HR News & Trends, Legal Issues

Court Ruling May Make You Rethink Taking on Unpaid Interns

intern

By John E. Thompson

We have repeatedly cautioned that employers who are prepared to take on unpaid interns should enter into these arrangements with their eyes fully open.

New developments emphasize this yet again.

The Fox Searchlight litigation

We reported in March 2012 that Fox Searchlight Pictures had been sued under the federal Fair Labor Standards Act and New York law by unpaid interns who were claiming to be due wages and other sums. The court has now ruled this week, in Glatt v. Fox Searchlight, that at least two of these individuals were indeed “employees” for purposes of the FLSA and state law.

What the court found

The judge concluded among other things that these interns:

  • Received nothing approximating the education they would receive in an academic setting or in a vocational school;
  • Received no benefits from the relationship other than those that were “incidental to working in the office like any other employee and were not the result of internships intentionally structured to benefit them”; and
  • Performed “essential” unpaid work that would otherwise have been done by paid employees.

Furthermore, the court was not swayed by the facts that:

  • The interns were not, and did not think themselves to be, entitled to a job at the conclusion of their internships; and,
  • The interns understood that they would not be paid for their activities.

It is noteworthy that the judge reached his decision in granting the interns’ summary-judgment motion. Essentially, he was saying that the answer is so clear as to leave no need for a jury trial.

Yet another high-profile lawsuit

Moreover, a former unpaid intern has now filed a federal-court lawsuit against prominent fashion designer Norma Kamali and her companies. The former intern alleges violations of both the FLSA and New York law.

One of the assertions is that her circumstances were “part of a broader trend where formerly entry level employees are being misclassified as unpaid ‘interns’ or ‘apprentices’ in an effort by employers to avoid paying [the required] wages . . ..” The intern asks for an unspecified award of minimum wages, overtime compensation, and other sums.

It has been clear for some time now that a new “hot issue” in wage-hour law is the employment status of unpaid interns. The Fox Searchlight ruling is likely to spur even more claims of this kind.

One must wonder how much longer those who have been willing to provide unpaid internships will continue to do so in this environment. We suspect that educational institutions, students, and others seeking these opportunities will find few of them available by next summer, if not before then.

This was originally published on Fisher & Phillips’ Wage and Hour Laws blog.

John Thompson is a partner in the Atlanta office of the law firm Fisher & Phillips. His practice focuses on wage and hour law, assisting employers in preventive efforts designed to ensure compliance, and he handles both investigations conducted by government agencies and litigation in the wage and hour area. John has served as a Special Assistant Attorney General for wage-hour matters for the State of Georgia. Contact him at jthompson@laborlawyers.com.
  • William Michalak

    Based on the article, the two offending companies deserve what they got because they were exploiting the interns. I don’t think that is cause to “rethink” unpaid internships though. The message should be, if you lack integrity and exploit people for ill-gotten gains, then you could end up in court.

    Internships, whether paid or unpaid, can be very valuable to people entering the workforce. Use them as they are intended, and you will be just fine. A Win-Win.

    • Peakbagger

      I guess I can’t tell from the article whether Norma Kamali “exploited” anyone or not. Looks to me like someone is simply SAYING that she did.

      Anyway, back in the real world, companies have better things to do than divert time and resources to defending themselves against claims — anyone can make a claim — that they “exploited” interns. Even if they did nothing wrong and they win, it is expensive, time-consuming, and unpleasant. Also, this is not exactly the easiest legal area to navigate. What is “intended” is open to interpretation. There is lots of room between clearly wrong and clearly right for reasonable people to disagree about the difference between one person’s “exploitation” and another’s valuable experience.

      Like it or not, when schools and others go knocking for internships, many risk-averse, high-integrity companies who are aware of what is going on will decide not to bother with it.