The use of unpaid interns by businesses has come under increasing scrutiny and media coverage over the past year. A recent federal court decision (the Glatt case) finding that unpaid interns who worked on the production of the movie Black Swan were actually employees entitled to pay under federal and New York State laws will only further increase this scrutiny and coverage. Many businesses use unpaid interns—in many industries, it is akin to a standard operating procedure—yet some of those businesses are not aware of the rules governing unpaid interns and the risks related to running afoul of those rules. In general, interns must be paid like employees, unless certain conditions imposed by federal and state laws are satisfied. The US Department of Labor has set forth six criteria that need to be considered. State law may impose additional criteria. Satisfying these criteria is often anything but easy.

There have been a number of highly-publicized lawsuits filed recently alleging a failure to properly pay interns. These lawsuits seek back pay, penalties, and attorneys' fees. The recent decision in the Glatt case is expected to lead to additional lawsuits being filed, as plaintiffs' counsel begin to sense this issue gaining traction and favor in the courts and as interns become aware of their rights and seek advice from counsel. Hiring unpaid interns simply because others in the industry use unpaid interns is not a sufficient defense. In the past, unpaid internships were generally not challenged in the courts. Businesses are now finding out that that is changing.

If your business currently uses unpaid interns, or is considering using unpaid interns, now is the time to make sure that your internship program complies with applicable wage and hour laws if you haven't already done so. A compliance check under the direction of legal counsel may also allow businesses to avoid having to disclose the results of that review in the event of future litigation. If you have any questions or concerns regarding legal compliance, attorneys in Chadbourne & Parke's employment law practice would be happy to assist you.