June 19, 2013

In a recent ruling, the United States District Court for the Southern District of New York has found that an unpaid internship program concerning the production of the film “Black Swan” ran afoul of the Fair Labor Standards Act (“FLSA”).  In Glatt v. Fox Searchlight Pictures Inc., the court found that the defendants improperly classified two workers as unpaid interns instead of paid employees.  In reaching its decision, the court relied on a United States Department of Labor (“DOL”) Fact Sheet addressing whether interns at for-profit businesses fall within the so-called trainee exception to the FLSA.  In this Fact Sheet, the DOL enumerates the following six factors:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
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.

Applying the DOL factors, the court found that the unpaid interns worked as paid employees work; they provided an immediate advantage to their employer; the internship was not designed to be uniquely educational to the interns; and if the unpaid interns did not perform the assigned work, then it would have otherwise been completed by a paid employee.  With respect to the last factor concerning whether the interns understood that they would not be paid, the court dismissed its relevance by noting that the FLSA does not allow employees to waive their entitlement to wages.   Accordingly, based on the totality of the circumstances, the unpaid interns should have been classified as paid employees under the FLSA.

In light of this ruling, employers should review their unpaid internship programs to ensure compliance with the FLSA.  While this ruling does not preclude the use of unpaid interns, it serves as a reminder that any unpaid internship program should be implemented pursuant to the DOL criteria.  With many summer internship programs already underway, now may be an appropriate time to review any such programs.