All posts tagged 'Internship'
Up-to-date information on wage-hour principles and developments from
Fisher & Phillips attorneys who focus their practices on these matters.

Court Adopts "Primary Benefit" Unpaid-Intern Analysis

July 7, 2015 02:49
by John E. Thompson

 

We have been following developments in Glatt v. Fox Searchlight Pictures since former unpaid interns filed the lawsuit in 2011 seeking (among other things) back-wages under the federal Fair Labor Standards Act.  In June 2013, the lower federal court ruled that at least two of the unpaid interns should have been deemed "employees" for purposes of the FLSA's requirements.

The Second Circuit U.S. Court of Appeals (with jurisdiction over Connecticut, New York, and Vermont) has vacated that decision and has remanded the case for further proceedings.  In so doing, the Second Circuit:

◊   Fashioned a set of considerations for use in determining whether interns at for-profit entities are or are not FLSA employees who must be paid consistently with that law's requirements; and

◊   Declined to defer to the U.S. Labor Department's arguments and views.

Who Receives The Primary Benefit?

The Circuit said that "the proper question is whether the intern or the employer is the primary beneficiary of the relationship."  The answer, it continued, involves weighing and balancing all of the relevant circumstances, including (but not limited to) the extent to which:

1.   The intern and the employer clearly understand that there is no expectation of compensation;

2.   The internship provides training that would be similar to that given in an educational environment (including clinical and other hands-on training provided at educational institutions);

3.   The internship is tied to the intern's formal education program by integrated coursework or academic credit conferred;

4.   The internship accommodates the intern's academic commitments by corresponding to the academic calendar;

5.   The internship's duration is limited to the period during which the internship provides beneficial learning to the intern;

6.   The intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and

7.   The intern and the employer understand that there is no entitlement to a paid job at the internship's conclusion.

According to the court, "[n]o one factor is dispositive[,] and every factor need not point in the same direction for the court to conclude that the intern is not an employee" under the FLSA.

Government's Positions Rejected

USDOL had submitted a friend-of-the-court brief in which it opposed evaluating the issue as being one of primary or relative benefit.  USDOL also urged the adoption of its longstanding test (most recently repeated in its "Fact Sheet #71") calling for treating an intern as an FLSA employee unless each of six factors is met.

The court did not feel that USDOL's position was based upon any special competence or role.  The court's view also was that USDOL's test is outdated, inflexible, and less-well-suited to "the role of internships in today's economy" than the court's approach.

The Bottom Line

This decision represents the views of only one federal appellate court, so it is too soon to know whether the approach it embraced will become the consensus.

Moreover, businesses should not take the ruling to mean that every unpaid intern is a non-employee under the FLSA, even where an internship has some connection to an educational institution or to an academic pursuit.  Instead, it is still important to:

♦   Evaluate thoroughly whether to permit unpaid internships at all under the business's particular circumstances;

♦   Design any such internships carefully so as to be able to demonstrate their non-employment nature;

♦   Administer the internships consistently with that design at all times; and

♦   Keep in mind that states and other jurisdictions can take their own positions regarding an intern's status under their particular wage-hour laws.

 

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Risks Of "Internship" Claims And Liability Still Increasing (Updated 05/08/13)

February 28, 2013 02:53
by John E. Thompson

We have warned for some time now that businesses and other organizations should think carefully if they are considering the possibility of permitting unpaid internships.  What might be described as the internship "season" is fast-approaching, so the time to consider whether and under what circumstances to get involved in these relationships is now.

The Current Landscape

The latest big-splash lawsuit surfaced last week.  A former unpaid intern filed a collective-action/class-action complaint for "at least $50 million" against Elite Model Management Corporation under the federal Fair Labor Standards Act and similar New York state laws.

This comes in the wake of an agreement by Charlie Rose and his show's production company to pay around $250,000 to settle an internship-related lawsuit brought last March.  A developing cottage-industry among lawyers is now on the lookout for opportunities to assert claims on behalf of unpaid interns, "even if [the intern] received school credit for the internship . . .."

Those who are in a position to provide unpaid internships should also recall the thinking exemplified in last year's advice given by "The Ethicist" at the New York Times in response to a reader who asked, "Is there anything I can demand of this company in exchange for my slave labor?"  This "ethicist" saw it as being laudable to "take the internship and then call the Labor Department — something you or your colleagues can do confidentially."

And indeed there are signs that educational institutions, vocational-training organizations, and similar entities are finding it harder to place their enrollees in unpaid internships.  This is hardly surprising, because word is spreading that making these opportunities available entails vulnerability to wage-hour claims.

It Is Wise To Be Cautious

There is neither a simple checklist nor any concise, all-encompassing legal test for reliably knowing whether a particular unpaid internship is consistent with the FLSA.  Nevertheless, prudence suggests keeping in mind our prior observations.  Whether an unpaid internship would occur under the auspices of an educational institution or otherwise, ask yourself this:  If there is a later FLSA claim, will the circumstances clearly, provably, and readily show (i) that the relationship was for the purpose of providing education, instruction, and training that imparted significant, substantive, transferrable knowledge of a broadly-applicable kind; and (ii) that what actually occurred was consistent with and carried out this purpose?

If the intern's activities establish instead that the idea and/or the outcome was to have the person perform work, then the risks of FLSA liability are likely to be substantial.  For example, if management's motivation is along the lines of, "We could sure use a summer intern," this does not bode well for successfully defending against an unpaid intern's later FLSA claim.

 

UPDATE 05/08/13:   The lawsuit parade continues.  A former photography intern for the "Pittsburgh Power" Arena Football League team has now sued the team and two owners, claiming that he was not paid for his internship activities (link to complaint below).  He is alleging among other things that there was "a corporate policy or practice of minimizing labor costs by knowingly misclassifying certain employees as unpaid interns in order to deny them compensation in violation of the FLSA and the [Pennsylvania] Minimum Wage Act."  He is also raising his claims as collective-action and class-action ones on behalf of, he contends, "more than 60" interns.

 

Boyle v. Swann, Inc.pdf (198.28 kb)

 

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FLSA Intern Class Conditionally Certified In Hearst Lawsuit

July 25, 2012 02:00
by John E. Thompson

As we reported earlier, a former Harper's Bazaar unpaid intern is pursuing a lawsuit against publisher The Hearst Corporation in which she claims (among other things) to have been an "employee" under the federal Fair Labor Standards Act who was not compensated in compliance with that law.

A New York federal judge has now conditionally approved the case as a "collective action".  This means that the lawsuit will proceed as the FLSA's version of a class action, including that court-authorized notice of the complaint will be sent to potential class members to let them know that they may join the lawsuit if they choose to do so.

The court ruled that Xuedan Wang had presented enough evidence to justify allowing the case to move forward on this basis for the time being.  Among the allegations of which the court took note are that Hearst decided that all interns working at 19 magazines were non-employees but used them to complete tasks necessary to its operations, such as answering telephones, making deliveries, and organizing clothing and accessories.  Wang also asserts that Hearst required interns to submit "credit letters" from colleges, some of which, she says, required the intern to make a payment to his or her college in order to receive the credit.  She contends that she and other interns were essentially entry-level employees who performed commensurate work with little supervision.

Of course, these are simply Wang's claims.  And after further factual development, Hearst can try to convince the court that treating the case as a collective action is not warranted after all.  Nevertheless, this litigation bears watching, because it might well serve as a template for similar FLSA lawsuits across the nation.

 

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Unpaid Internships At Non-Profits Or Arranged By Schools

March 14, 2012 00:43
by John E. Thompson

Our earlier post prompted questions about whether federal Fair Labor Standards Act principles are different for unpaid internships at non-profit organizations or for those sponsored by educational institutions for which the intern receives academic credit.  The short answer is:  No, they are not.

USDOL Statements Sound Encouraging

It is of course true that Deputy Wage and Hour Administrator Nancy Leppink's ominous quote referred to "for-profit" entities, and this is the sector upon which Fact Sheet # 71 focuses.  Furthermore, a Fact Sheet footnote says that unpaid internships are "generally permissible" for a non-profit charitable organization in the right circumstances.  The publication further implies that the relationship is more likely not to be viewed as FLSA employment if it is "structured around a classroom or academic experience . . . ," such as "where a college or university exercises oversight over the internship program and provides educational credit . . .."

Perhaps this reflects a Labor Department preference for encouraging what it believes to be the inherently-nobler pursuits of charities or educational institutions.  There might even be a degree of Executive Branch self-interest involved.  For example, full-time, unpaid White House interns are expected to:

◊   Perform tasks such as "conducting research, managing incoming inquiries, attending meetings, writing memos, and staffing events"; and

◊   Engage in their activities at least 4½ days a week, Monday through Friday, from 9 a.m. until 6 p.m.

This looks a lot like being "engaged in the operations of the employer or . . .  performing productive work," activities which the Fact Sheet says would be viewed as FLSA employment where a "business" is concerned.  But this does not mean that everyone else gets to do the same thing.

Don't Be Lulled To Sleep

Non-profit organizations permitting internships, and entities considering participating in student internships, should not simply assume clear-sailing where the risk of FLSA claims is concerned.

For one thing, it is unlikely that USDOL sees such unpaid internships as being "generally permissible" in each situation, or for non-profits of every kind, or for all school-sponsored arrangements.  Even USDOL does not consider the Fact Sheet to be an authoritative or binding official position.   Moreover, the Fact Sheet itself says that USDOL "is reviewing the need for additional guidance" on internships in the non-profit sector.  So notwithstanding the Fact Sheet's statement about what is "generally" the case, do not doubt that USDOL will assert FLSA liability for a particular unpaid internship, even one undertaken with a non-profit or in conjunction with a school, when it deems this to be warranted.

And even were it otherwise, USDOL is not the only potential source of a challenge.  Interns are perfectly free to assert their own FLSA claims in court should they decide to do so, without regard to what USDOL thinks or does.

The Bottom Line

Whether an unpaid internship occurs under the auspices of an educational institution, in a non-profit organization, or at a for-profit business, in the end the FLSA question still gets down to some version of this:  Do the circumstances clearly show that the relationship is for the purpose of generalized learning, education, and training that imparts to the participant significant knowledge of a broadly-applicable kind, or do they instead indicate that the idea is to have the person perform work?  In other words, if the motivation is something like, "We could sure use help from an intern this summer," that is a danger sign – whether the setting is for-profit, not-for-profit, school-related, or any other.

 

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Are Unpaid Internships Worth The Risk? (UPDATED 03/15/12)

March 10, 2012 04:19
by John E. Thompson

For awhile now, unpaid internships have been a hot topic under the federal Fair Labor Standards Act.  We noted some time ago that the U.S. Labor Department was taking a skeptical view of these relationships.

In conjunction with the April 2010 release of Fact Sheet # 71, the U.S. Wage and Hour Division's Deputy Administrator Nancy Leppink announced what appears as a practical matter to be a rebuttable presumption that many such internships violate the FLSA:  "If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law."

Since that time, lawsuits against The Hearst Corporation and Fox Searchlight Pictures (links to copies below) and others show that the prospects for FLSA claims by current or former unpaid interns are by no means merely hypothetical.

Reports suggest that, with summer approaching, and in the context of continued high unemployment, more people than ever are beseeching organizations of various kinds to take them on as unpaid interns.  But in the current wage-hour environment, it should surprise no one that, as USA Today recently reported, many organizations are doing away with these internships altogether.  Perhaps this represents an unfortunate reduction in learning opportunities, but it is also an entirely foreseeable reaction by those who are in a position to permit them.

The answer to the question, "Are unpaid internships worth the risk?" is that only the organization being asked to provide one can decide this in the context of its own circumstances, capabilities, and philosophy.  In thinking about it, management will want to take into account the mindset exemplified by a recent endorsement by "The Ethicist" at the New York Times of the suggestion that an inquirer should both "take the internship and then call the Labor Department . . .."

If management concludes that it is willing to allow unpaid internships, then it should plan, structure, and supervise them very carefully, bearing in mind the ambiguous criteria that will be applied should an intern later decide to claim that he or she should have been treated as a paid employee under the FLSA.  Remember also that, if an intern under the age of 18 is later deemed to have been an employee for FLSA purposes, there is also the potential for the assertion of child-labor violations and substantial penalties in addition to liability for back-pay and other sums.

 

UPDATE 03 15 12:  Another high-profile lawsuit has been filed by a person claiming to have been an unpaid intern.  This one is brought by an "Editorial Intern" against PBS talk-show host Charlie Rose and Charlie Rose, Inc. under New York wage-hour law (link to copy below).  The named plaintiff also seeks to assert claims on behalf of a class of such interns.

 

◊   Have a comment or something else to add?  Please use our comment feature below.

 

Glatt v. Fox Searchlight.pdf (1.37 mb)

Wang v. Hearst.pdf (1.81 mb)

Bickerton v. Rose.pdf (836.47 kb)

Coincidental or Coordinated? Unpaid Internships Drawing Lots Of Attention (Updated 05/25/10)

April 25, 2010 08:59
by John E. Thompson

A spate of recent developments signals potential trouble for organizations allowing unpaid internships, particularly profit-seeking entities. The kickoff was an April 2, 2010 New York Times piece, the tenor of which was that many such internships amount to illegal unpaid employment.  The article quoted the U.S. Wage and Hour Division's Deputy Administrator Nancy J. Leppink as saying, "If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law." 

This was followed by the April 5 release of a similarly-toned report from the labor-side Economic Policy Institute.  And, on April 7, California's Division of Labor Standards Enforcement issued a letter opinion outlining its views about under what circumstances these relationships are permitted by that state's laws. 

Then last week, the U.S. Wage and Hour Division released its Fact Sheet # 71 in which it listed six criteria that it said "must" be applied, "all" of which must be met, in order for an unpaid internship not to violate the federal Fair Labor Standards Act where for-profit, private-sector organizations are concerned.  These factors, which have not been the subject of notice-and-comment rulemaking, are (with some editing):

•  The internship is similar to training given in an educational environment, even if it includes actual operation of the employer's facilities,

 

•  The internship is for the intern's benefit;

 

•  The intern does not displace regular employees but instead works under the existing staff's close supervision;

 

•  The employer derives no immediate advantage from the intern's activities, and its operations might occasionally actually be impeded;

 

•  The intern is not necessarily entitled to a job at the internship's end;and

 

•  The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

 

Whether public-sector and non-profit internships will be viewed with skepticism similar to that running through this document remains to be seen (although the Fact Sheet implies that they might not be).  The Wage and Hour Division says that it is "reviewing the need for additional guidance" in these areas.  Even those sectors should therefore proceed with caution. 

 

Maybe all of this is remarkable happenstance.  Or maybe instead it reveals a focused coordination of efforts aimed at coming enforcement initiatives.  Either way, any for-profit organization that is still willing to take on unpaid internships should structure and handle them so as to maximize the chances that they will be found not to create employment relationships for wage-hour purposes.

 

 

UPDATE 05/25/10:  Fisher & Phillips Partner Joel W. Rice has published observations and recommendations relating to internships in Workforce Management Online.

 

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