The Fair Labor Standards Act (FLSA) & the Legality of Unpaid Internships

With today’s competitive job market, people can be quick to jump at the opportunity to gain experience—whether they get paid or not. This eagerness is what fuels the market for unpaid internships, where motivated people are looking to enhance their resumes and companies are looking to reduce labor costs.

Unpaid internships are common in nonprofits, small businesses, and the creative industry (such as with film, media, and fashion companies). However, some companies may be hesitant about hiring unpaid interns. If you have heard about recent lawsuits by unpaid interns against their former employers, you might be worried about whether your company’s unpaid internship program violates labor laws.

Recent Lawsuits in the Creative Industry
Increased concern about the legality of unpaid internships has resulted from recent lawsuits by former interns against major entertainment and media companies.

In a lawsuit filed in November 2011 against Fox Searchlight Pictures, two unpaid interns, Alex Footman, 24, and Eric Glatt, 42, allege that the production company violated the Fair Labor Standards Act’s regulations during their internships on the movie “Black Swan.” Footman and Glatt claim that they were doing the work of regular employees without getting compensation and did not receive the educational experience expected of an internship. For five months, Footman’s work as a production intern on the film included menial tasks such as making coffee, cleaning the office, and taking lunch orders. Glatt had to do low-level administrative work such as preparing purchase orders and collecting signatures on documents. These tasks are representative of the kind of work that newcomers in the entertainment industry sometimes undertake to “pay their dues” and would be acceptable if they were paid. However, because these individuals were brought on as unpaid interns (as they often are in the film industry), their work responsibilities opened the door to claims of federal and state labor law violations.

In a lawsuit filed in February 2012 against Hearst Corporation, intern Xuedan “Diana” Wang, 28, alleges that she worked up to 55 hours per week unpaid doing the same type of work as paid employees. As the Head Accessories Intern, she coordinated pickups and deliveries of samples for Harper’s Bazaar magazine, maintained fashion closets, and managed expense reports. Interns from the company’s other magazines have joined the lawsuit in what has now been certified as a class-action lawsuit against the media conglomerate.

With more lawsuits about unpaid internships getting public attention, interns may now feel more comfortable in speaking out against alleged exploitation by their employers. In these recent cases, the interns were never paid for their work and claim that their employers violated the Fair Labor Standards Act. As a prospective or current employer of interns, you must understand the requirements for lawful unpaid internships under this law so that similar lawsuits don’t happen to you.

Understanding the Fair Labor Standards Act (FLSA)
The provisions of the Fair Labor Standards Act are enforced by the Department of Labor and guide companies on how to structure their unpaid internships. Unpaid internships that lawfully comply with the FLSA must satisfy the following six criteria:

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.
   An unpaid internship should be an educational experience for the intern. The intern should get training under a structured learning schedule or similar to education offered at vocational school.
2. The internship experience is for the benefit of the intern.
   Throughout the course of the internship, the intern should be building meaningful professional skills that could be used in multiple employment settings, not just ones specific to the company.
3. The intern does not displace regular employees, but works under close supervision of existing staff.
   It is critical to distinguish interns from employees. The intern should not have entirely the same job responsibilities as a regular paid employee. You should have tasks assigned only to interns and designate staff to supervise the intern’s work.
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.
   If you would have hired a paid employee or required existing paid employees to take on the work of the unpaid intern, you are gaining an immediate advantage from the work of the unpaid intern in violation of the FLSA.
5. The intern is not necessarily entitled to a job at the conclusion of the internship.
   The intern should understand that the internship is not a trial period for permanent employment.
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
   You should discuss the topic of no wages with your intern at the start of the internship so that there is no future confusion.

What Internship Supervisors Should Do Now
If your company currently offers unpaid internships, a careful reevaluation of your internship program under the FLSA is crucial. To start off, make sure managers and supervisors fully understand the FLSA and their roles as mentors so that they do not exploit interns. Shape the internship program into an overall educational experience for interns. Make a list of skills and knowledge interns should gain by the end of the program. Assign tasks to interns that do not mirror work done by regular paid employees. Set out company policies in writing so interns are aware that they will not be getting paid and not entitled to jobs at the end of the program. If you are still unsure about the legitimacy of your unpaid internship program, you can send a request to the Department of Labor for an opinion.

If you have reassessed your unpaid internship program and it fails to comply with the requirements under the FLSA, you must classify your interns as employees and pay them appropriate compensation for their work.

For more information on the Fair Labor Standard Act, visit the Department of Labor’s Wage and Hour Division website: http://www.dol.gov/whd/ 

The Future of Unpaid Internships
In light of recent lawsuits, several companies have reacted by terminating their unpaid internship programs or offering only paid internships for fear of possibly violating the FLSA rules. Fashion PR firm Alison Brod has even rejected all volunteer applications for New York Fashion Week.

With companies taking precautionary measures and lawsuits gaining traction, does this signify the beginning of the end for unpaid internships? What will this do to the future job market in creative industries where unpaid internships have been invaluable for gaining experience? What do you think is the future for unpaid internships? Let us know! We’re also on Twitter and Facebook.