Wage and Hour Trends – The Rise of the Intern

Employer Defense Lawyer Los Angeles
by Sue M. Bendavid
March 22, 2013

Interns. Remember the good old days when as an employer, you could expect them to arrive punctually, help out in the day-to-day operations of your business, and be asked for little in return but job training (which used to be considered invaluable for those trying to break into the biz) and a glowing reference?

Those days may be long gone, if trends in employment litigation are any indication – and these trends aren’t just in individual claims. Class actions are being brought against several very high profile employers.

In February 2012, a former Harper’s Bazaar intern filed suit against the Hearst Corporation, claiming 40-55 hour work weeks without compensation. A New York Court later granted class certification – meaning approximately 3,000 former interns were joined in the suit against the media mogul.

Last summer, two interns working on the film, Black Swan, expanded their wage and hour claim to include all unpaid interns working for Fox Entertainment Group over the last two years. In December, talk show host Charlie Rose agreed to a six figure settlement for 190 unpaid interns who worked for The Charlie Rose Show between 2006 and 2012.

Also in December, a former assistant football coach initiated a class action claim against Hamilton College, alleging the school misclassified him and other plaintiffs as interns, paid them sums that didn’t meet minimum wage, failed to pay overtime, and failed to pay split shift pay.

The above suits were all filed in New York, but given this increase in litigation initiated by interns, it may be time to discuss what an internship is in the legal sense, and how California employers can reduce the risk of claims.

How to Avoid Wage and Hour Claims by Unpaid Interns

What is an internship? Ideally, it’s an educational experience, particularly if it’s an unpaid internship. The United States Department of Labor’s Wage and Hour Division (WHD) has very specific guidelines regarding hiring interns and offering internships on an unpaid basis.

Whether you’re running a for-profit business or a not-for-profit organization and are thinking about getting an intern to help, you should consider what you’re offering vs. what you’ll be getting in return. The WHD provides a six point test to help employers decide if they need to compensate interns or not.

Ask yourself these questions:

1. Will you provide training similar to that provided in an educational environment? You should provide a learning environment, not a work environment.
2. Is the internship you’re offering a benefit to the intern? Will the student gain valuable “real job” experience, or will they be doing the “busy work” no one else wants to do?
3. Will the intern displace a regular employee? If yes, you should compensate the intern. Otherwise, make sure the student is working under close supervision of your staff.
4. Will you as an employer, be gaining any advantages from bringing in an intern? If yes, you may need to pay your intern. If your work is actually impeded by the presence of the intern, chances are better that you’ll be providing more of the educational environment the WHD recommends.
5. Will the student be entitled to a job at the end of the internship? If your answer is yes, that actually encourages the intern to work, rather than learn, which could lead to potential wage and hour claims.
6. Does the intern understand that s/he is not entitled to wages? You should make clear up front, whether or not you will be compensating the intern for her/his time.

The six elements satisfy federal criteria. Not long ago, The California Division of Labor Standards Enforcement, or DLSE (commonly known as the Labor Board), adopted these six criteria as well (and disavowed certain other factors previously used by the DLSE).

This was according to a DLSE opinion letter handed down April 7, 2010:

The DLSE has consistently applied federal interpretations of statutes, regulations, and case law under the FLSA [Fair Labor Standards Act] where there is no inconsistency with State laws…Since DOL’s [Department of Labor’s] 6-point formulation is derived from the early U.S. Supreme Court’s opinion in [the] Portland Terminal case and has been applied (with varying degrees of deference) by the federal appellate courts, it is reasonable and appropriate for the DLSE to look to the factors used by the DOL in determining the exemption for purposes of coverage of State minimum wage coverage for trainees/interns in the absence of a State statute or regulation on the matter.

It’s important for employers to correctly classify their employees, independent contractors and interns. Misclassification can leave you open to claims for unpaid wages – including a failure to pay minimum wage and unpaid overtime, waiting time penalties (for not paying wages on a timely basis), and other penalties and tax claims. .

When all is said and done, remember that the person who should most benefit from an unpaid internship is the student. That means you are offering real educational opportunities, and not just taking advantage of getting some extra tasks done, or of lightening the work loads of your regular employees.

Sue M. Bendavid is a Wage and Hour Attorney who protects and defends employers from employee claims. For more information about wage and hour issues and avoiding employment litigation risks, contact Ms. Bendavid via email: sbendavid@lewitthackman.com.

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