‘Tis the Season for internship programs — are they harming or helping your business?

During the summer, organizations across the country rely on interns to perform work that they would ordinarily pay an employee to perform. In years past, this practice was widely accepted as employers would argue that the interns were receiving invaluable training in exchange for their free labor, while the interns recognized this as a rite of passage that they simply had to endure.  However, a series of recent lawsuits is set to change the way employers use interns at work.

On Tuesday, July 12, 2016, Fox Searchlight Pictures Inc. and Fox Entertainment Group Inc. reached an agreement to settle a class action lawsuit brought by former unpaid interns. This agreement will require Fox to pay $495 to every former intern who files a claim that shows they worked for one of the Fox entities, without pay, for at least two weeks between 2005 and 2010.  Twenty-First Century Fox Inc. settled a similar claim filed by 557 former interns for the same, $495 per-intern rate – but is this really all the damages that an employer could be facing?

Lawsuits like the one involving Fox make claims under the Fair Labor Standards Act (FLSA), which awards reasonable attorneys’ fees and costs to the plaintiff if they prevail. So, even if a former intern is only awarded $495 for past work, an employer may still end up paying a crushing amount of attorneys’ fees and costs (likely over $100,000) if they lose their case.

With that in mind, it would be beneficial for all employers to revisit their policies that define the type of work that interns may perform. The U.S. Department of Labor has established a 6-factor test to determine if an intern may be considered an employee under the FLSA:

  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.

The Department of Labor believes that if all six factors above are met, the FLSA does not apply and the employer is not required to pay that individual a minimum wage or overtime compensation. Not all courts have adopted the Department of Labor’s 6-factor test, and instead use a “primary beneficiary” test that examines the type of work an intern may perform in a specific industry.  In that scenario, courts may permit employers to classify individuals as interns even if the work they are primarily tasked to perform is menial.

Wherever your organization is located, it is important to refrain from using interns simply to fill in gaps in your workforce on an as-needed basis. Instead, organizations should establish clear criteria that define the type of work an intern is permitted to perform.  In addition, an effort should be made to incorporate unique training and other benefits to interns to distinguish them from your other employees.  Each organization will need to determine how best to incorporate these recommendations into their internship programs and attorneys of the Burns White Employment Group are prepared to assist you with that task.

 

Sammy Sugiura Jr.
As a former Assistant Public Defender, Associate Sammy Sugiura Jr. brings extensive courtroom experience in criminal and civil matters to his litigation practice at Burns White. His specialties include: Litigation, Financial Institution Litigation and Employment Law.

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