning experience in the fashion world, a recent graduate of Ohio State University accepts a position as an unpaid intern at Harper's Bazaar magazine. She winds up working anywhere from 40 to as many as 55 hours a week, coordinating pickups of fashion samples and maintaining records on the samples, and processing reimbursement requests for corporate expense reports.

Unpaid interns at Fox Searchlight Pictures work on the film "Black Swan," hoping that the experience will provide them with a valuable education in the film industry. Instead, they find themselves performing menial work.

An unpaid intern works 25 hours a week on the "Charlie Rose" show. She is given various responsibilities, including providing background research about interview guests, assembling press packets, escorting guests through the studio, breaking down the interview set after daily filming, and cleaning up the "green room."

In each of these instances, the intern or interns wound up suing the high-profile employer, claiming that their rights were violated under the wage and hour laws because they were essentially doing the jobs of other workers and not being provided a bona fide educational experience.

In today's business environment, employers increasingly have been having to make do with fewer employees to meet smaller budgets. At the same time, competition for entry-level professional jobs, especially among recent college graduates, has intensified. These pressures make unpaid internships attractive to recent graduates looking to gain experience as well as to employers looking for help.

To Qualify for FLSA Exemption, Internship Programs Must Meet Specific Requirements

Employers who provide interns with training for their educational benefit may be exempt from minimum wage and overtime requirements under the federal Fair Labor Standards Act (FLSA) and equivalent state laws. However, an internship program must satisfy certain requirements to qualify for the exemption:

  • The internship, even though it includes involvement in the¬†actual operation of the employer's facilities, is similar to training that would be given in an educational environment.
  • The internship experience is predominantly for the intern's benefit.
  • The intern does not displace regular employees but works under the existing staff's close supervision.
  • The employer that provides the training derives no immediate advantage from the intern's activities, and its operations may actually be impeded on occasion.
  • The intern isn't necessarily entitled to a job when the internship ends.
  • The employer and the intern understand that the intern is not entitled to wages for time spent in the internship.

The following illustrates how each of these criteria must be met:

"Similar to training that would be given in an educational environment." Generally, the more an internship program is structured around a classroom or similar academic experience, the more likely it will pass muster. In the clearest example, a college or university will oversee the program and provide educational credit.

"Predominantly for the intern's benefit." Interns should be acquiring skills that can be used in multiple employment settings rather than skills that are tailored to the employer's operations.

"Not displace regular workers." The employer should not use interns as substitutes for regular workers or as supplements to the existing workforce. Interns may, however, shadow other jobs to enable them to learn certain functions under the close and constant supervision of regular employees, provided the interns perform minimal or no actual work. If interns receive the same level of supervision as the regular workforce receives, they are more likely to be considered employees rather than being in training.

"Employer may not derive immediate advantage." The business should not depend on or benefit from the intern's work. Interns who perform actual productive work, such as the type of work the interns claimed to be doing for the Charlie Rose show, must be paid minimum wage and overtime pay for hours worked over 40 in a workweek.

"No job entitlement." Internships should run for fixed durations that are established before they begin. Internships are not supposed to be trial periods for individuals seeking employment. If an intern is placed with the employer for a trial period with the expectation of eventually being hired on a permanent basis, there is a risk he or she may be viewed as an employee receiving compensable training.

"Advance understanding that intern is not to be paid." The fact that the internship will be unpaid should be made clear up front, preferably in writing.

If you have any specific questions about the rules on using unpaid interns, please contact a member of our Litigation & Dispute Resolution group, Labor & Employment group, or your Much Shelist attorney.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.