Many employers in today’s business environment have had to make do with fewer employees to meet the constraints of smaller budgets.  As the economy shows signs of rebounding, many companies face pressure to grow their business in spite of a lack of resources to support increased hiring.  At the same time, competition for entry-level professional jobs, especially among recent college graduates, has become fierce.  Many unemployed professionals see working for free as a way to build their resumes, gain experience, get their feet in the door, and stay current in their field.  Both groups – employers and those seeking work – have increasingly turned to unpaid internships to provide educated and eager help for employers and opportunities for those in the entry-level job market.

Employers considering unpaid internship programs, and those that already have them, however, should beware – the Department of Labor and plaintiffs’ employment counsel are watching.  Two new lawsuits in the Southern District of New York by interns against high-profile employers demonstrate this trend.  In Wang v. The Hearst Corp., filed this week, a former intern for the fashion magazine Harper’s Bazaar claims that the publisher violated state and federal wage law by making her work as many as 55 hours per week without pay.  The plaintiff claims that interns “are a crucial labor force” for the magazine and that she spent her time coordinating deliveries of samples, maintaining records of the contents of the magazine’s sample trunks, and processing reimbursement requests – activities for which she claims she should have been paid.  Hearst has told the press that its internship program is educational in nature and conforms to legal requirements.  A similar lawsuit filed last fall, Glatt v. Fox Searchlight Pictures, Inc., alleges that the defendant violated wage laws when it used unpaid interns during production of the 2010 film “Black Swan.”  These are only two examples of what may be a growing litigation trend.

The fact that an unpaid intern performs work voluntarily is not enough, by itself, to avoid violations of the Fair Labor Standards Act; for-profit employers are prohibited from using volunteers.  However, for-profit employers can hire unpaid interns without running afoul of the FLSA, so long as they meet the stringent test for “trainees.”  An individual who meets this test is not considered an employee and thus is not covered by the minimum wage or overtime provisions of the FLSA.  Many states have analogue laws that may also apply and should be considered.

The Department of Labor has identified six criteria to determine whether an unpaid internship meets this test: (1) the internship is similar to training which would be given in an educational environment; (2) the experience is primarily for the benefit of the intern; (3) the intern does not displace regular employees, and works under close supervision of existing staff; (4) the employer that provides the training derives no immediate advantage from the activities of the intern; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.  The test is more likely to be satisfied where the internship has a classroom component and participants learn skills applicable to multiple employment settings. 

Given growing attention to internship and volunteer programs, as demonstrated by the Hearst andFox Searchlight lawsuits, employers should carefully evaluate programs of this kind that they have in place or are considering to ensure compliance with the FLSA and applicable state laws.

Co-authored by Richard Alfred and Jessica Schauer