We previously wrote how unpaid internship programs are receiving increased scrutiny, are an increasingly frequent subject of litigation and can create significant liability if they are not carefully created and executed. Perhaps because of the focus being placed on unpaid interns, paid interns are now bringing wage-hour lawsuits too. In December 2012, a former athletic intern who served as assistant football coach and assistant women's basketball coach at Hamilton College brought a putative class and collective action in the Northern District of New York. Benjamin J. Kozik v. Hamilton College, Case No. 6:12-cv-01870-LEK-TWD. Although he was a paid intern, Kozik alleges that Hamilton College failed to pay minimum wage and overtime, willfully misclassified paid interns as exempt from wage-hour laws, and classified them as part-time when they were working 100 hours a week or more. Often there is no record of the number of hours worked per day in these situations, which makes it very difficult for an employer to challenge a disgruntled intern's claims about number of hours he or she worked each day.
Both employers and job seekers continue to find appeal in internship programs as a way for the unemployed, underemployed or recently-graduated to gain experience and a way for employers to engage with the community, assist and train a new generation of workers, and get some free or low-cost labor in process. As discussed in our previous article, employers must carefully plan, structure and administer internship programs to avoid violating wage-hour laws and potentially significant damages. If such precautions are not taken, what at first seems like a win-win can quickly become a headache of sizable proportion.
Since our first article, for example, another highly publicized putative class action and collective action was filed against Elite Model Management by an unpaid intern that worked only one month during New York Fashion Week. The complaint seeks damages of at least $50 million. As for previously filed cases internship cases, Charles Rose of the Charlie Rose Show on PBS settled a putative action under terms that could amount to more than $250,000 in payments to plaintiffs and attorneys' fees. These cases are not a passing fad.
The Hamilton College case presents yet another cautionary tale of internship programs. Although the facts have not yet been determined, one can easily imagine situations in which persons interested in being a coach would beg to be allowed to take an "intern" position in which they are not paid the minimum wage and do not receive overtime because they are eager to get the experience needed to pursue their dream career. But employers need to be aware that calling someone an "intern" (paid or unpaid) does not, by itself, establish that the person is not an employee entitled to all of the benefits of the FLSA. Simply put, labels do not matter much. Employers must carefully review each intern position to ensure that it meets the requirements of an internship, regardless of whether the intern receives a stipend or some other form of payment.
Scrutiny of internship programs – both paid and unpaid – shows no signs of slowing down. Employers are encouraged to carefully review their internship program to ensure that they will withstand legal challenge.