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Avoiding Pitfalls with Unpaid Internships

Avoiding Pitfalls with Unpaid Internships


To Pay or Not to Pay?

As the school year begins again, it is a great time for hoteliers to think about their unpaid internship programs.  Unpaid internships can be great symbiotic relationships.  College students or individuals trying out new fields are willing to work for free in exchange for real-life work experience and something to add to their resumes. However before accepting free labor, employers must be aware of the potential consequences of this relationship and take steps to ensure their internship program complies with the law.

The Fair Labor Standards Act (FLSA) is a federal statute that requires companies to pay all employees a minimum wage and overtime. Who counts as an “employee” is a tricky question and some companies who thought they had unpaid “interns” found out the hard way that they actually had “employees” they were not paying. A recent New York case that is getting a lot of attention is Glatt v. Fox Searchlight Pictures, Inc. In that case, unpaid interns who worked on the movie Black Swan brought a lawsuit claiming that they actually were employees and, as such, should have been paid minimum wage and overtime for their 50-hour weeks. The interns had performed routine administrative tasks such as making photocopies, running errands, ordering lunch, and getting people coffee.

Sounds like typical intern work, right? Wrong. The Federal District Court held these individuals did not categorize in the FLSA exception for interns because their work was purely routine and did not further their education in the way a true internship should. The court also found it was the employer, not the interns, who got the better deal, deriving the most benefit from the relationship. Significantly, the court also held the interns performed work that otherwise would have been done by regular employees, thereby permitting the employer to get the same amount of work done with fewer paid workers. Even though the interns had agreed to serve without pay, the court found overall that the interns were employees and should have been paid wages and overtime. This case is not a fluke — there have been a number of similar intern-related cases lately.

In ruling in favor of the interns, the Glatt court followed a Fact Sheet from the Department of Labor (DOL) detailing a test for whether an internship is exempt from minimum wage laws. To see if your internship program is kosher under the DOL guidance, check out these requirements for a legal unpaid internship:

  • Must be educational. The internship, even though it includes actual work for the company, must be similar to training that would be given in an educational environment. This factor is often satisfied when the program is for course credit and when there is a degree of oversight by the intern’s educational institution.
  • Must benefit the intern, not the company. This is key. The internship experience must be set up for the primary benefit of the intern. The company must not derive immediate advantage from the activities of the intern; in fact, its operations should potentially be impeded by the intern’s presence.
  • Must not displace regular employees. Interns cannot be used to displace or substitute regular employees or to supplement the workforce during times when the company would otherwise hire more employees or ask existing employees to work longer hours.
  • Must not be a job interview. The intern cannot necessarily be entitled to a job at the conclusion of the internship. The internship should be for a fixed period of time, established prior to the outset of the internship, with no expectation that it will lead to a permanent position.
  • There must be no expectation of wages. Both the employer and the intern must understand that the intern is not entitled to wages for the time spent in the internship.

In short, based on the above federal guidelines (which Washington state closely follows), it is fine for a company to have an unpaid intern, provided the intern — not the company — is the primary beneficiary of the program. To ensure the company is not deriving benefits from or depending on the intern’s work, the company should ensure the intern’s duties don’t regularly include routine operational tasks, such as janitorial work, clerical work, or work that other employees would normally perform. The company should also make sure the intern is closely supervised, receiving more supervision than regular employees, and should give the intern plenty of training opportunities. If the intern is doing operational work, the company should ensure he or she is learning skills that would be transferable to another company, rather than skills that are specific to the company’s own operations. Finally, the company should consider requiring the intern to sign a document expressly stating that he or she is an intern and not an employee, that the internship is unpaid, and that the intern is not entitled to a job at the conclusion of the internship.

For more information, please contact me, Greg Duff, or other attorneys in the GSB’s Employment Group.

Originally published on Duff on Hospitality, 6 September 2013.



Last modified on Wednesday, 23 October 2013 01:59

Victoria Slade

Associate, Garvey Schubert Barer

Victoria Slade practices in the areas of employment law and litigation.  She represents employers with unionized and non-unionized workforces.  She has advised employers in compliance with various state and federal employment laws, such as the Fair Labor Standards Act, the Family and Medical Leave Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act, the Washington Law Against Discrimination, and more.  Victoria has drafted policies for employee handbooks and reviewed handbooks to ensure they are compliant with current law.  For employers with unions, she has assisted with handling grievances and preparing for arbitrations.  She also represents numerous large public employers and is knowledgeable regarding compliance with the Public Records Act and Open Public Meetings Act.  Additionally, Victoria has done significant research into the changing law surrounding social media and both drafts social media policies for employers in different industries and advises on disciplinary matters relating to social media.

Victoria has participated in cases ranging from small disputes to complex commercial litigation.  She has provided advice and litigation assistance for clients in multiple industries, including numerous healthcare institutions.  Victoria has contributed to several significant victories for GSB clients, including a defense verdict after a two-week jury trial and summary judgment dismissal of numerous claims followed by a substantial fee award to our client for having had to defend against a frivolous action.  She is well-versed in civil discovery and motions practice and has drafted numerous documents for state and federal courts. 

Victoria also actively participates in pro bono and community service projects.  She has worked with and contributed legal services to several local non-profit organizations, including the ACLU, Appleseed, Team Child, Legal Voice, the Tenants Union, Columbia Legal Services, and the QLaw Foundation.

1 comment

  • Adam Kielich

    posted by Adam Kielich

    Tuesday, 22 October 2013 23:02

    I see the unpaid internship issue remaining a key focus for the DOL at least through the remainder of Obama's term.


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