The tight job market has made many high school and college students and recent graduates willing to work as unpaid interns as a means of gaining real-world experience and enhancing their résumés. Employers in various industries have provided unpaid internships to this willing work force, but as one recent federal court decision indicates, these internships often do not pass muster under federal and state wage and hour laws. In Glatt v. Fox Searchlight Pictures, Inc., a federal district court held that an employer violated both the federal Fair Labor Standards Act (“FLSA”) and its New York counterpart by failing to pay interns for their work.
The Court’s Decision in Glatt v. Fox Searchlight Pictures, Inc.
In Glatt v. Fox Searchlight Pictures, Inc., the court addressed the claims of two individuals who agreed to work as unpaid interns for a motion picture production company. The interns performed routine, menial tasks such as running errands, tracking and reconciling purchase orders and invoices, drafting cover letters, organizing files, and making copies. The company benefited from the work performed by the interns, and regular employees would have performed the tasks if the interns had not been available. After the internships ended, the interns sued the company, claiming unpaid minimum wages and overtime compensation under the FLSA and New York law.
Analyzing these claims under a six-part test created by the U.S. Department of Labor, the U.S. District Court for the Southern District of New York held that the interns were employees for purposes of the FLSA and New York law and were entitled to the statutory minimum wage and overtime compensation for their work. The six-part test, originally created to identify “trainees” who could be excluded from the statutory minimum wage and overtime provisions, consists of the following elements:
- The internship must be similar to training provided in an educational environment, even though it may include the operation of the employer’s facilities.
- The internship must be for the benefit of the intern.
- The intern must not displace regular employees and must work under the close supervision of the existing staff.
- The employer must derive no immediate advantage from the intern’s activities, and the employer’s operations may be impeded by the intern’s activities from time to time.
- The intern is not guaranteed a job at the end of the internship.
- The intern must understand that he or she is not entitled to wages for the services performed.
With respect to the first factor (similarity to training provided in an academic environment), the court stated that classroom training is not required, but there must be something beyond mere on-the-job training that any employee would receive. The fact that an intern may learn something about the operation of a business simply by being present in the workplace also is not sufficient. The court found no educational component to the internship program in Glatt. The court further found that the interns in Glatt displaced regular employees and received no benefit from the internship beyond what they would have received had they been classified as employees (e.g., work experience, references). Moreover, the company in this case derived an immediate advantage from the interns’ work, and there was no evidence that the intern program ever impeded the company’s operations. Although the last two factors listed above (no guarantee of regular employment and no expectation of pay) were satisfied, the court said that they were not determinative and that, considering the totality of the circumstances, the company had improperly classified the claimants as unpaid interns. The interns were therefore entitled to the statutory minimum wage and overtime compensation under both the FLSA and New York law.
The six-part test for determining whether individuals are properly classified as unpaid interns is not new, but the court’s decision in Glatt sheds light on how some of the factors in that test should be applied and provides a valuable reminder to employers of the risks associated with unpaid internship programs. Even when interns are willing to work without compensation, perform only menial or routine tasks, and receive academic credit for the internship, they may be entitled to pay under the FLSA and similar state laws.
Employers considering an unpaid internship program should work closely with legal counsel in designing the program to ensure that it is valid under applicable laws.
It should be noted that the six-part test applied in Glatt was designed for use in connection with for-profit companies. Nonprofit organizations have far greater leeway in using unpaid interns and volunteers.