Connecticut Employment Law Blog Insight on Labor & Employment Developments for Connecticut Businesses

Black Swans and Trojan Horses: Why That Internship Program May Not Be Legal

Posted in Highlight, Human Resources (HR) Compliance, Litigation, Manager & HR Pro’s Resource Center, Wage & Hour

Last week, a federal judge in New York ruled that unpaid interns on the movie “Black Swan” should have been paid for their work, under the Fair Labor Standards Act (FLSA).

You can download the decision in Glatt v. Fox Searchlight here.  The court relied on the six factors that have been outlined by the U.S. Department of Labor before.

I talked about these factors in a 2012 post and they are worth reviewing again:

  • 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;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • 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;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Put another way, if you’re bringing on unpaid interns to do work in place of regular employees, it’s probably not going to fly.

While the mainstream press is professing some shock at the decision, most employment lawyers saw this as inevitable. As one blogger, Philip Miles, stated, it’s just “difficult for unpaid internships to be FLSA-compliant”.

Or, as Jon Hyman from the Ohio Employer’s Law Blog stated:

Employers that use unpaid interns should pay careful attention to this issue. It is far better to scrutinize interns under the DOL’s six factors before the agency, or a group of plaintiffs, swoop in and do it for you. It is even better to formalize the relationship in a written internship agreement that formally spells out how each of these six questions is answered in your favor. Or maybe it is best simply to assume that except in rare cases, there is no such animal as an “unpaid intern,” and you should simply accept the fact that if you are going to label entry-level employees as interns, you need to pay them for their services.

Is this decision good or bad? Suzanne Lucas (otherwise known as the “Evil HR Lady”) writes this morning in Inc. that ultimately the decision will only hurt college students, not help them:

Why? We already know that college is expensive, and that having a degree does not guarantee a job. We also know that your best chance of getting a job after getting that shiny new degree is if you have a slew of internships on your resume. Without those, you don’t stand out. It’s hard to convince a hiring manager that you are ready to be a financial analyst with a transcript and three summers working fast food. They want someone who has experience.

Internships have been the way people gained experience. Companies were willing to take on interns as a sort of community service as well as the ability to get some of grunt work done for free. Though the latter has been illegal for a very long time, it’s mostly ignored. Now, it can’t be.

More companies will be paying for their interns: It sounds good on its face. But it also means that some companies, particularly small ones, will just skip the interns altogether. If they have to pay, then why hire someone completely inexperienced who will only be there for three months anyway? Why not hire a real person who has experience and will stick around past the training phase? Which means the number of internships available will drop.

What the decision should remind companies yet again is that unpaid internships are a risky endeavor.  If you have some this summer, make sure that they meet the DOL’s guidance on the subject.