Viacom recently announced a settlement of $7.2 million dollars to end litigation by numerous unpaid interns for the Company’s television networks. In 2013, two former interns sued Viacom claiming that it violated the Fair Labor Standards Act (FLSA) and other state statutes by classifying them as “interns” (who are not paid) instead of actual employees. This is one of the largest settlements paid by a private employer for such an action.

The Department of Labor has six criteria to determine if an internship can be unpaid:

  1. The internship is similar to training that would be given in an educational environment, even if it includes actual operation of the facilities of the employer
  2. The internship experience is for the benefit of the intern
  3. The intern does not replace regular employees
  4. The employer derives no immediate advantage from the intern’s activities
  5. The intern is not necessarily entitled to a job at the end of the internship
  6. The employer and intern understand that the intern is not entitled to wages

The Viacom plaintiffs specifically alleged that their internship program primarily benefited Viacom—not the interns. The settlement will cover approximately 12,500 former interns. Counsel for the unpaid interns will receive $900,000 of the settlement amount. Viacom started paying their interns in 2013.

Internships are common opportunities in the entertainment industry. However, lawsuits over these unpaid opportunities have become more rampant since a California federal judge’s June 2013 decision determining that Twenty-First Century Fox should have paid two interns who worked on the movie “Black Swan.” Employers who utilize unpaid internship programs should carefully evaluate their operations according to the six criteria listed above.