Working on a movie set or for a major magazine publisher may seem like a glamorous internship for a young person.  But not everything is always what it appears to be on the surface. 

In recent years there has been a spate of lawsuits against some large companies by former unpaid interns, citing violations of the Fair Labor Standards Act based on allegations that they were in effect, acting as employees.  The first such suit was filed against Fox Searchlight Productions for interns working on the set of The Black Swan. Most recently, Conde Nast settled a class action suit brought by former interns.

“The allegation is that the work that those interns are doing qualifies as employment or work under FLSA, and they should be paid at least minimum wage and overtime,” said Elizabeth Washko, Shareholder at Ogletree Deakins.

But unpaid internships have been around for years—what is really at the heart of these claims, and why now? 

“I suspect it’s partly due to the economy and people getting frustrated with doing these internships or repeatedly doing internships and not getting anywhere with it.  Or maybe they’ve felt that they weren’t learning anything but were doing a lot of free labor,” suggested Washko.  “I’m sure there have been situations where companies have abused the opportunity and haven’t provided much for interns for their efforts and have used them to replace employees,” she added. 

Rebecca Aragon, Shareholder at Littler Mendelson, agrees.  “With the economy being what it is and it’s tough to get a foot in the door, internships provide invaluable experiences.  But many interns find when they get there they are not receiving the kind of experience they expect, or maybe there wasn’t’ a meeting of minds between the company and interns as to what they’d be doing and how and what they’d be learning.”

Fairness is another ingredient fueling the claims.  “In some companies, internships are excellent opportunities.  In other companies, interns are not learning anything, just being treated as unpaid labor, and that issue came to light as a result these class actions,” added Aragon.

As of yet, there hasn’t been much guidance from the courts as to what the companies should be doing to ensure that internships are legitimate, and the unpaid intern litigation trend has yet to play out fully. “We don’t know how many single plaintiff actions there have been.  An intern does not have to bring this kind of claim as a collective action but can do it individually,” said Aragon. 

As several key cases are still pending before the Second Circuit, it is hard to predict the future for unpaid internships, but to date, one result of these lawsuits is that schools with internship programs are now more closely scrutinizing where they send their students.  “The last thing they want to do is give credit while all their students did was make copies and get coffee,” said Aragon. “It ruins the integrity of the program and calls into question whether grades are reflective of an educational experience.”  

Aragon further points out that an intern who receives academic credit is not precluded from filing a claim. “It’s not a shield, nor should a company feel comfortable that just because a student is coming from a very reputable school and receiving credit the company is protected from any liability.  At the end of the day, the company has to make sure the internship program is for the benefit of the student.” 

Also, added Washko, once the courts establish the criteria more firmly, companies will be paying more attention to their internship programs, to further refine and evaluate them.  However, some companies may go the way of Conde Nast, by eliminating their internship programs altogether, while Columbia University has stopped granting academic credit for internships, hoping that companies will start compensating interns in accordance with DOL guidelines.

There are several ways in which companies who wish to maintain their internship programs can protect themselves, say both Washko and Aragon.  Perhaps the easiest way is to simply pay the interns minimum wage.  Washko recommends that the relationship between the intern and the company be put in writing, while Aragon added she’s advised companies to maintain an arbitration agreement with an intern in the event of a future claim.

Though there has been an upsurge in these types of claims recently, Aragon said she thinks that they may taper off in two or three years now that companies are more cognizant of their potential liability. “Companies will be more savvy about how to put together an internship program; they will have policies and procedures, they may have directors of internships programs, and they may pay minimum wage.”


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