Unpaid Internships Are Mainstream, But Are They Legal?

During the last few years of tough economy, many companies have been tempted to save a  penny by offering unpaid internships to the eager hoards of college graduates, who have often been forced to accept unpaid positions because of lack of paid work in their chosen field.  While some of these unpaid positions offered true training and educational experience, others consisted entirely of menial tasks – ranging from stuffing envelopes and picking up dry cleaning to sanitizing door handles and sweeping bathrooms.

A publicized lawsuit by unpaid interns against the company that produced Black Swan and 500 Days of Summer filed in New York in 2011, began a rush of class and collective actions brought by interns under state and federal wage and hour laws.  To avoid being part of this litigation trend, any company that offers unpaid internships in Texas needs to make sure that it complies with both federal and state wage and hour laws.

Federal Law 

The Fair Labor Standard Act (FLSA) requires that an employer pays a minimum wage and overtime wages to anybody classified as its employee.  The Department of Labor issued a Fact Sheet in 2010 describing six factors that are used to determine whether a worker should be qualified as an intern/trainee or an employee under the FLSA.  If an employer offers an unpaid internship, it must make sure that the internship position meets the following 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;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  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;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Texas Law

Texas does not have separate regulations at the state level regarding unpaid internships. Instead, the Texas Workforce Commission advises employers to adhere to the six-prong test established by the DOL.  Additionally, the Commission has specifically clarified that the key fourth factor on the list – that an employer receive “no immediate advantage from the activities of the intern” – requires that an intern receive more benefits from the work then the employer.

Unpaid Internship Class Actions (examples of what has triggered litigation so far)

1.    Glatt v. Fox Searchlight Pictures  (NYSD, 2013) – interns “performed routine tasks that would otherwise have been performed by regular employees” such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking and reconciling purchase orders and invoices, drafting cover letters, organizing filing cabinets, making photocopies, running errand, assembling office furniture, arranging travel plans, taking out trash, taking lunch orders, answering phones, watermarking scripts, and making deliveries.  (held: the unpaid internship violated the FLSA).

2. Rabenswaay v. Kamali et al. (NYSD, 2013) – interns did photo retouching, photographed products, edited brand books, created visuals, signage, and labels, and other tasks requested by supervisors. The job involved no training (ongoing).

3. Ballinger et al. v. Advance Magazine Publishers (NYSD, 2013) – interns packed and unpacked accessories and jewelry, sorted through and organized accessories and jewelry, ran errands, filled out insurance forms, reviewed submissions, responded to emails, proofread, line-edited and relayed pieces between writers and editors (ongoing).

4. Bickerton v. Charles Rose (NY S. Ct. 2012) – interns performed background research for the show, escorted guests for interviews, assembled press packets, broke down the interview sets, and performed other productive tasks (settled for $250,000).

5. Wang v. Hearst Corporation (SDNY 2012) – interns coordinated pickups and deliveries of samples, provided on-site assistance at magazine photo shoots, managed reimbursement reports, etc. (dismissed due to lack of commonality).

CONCLUSION: In light of the rise of litigation related to unpaid internships, employers should modify their internship programs to comply with the DOL’s requirements described above. Although the above cases deal with the fashion and publishing industries, where unpaid internships have historically been the norm, the FLSA requirements apply to all industries and all businesses need to ensure that they are compliant.

Update (7/19): After running a quick search for unpaid internships on the local Craigslist, I have found a great example of a Marketing & Events Intern position advertisement that appears to violate the DOL requirements.  In contrast, this unpaid internship for a Solutions Consultant seem to comply with the FLSA as long as they actually do offer the described training.

Update (7/25)And here is Dallas Observer advertising an unpaid Marketing Internship position with a description that on its face appears to violate the FLSA’s minimum wage requirements.

For more information, contact Leiza Dolghih.

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