What every employer should know about hiring interns
By Jack Starkman
In the summer of 2010, Fox Searchlight released the movie Black Swan. The film went on to earn an Oscar — but behind the scenes, it was changing the legal landscape for unpaid internships.
The back story is a lesson to all employers who hire paid or unpaid interns.
In an effort to learn more about the film industry, Eric Glatt left a job on Wall Street and took a position as an unpaid intern on the set of Black Swan. However, the internship did not provide any training opportunities.
Glatt instead was asked to complete a wide variety of tasks as if he was an employee, such as ordering lunch for staff, scheduling travel, submitting purchase orders and even taking out the trash.
In September of 2011, Mr. Glatt, along with another intern, Alexander Footman, filed suit alleging Fox Searchlight had violated the minimum wage and hour laws under the Fair Labor and Standards Act by not paying them as employees. The Second Circuit Court of Appeals agreed.
Prior to this decision, the national standard used for determining whether an internship could be unpaid was the Department of Labor’s six-point test:
- 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;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
So, what went wrong for Fox Searchlight in the Black Swan case?
The Second Circuit Court of Appeals created a new test for unpaid internships finding that the Labor Department’s test was both out of date and not binding in federal courts. The Court further found that these internships did not foster an educational environment and that the employer — not the intern — received the benefits of the work. Since this decision, the Eleventh Circuit has also adopted this new test.
This begs the ultimate question — in a for-profit, private sector business, which factors will apply? It depends on location.
For locations in Connecticut, New York, and Vermont (states within the jurisdiction of the Second Circuit) and Alabama, Georgia, and Florida (states within the jurisdiction of the Eleventh Circuit), there is a new list of factors that look at whether the internship:
- Includes an understanding there will be no compensation
- Provides training that would be similar to that “which would be given in an educational environment”
- “Is tied to the intern’s formal education”
- “Accommodates the intern’s academic commitments by corresponding to the academic calendar”;
- Has a duration “limited to the period in which the internship provides the intern with beneficial learning”;
- Is composed of work that “complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern”
- Includes an understanding that the intern is not entitled “to a paid job at the conclusion of the internship”
In these states, the crux of the “primary beneficiary test” is based on the internship’s educational benefits and whether it is part of a bona fide academic pursuit. In other words, is the internship directly related to formal schooling or is it part of an educational setting?
For locations in states outside of the Second and Eleventh Circuit, the Department of Labor’s six-point test is still the standard. Most importantly, employers in these states should look at who benefits the most from the work relationship — the intern or the employer? If the employer is the primary beneficiary in the work relationship, then the position must be paid.
Regardless of the location, it is a very rare circumstance when a for-profit, private sector business can show that the work completed by an intern was not for its immediate advantage. As a result, most companies err on the side of caution and pay their interns. However, if a business still wants to implement an unpaid intern program, it should:
- Create a clearly defined internship policy using the factors test that applies to your location
- Require the intern to sign an acknowledgment that they will not be paid and are not entitled to a paid position at the conclusion of the internship
- Do not allow the intern program to replace other employees
- Provide training to supervisors about internship duties and responsibilities
- Keep a close eye on the type of work your interns are performing and ensure that their work is part of educational training
- Work closely with the interns’ educational institutions to ensure that the interns are receiving academic credit as a result of their internship
As always, it’s best to consult an employment law expert or an experienced HR consultant to provide the best guidance on any questions that may rise from this area of law.
Article originally posted on The Business Journals.
