The Warshawsky Law Firm Blog

Wednesday, September 25, 2013

Unpaid Internships Are Illegal In Most Employment Situations

Unpaid internships are considered by many to be a “rite of passage” for young persons starting their careers.  College students and recent graduates alike often find that the only entry-level positions open to them are unpaid internships.  Such positions are common in media, publishing, art, fashion, entertainment, politics, and other industries with a creative or intellectual bent, but they are found throughout the business world.

Young persons supposedly gain valuable job experience and “make connections” through unpaid internships, but more often they work long hours doing menial work for disinterested bosses who take them for granted.  Indeed, unpaid internships have become a way for many employers to obtain free labor, to avoid paying taxes, and to artificially lower the cost of doing business.   Even when unpaid internships provide worthwhile experience, only persons with other means of support (from parents, spouse, savings, etc.) are able to enjoy their benefits.

Unpaid internships are unfair to young persons.

They also are illegal in most employment situations.

UPDATE:  A 2015 decision by the U.S. Court of Appeals for the Second Circuit has changed the legal standard that applies to unpaid internships in New York, Connecticut, and Vermont, making them more likely to pass muster under federal law.  Please see here for more information.

The general rule, under federal and state law, is that private, for-profit employers must pay their employees at least minimum wage (currently $7.25 per hour; the minimum wage in New York will rise to $8.00 per hour on December 31, 2013), plus overtime (time-and-a-half) for any hours over 40 in a workweek.

There are several exceptions to this rule, of course, including an exception for “interns."  However, these exceptions are narrowly construed and only apply in specific, limited circumstances.

Regarding unpaid internships, the U.S. Department of Labor explains “[t]here are some circumstances under which individuals who participate in ‘for profit’ private sector internships or training programs may do so without compensation.”  The DOL applies six criteria in determining whether or not an unpaid internship is lawful (see DOL Fact Sheet #71):

1.  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;

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.

The New York Department of Labor applies a similar set of factors.

Only if each of these factors is satisfied is it lawful not to pay interns for their work.

If these factors are not met, then the interns must be paid the required wages.

In recent years, several lawsuits have been filed on behalf of interns seeking compensation for unpaid wages.  In June of this year, a federal district judge in Manhattan ruled that unpaid interns working for Fox Searchlight Pictures were “employees” protected by federal and state minimum wage laws.  In his decision, the judge applied the six factors listed above, observing as follows:

Regarding factor #1:  “While classroom training is not a prerequisite, internships must provide something beyond on-the-job training that employees receive.”

Regarding factor #2:  “Resume listings and job references result from any work relationship, paid or unpaid, and are not the academic or vocational training benefits envisioned by this factor.”

Regarding factor #3:  The interns “performed routine tasks that would otherwise have been performed by regular employees”; if the interns “had not performed these tasks for free, a paid employee would have been needed.”

Regarding factor #4:  “Searchlight does not dispute that it obtained an immediate advantage from [the interns’] work.  They performed tasks that would have required paid employees. . . . The fact they were beginners is irrelevant.”

Regarding factor #5:  “There is no evidence [the interns] were entitled to jobs at the end of their internships.”

Regarding factor #6:  Although the interns “understood they would not be paid . . . this factor adds little, because the FLSA does not allow employees to waive their entitlement to wages.”

The judge concluded, the interns were “were classified improperly as unpaid interns and are ‘employees’ covered by the FLSA and NYLL.  They worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training.  The benefits they may have received – such as knowledge of how a production or accounting office functions or references for future jobs – are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer.  They received nothing approximating the education they would receive in an academic setting or vocational school.”


If you or someone you know is owed wages for work performed during an unpaid internship, please contact The Warshawsky Law Firm today.          

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