Are unpaid internships legal? Considered by some to be an important first step into an increasingly competitive workforce, the legality of unpaid internships is still unclear. This is despite the fact that in recent years, interns have won lawsuits against major corporations (including Sirius XM Radio, NBCUniversal, Conde Nast and Viacom Inc.), with plaintiffs claiming that they did the work of paid employees and thus should be compensated for their labor.
Ultimately, it seems that the question of whether unpaid internships are actually legal is less important than whether they should be legal.
Landmark Lawsuit Leads to More Confusion
Looking to get his foot in the door in Hollywood, Eric Glatt left a career on Wall Street to intern for the Darren Aronofsky film Black Swan. Glatt’s internship duties included performing administrative and clerical work for no pay. Before long, Glatt felt exploited, and decided that he wasn’t learning anything from his internship. So he, along with another intern, Alex Footman, filed a lawsuit against Fox Searchlight Pictures.
The lawsuit alleged that the internship went against federal and New York state minimum wage laws—that since the interns were doing the work of employees, they deserved to be paid like employees. The case had major repercussions on the world of unpaid internships, with interns at companies like Hearst, Conde Nast and Warner Music subsequently filing class-action lawsuits against their host companies.
It wasn't until July 12th, five years after Glatt’s lawsuit was initiated, that a proposed settlement was filed in the case. The settlement, if approved by a judge, will allow Glatt to collect $7,500 for his work on Black Swan. Additionally, other former Fox Searchlight interns will receive a range of payments for their labor. Nevertheless, Glatt v Fox Searchlight Pictures, Inc. never definitively answered an important question: when is it ok for businesses to employ unpaid interns?
‘Immediate Advantage’ vs. Academic Benefit
In 2015, after Glatt v Fox Searchlight Pictures, Inc. made it to the Second Circuit Court of Appeals, a judge rejected the Department of Labor’s widely known, six-factor test that assesses the legality of unpaid internships. The test centers around the idea that employers should not be able to derive an “immediate advantage” from an intern’s work. In contrast, if an intern is found to contribute to their company in a meaningful way, then they have to be paid.
Although the Department of Labor’s test has long been seen as a protection against the exploitation of unpaid interns, the Second District introduced its own seven-factor test in its ruling. The court’s test focused on the extent to which an unpaid internship is connected to an educational institution. In other words, the new test is concerned with whether an unpaid intern will be able to receive some academic benefit (like college credit) for their work.
According to the Second Circuit, the Department of Labor’s test is outdated as it does not reflect the reality of today’s internships, a reality in which many young people need an internship just to start their career. Yet, however much the world of internships has changed since the Department of Labor’s test was first created, it is undeniable that the Second Circuit’s ruling gives companies wiggle room not to pay their interns.
What Does the Ruling Mean For Other Internship Programs?
The Second Circuit court’s seven-factor test could be applied to employers located in states within the court’s jurisdiction (including Connecticut, New York, and Vermont). Additionally, the Eleventh Circuit (Florida, Georgia and Alabama) has already adopted the test.
However, just because some states have adopted the Second Circuit court’s approach toward unpaid internships does not mean that it will become a national standard. The Department of Labor has not modified its test in spite of the Second Circuit’s questioning its relevance. This means that, at least for now, tying an unpaid internship program to an academic program will not completely excuse all employers from having to pay their interns minimum wage.
It is undeniable that internships continue to be beneficial for companies as well as workers. A study from the National Association of Colleges and Employers found that nearly 62% of interns are eventually converted to employees, a 13-year high. To restrict the opportunities presented by internships to those who can afford to work for free for a summer or a semester seems unfair to those who can’t. Likewise, having to pay to work (as students do when they use college credit to score internships) hardly seems like a fair trade off between employee and employer. If unpaid internships are not always illegal, then they certainly should be.
Authored by Andrea Babinec, LegalMatch Legal Writer
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