Many business owners see only an upside to the unpaid internship arrangement. If the person can contribute something (or, really anything), there’s a belief it’s a net benefit because the individual has voluntarily agreed to provide services without remuneration. From the unpaid intern’s vantage point, getting a foot in the door and hands-on experience in a real-world setting is often priceless.
On the flip side, the federal government and possibly state governments tend to see fewer positives in the arrangements. Two potential government concerns are: the risk of exploitation (i.e., the individual should be compensated like any other employee providing services), and the loss of taxes.
Recent lawsuits have made the threat of litigation a real possibility for businesses who utilize unpaid interns. This spring, former unpaid interns who worked on the movie Black Swan filed a class action seeking back pay against Fox Searchlight, alleging that they were tasked with the responsibilities of production assistant, bookkeepers, secretaries, and janitors, without being paid. The complaint noted that “[u]npaid interns are becoming the modern-day equivalent of entry-level employees….” That suit was followed by former interns suing PBS’s The Charlie Rose Show in March, and Harper’s Bazaar magazine in February, alleging failure to pay minimum and overtime wages. The U.S. Department of Labor (DOL) has also recently stated that it is increasing its enforcement efforts aimed at unpaid internships.
Under the Fair Labor Standards Act and the DOL, the following factors are to be evaluated whether: 1. The individual receives training akin to that provided in an educational environment. 2. The unpaid internship arrangement is to benefit the individual or the business. 3. Using the unpaid internship arrangement will displace or otherwise impact any regular employees. 4. The business derives an immediate advantage from the activities of the individual. 5. There is an expectation of a paid position following the internship. 6. There is an expectation of compensation.
It is often best to memorialize the arrangement in a written agreement. It is also wise to keep the program brief. Finally, it is also advisable to think through the implications of having an intern as it relates to your workers’ compensation policy, health insurance, and any other workplace policies and programs. As with many employment matters, a phone call to your employment attorney before agreeing to it is advisable. The bottom line is be sure there is a good reason for taking this plunge before simply agreeing to it.
This column is not considered legal advice but solely the opinion of the author. Andrew Gould, Esq. is a labor and employment attorney, Board Certified by the Texas Board of Legal Specialization, with the law firm of Wick Phillips Gould & Martin, LLP. To contact Gould or to suggest topics, e-mail him at: andrew.gould@wickphillips.com.
