Rice Law Office Blog

Summer intern season is in full swing, and so are wage claim lawsuits from former interns seeking compensation for their unpaid work. We’ve written about this issue previously, however the latest round of lawsuits features some high profile companies and multimillion-dollar settlements for disgruntled former interns.

In the latest case, Grant v. Warner Music Group, two plaintiffs brought a collective action lawsuit for a group of former interns. The plaintiffs maintained that they should have been classified as employees, but were paid nothing or below minimum wage 

Without the work performed by the interns, the plaintiffs allege, Warner would have been forced to hire paid employees. This is a classic determinant of whether interns must be paid for their work, and Warner Music Group agreed to pay a settlement of $4.2 million.

Similar claims against Viacom and NBCUniversal this spring resulted in two settlements in favor of the unpaid interns—Viacom settled for $7.2 million and NBCUniversal for $6.4 million. For more information on when you should pay your interns see our previous post, or DOL Fact Sheet #71, which addresses internship programs under the Fair Labor Standards Act.

Photo courtesy of Wikimedia user Jericho under a Creative Commons Attribution 3.0 Unported License.

There is a long standing, if unspoken, bargain between students seeking work experience and companies looking to identify young talent—internships. Students are given the opportunity to gain hands on experience, as well as a potential “tryout” for full time employment, while employers are given access to low (or no) cost labor as well as the chance to preview young talent for prospective future employment.

This bargain, however, is coming under fire as individuals are successfully challenging their classification as “interns” in the courts. While it is acceptable under the law to provide no pay to an intern, recent court rulings have further specified the types of employees that can be classified as “interns”. Specifically, the Fair Labor Standards Act (FLSA) requires that interns who work in the capacity of a regular employee receive minimum wage and overtime. Failing to meet obligations under FLSA exposes employers to a range of liabilities and legal action.

How, then, do you know when an intern is functioning in the capacity of a regular employee? The distinction can become somewhat difficult to decipher, however there are some general guidelines to follow. Interns shouldn’t be hired into specialized roles that no other employee in the company could fill, nor should an intern replace an employee. The availability of training and mentoring is helpful for distinguishing interns from employees, but the training should be general and not for the immediate benefit of the company.

A defined period with a specific start and end date also helps distinguish internships from employment, and it should be clear that a job is not guaranteed at the end of the internship period. It’s also important that both the employer and intern acknowledge that the position will be unpaid from the outset. Generally, interns are supervised and their work closely reviewed as part of the learning process—this helps distinguish them from paid counterparts.

While these guidelines are useful, there is a growing gray zone between internships and employment, and the Department of Justice is increasingly active in pursuing infractions. From the employer’s perspective, it’s best to consult with counsel on the structure and expectations for unpaid internship programs. For students looking at unpaid internships, consider what you’re being asked to do—it may be that your prospective employer should be paying you to fill that role!