Three recent wage and hour class action cases filed in New York are calling into question employers’ practices with respect to unpaid interns, perhaps signaling an uptick in such claims under the Fair Labor Standards Act (FLSA).

The U.S. Department of Labor has outlined six criteria for the appropriate designation of unpaid interns. Unpaid internships must be similar to educational training, must benefit the intern and not provide an advantage to the company, and must be supervised by existing staff, without displacing regular employees. Additionally, both the employer and the intern must understand that the internship is not a paid position, and the intern must not necessarily be entitled to a job at the conclusion of the internship.

These factors were derived after a review of 1947’s Walling v. Portland Terminal Co., in which the U.S. Supreme Court held that where the employer receives “no immediate advantage” from the individuals doing the work, they are properly classified as exempt from the FLSA. The six factors contained in the DOL’s test are, essentially, a restatement of the facts of Walling. Because the Supreme Court did not incorporate these facts as part of its holding, some lower courts are reluctant to require that employers comply with all six of the DOL's criteria, causing splits in authority with respect to the criteria for classifying interns.

Unpaid interns in the media and entertainment industries, relying on at least three of these factors, are challenging employers’ applications of the criteria. In the first of these cases, the plaintiffs allege that they were wrongfully classified as unpaid interns for their work on the movie Black Swan. Specifically, the former interns claim that they performed services as accounting, production, and post-production interns and received no educational credits and/or other compensation.

The second case, filed by a former unpaid intern at Harper’s Bazaar, alleges that the plaintiff worked between 40 and 55 hours per week performing such tasks as coordinating deliveries, managing expense reports, and otherwise assisting in magazine photo shoots, without receiving educational credits and/or other compensation.

The most recent case involves claims by an unpaid intern with The Charlie Rose Show who allegedly performed background research, escorted the show’s guests, broke down the set after taping, and cleaned the green room after guests left. As in the other cases, plaintiff claims he received no educational credits and/or other compensation.

Ultimately, these cases allege that the employers at issue intentionally, willfully, and repeatedly violated state laws (and, in two of the three cases, the FLSA) by failing to pay wages to intern class members. The plaintiffs claim they were not properly classified as unpaid interns because they displaced regular employees and were not provided academic or vocational training, and because the employer derived an immediate benefit from their presence.

It remains to be seen whether the plaintiffs will be successful, both on an individual and collective/class basis. If the plaintiffs are able to convince the courts to certify collective and/or class actions, the costs and potential exposure to the defendant employers will increase significantly.

Employers who regularly use unpaid interns should review their practices and compare them to the six criteria outlined by DOL to ensure that such unpaid internship programs are in keeping with the law. If you have questions on your unpaid internship program, policies, or procedures, please contact Quinton J. Stephens at 801.531.3089 or, or the member of the Labor and Employment Group with whom you work.

Copyright © 2012 by Ballard Spahr LLP.
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