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
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.
Read more articles at Fisher & Phillips' Wage and Hours
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