Summer Interns: No Good Deed Goes Unpunished

Michael G. Trachtman
Powell Trachtman Logan Carrle & Lombardo, P.C.
MEA General Counsel
mtrachtman@powelltrachtman.com

Most of us have been there: a fresh-faced student asks – even begs – for the opportunity to do odd jobs in your workplace, for free, just to get some real-world experience. You don’t need anyone (and, in fact, the student will probably get in the way) but, perhaps remembering your own student days, you agree. And, for sure, it feels good to have helped an ambitious young person make their way in the world … right up until the time you get sued for violating the Fair Labor Standards Act.

There have been a slew of high-profile cases involving unpaid interns, and the effect of those cases has been an ever-increasing proliferation of less-publicized but very expensive cases against smaller companies. Some of the recent headline-grabbers (against companies with monumental legal staffs who should have known better) include:

  • Conde Nast (publisher of high-end magazines like Vogue and Vanity Fair), agreed to a $5.8 million settlement in a class action lawsuit brought on behalf of approximately 7,500 unpaid/underpaid interns.
  • Two Fox companies settled a lawsuit on behalf of 139 unpaid interns who worked on a movie, The Black Swan, for two weeks.
  • Viacom settled a lawsuit brought on behalf of 1,311 unpaid interns for $1.6 million.
  • Charlie Rose settled a lawsuit brought by unpaid interns who worked on the “The Charlie Rose Show”.

And so on … similar suits have been filed against Atlantic Records, W Magazine, the website Gawker, Fox Soccer Channel, among others. In July 2015, the Guardian reported that, as is typical in political campaigns, Hillary Clinton was using unpaid interns as political operatives. Having little choice, the campaign hired eight, fully paid “Summer Fellows” instead.

I last wrote about the risks of hiring unpaid interns about two years ago. Since that time, there’s been talk, and rumors, that the law has changed – and it has, but not in this jurisdiction (i.e., the federal Third Circuit Court of Appeals, which has jurisdiction over Pennsylvania, New Jersey, and Delaware). In 2015, the Second Circuit (which has jurisdiction over Connecticut, New York, and Vermont) made it a bit easier to lawfully hire an unpaid intern, but that ruling holds no sway in this area. The risks remain, and are worth reiterating.

So, as you head into the summer intern season, here is what you need to know.

Most employers understand that under the Fair Labor Standards Act (“FLSA”) workers who are “employees” must be paid at least minimum wage, and overtime for hours in excess of 40 per week. The question is whether interns are “employees”. In 2010, the Department of Labor established a six-part test for purposes of determining when an intern would not be considered an employee – to escape the reach of the FLSA, the following criteria must be clearly satisfied:

  1. The internship must be similar to training given in an educational environment;
  2. The internship experience must be primarily for the benefit of the intern;
  3. The intern must not displace or supplant regular employees, or perform duties traditionally rendered by regular employees;
  4. The employer must derive no immediate advantage from the intern’s activities (ideally, the intern would impede the employer’s operations);
  5. The intern should not necessarily be entitled to a job at the conclusion of the internship;
  6. The employer and the intern must agree, preferably in a signed writing, that the intern is not entitled to receive remuneration for his/her work.

That is a tough row to hoe.

The upshot… There are many employers (usually manufacturing and high-tech companies) who work with high schools and colleges to establish compliant, education-based internship programs, often as a means for developing a pool of future employment candidates. But if, like most companies, you hire interns to handle menial or unskilled tasks or as a helping hand to an eager post-Millennial, all it will take is a phone call from a disgruntled ex-intern to the DOL or a plaintiff’s employment lawyer for you to find yourself potentially liable for back wages, overtime, penalties and legal fees.

The solution … Pay the minimum wage and applicable overtime. You’ll sleep better.

Let us know if we can help.

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Michael G. Trachtman is MEA’s general counsel and the President of Powell Trachtman Logan Carrle & Lombardo P.C., a 30+ attorney King of Prussia-based law firm that has represented businesses and business people for over twenty-five years. He can be contacted at mtrachtman@powelltrachtman.com. See www.powelltrachtman.com for more information.