The movie giant, Fox Searchlight Pictures, was recently sued for failing to pay interns who worked during the production of Black Swan. A federal court in New York quickly ruled in favor of the unpaid interns, finding that they did not qualify as "trainees" under the Fair Labor Standards Act (FLSA) and should have been paid for all work they performed. The court also conditionally certified the matter as a collective action under the FLSA, which may allow other interns to potentially join in the suit.
This issue is not limited to the Hollywood movie sets. In a down economy, a number of individuals (especially younger members of the workforce) are willing to work for "free" in an effort to try to get their "foot in the door" or merely to gain some experience. Even if done with the best of intentions, and even if everyone is in agreement, employers should carefully consider such arrangements.
TIP: Periodically evaluate any unpaid position to ensure it is properly classified under the FLSA and applicable state law. The USDOL closely scrutinizes any such classification, and the penalties can be significant.
Under the FLSA, the exception for unpaid interns is very narrow. The United States Department of Labor (USDOL) has crafted the following factors, all of which must be met in order to be properly classified as an unpaid intern rather than an employee:
- 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.
While the USDOL and courts generally analyze these claims on a case-by-case basis, looking at the totality of the circumstances, the second factor is often considered the most important.