Revenge Of The Interns: Why More Interns Are Suing Businesses

If you're trying to get more work done for less, hiring unpaid interns may not be your best solution. Find out why you don't want to walk through this legal minefield.
August 20, 2013

Internships have become an increasingly popular way for college students and young grads to get hands-on experience in the professional world and for employers to audition prospective employees and get some low-cost help. But business owners, beware: Taking on interns—especially unpaid ones—could land you in a legal mess.

Several large companies, including Gawker Media, Atlantic Records and Fox Searchlight, have been hit with high-profile lawsuits in recent months by former unpaid interns who feel they should have been compensated for the work they performed. The lawsuits claim that the corporations broke federal laws that require interns at profit-making businesses to be paid unless their internships provide education or training.

In certain industries, particularly media, movies and fashion, unpaid internships have become very common, experts say. “Employers have really caught onto the idea that if you call it an internship, you don’t have to pay for it,” says Eric Glatt, a former Fox Searchlight intern who is starting a Washington, DC-based organization called the Fair Pay Campaign to advocate for paid internships. In 2011, Glatt and another former intern, Alexander Footman, sued Fox Searchlight, claiming their unpaid internships on the set of the film Black Swan involved doing the same work employees were paid to do. A federal court judge ruled in June that Fox Searchlight violated New York state's minimum wage laws. (Fox Searchlight is appealing the ruling.)

“If the business owner has need for someone to work on a project and the thought that occurs to them is, 'Hey, let’s get an intern to do it,’ that’s a bad business mistake,” Glatt adds.

The news site has started tracking the lawsuits stemming from unpaid internships and also launched a Kickstarter campaign to help pay for their investigation.

Understanding “Unpaid”

Before taking on an intern, it's important for any small or mid-sized business to understand the rules involving internships. Within the Fair Labor Standards Act, the U.S. Department of Labor lays out six stringent criteria that an internship must meet in order for it to be unpaid. Those criteria include that the internship must include training and education, must benefit the intern—not the business—and must not displace current employees.

“At its heart, the question is, who is getting the most out of the internship relationship?” says Peter Minton, a New York attorney who helps startups navigate employment laws. “If the intern is getting the benefit of the bargain even without being paid, the company is on the right track. But if the company is getting more out of the relationship, the intern needs to be paid to balance the scales.”

Because the Labor Department’s rules are very strict and can be difficult to adhere to, it’s often better for a businesses to pay interns at least minimum wage in order to avoid any potential legal headaches, legal experts say. “In the grand scheme of things, it’s way cheaper [to pay an intern minimum wage] than what you’re going to pay lawyers to handle these claims in court or deal with IRS audits and penalties,” says Robin Bond, founder of Transition Strategies, a Wayne, Pennsylvania, law firm that consults with small businesses.

Some businesses have tried to dodge the rules by renaming their interns “fellows,” but that doesn’t solve the problem: At the end of the day, if you’re not paying them and they’re doing tasks that benefit your business, they could sue you for unpaid wages and other damages. 

"Whether the title is 'interns,' 'fellows,' 'externs' or some other neologism is irrelevant," Minton adds. "The question is whether the employment relationship manages to leap the high hurdles state and federal legal regimes require in order to have a legal unpaid worker program." 

Designing It Right

Although paying interns is the easiest way to avoid legal trouble, business owners who want to maximize their internship programs and use them to find prospective employees should think about designing them in a way that benefits everyone—both the business and the intern.

A recent study published in the Journal of Business Venturing found that interns are more likely to accept jobs at large corporations than at small businesses because they see more opportunities at larger firms and worry about the their chances of getting promoted—especially at family-run businesses where there’s an heir apparent.

Experts say businesses can make the intern experience more enriching by taking some basic steps:

  • Make it fun. Think about the types of interesting experiences and training your interns would want to receive during their stint with your company. What can you offer them that they can’t get on their own? “Don’t just bring in interns to do all the crap work that nobody else wants to do,” Bond says. “Give the interns an opportunity to see you in action. If you’re a lawyer, take them to a deposition. Take them to court. Make it fun.” 
  • Make it meaningful. Today’s millennials in particular are drawn to jobs that are meaningful, Bond says. An internship should be an opportunity for them to get experience doing actual work that could eventually become their career. Don’t just relegate menial tasks to interns. Give them on-the-job experiences that would look impressive on their resume.
  • Give them a mentor. Make sure your interns feel like they're part of the team. An easy way to do that is to assign each one a mentor, an employee who can show them the ropes, invite them to lunch and answer any questions they may have.
  • Put them on the “team.” Likewise, make sure the interns feel like an employee and get invited to employee events, such as employee lunches or other social activities. Have them sit in a central place in the office so they can mingle with employees and make friends.

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