Outside Counsel

Rising Litigation Over Unpaid Interns

, New York Law Journal

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Samuel Estreicher
Samuel Estreicher

With the ongoing difficulty recent graduates have obtaining jobs in an oversaturated market, unpaid internships continue to provide a valuable opportunity to break into a desired profession or line of work. Unpaid internships allow job seekers to develop practical skills, real world experience and valuable contacts to help them in their future job searches.1

In view of the recent rise in litigation related to whether interns must be paid at least a minimum wage to comply with the wage-hour laws, employers are beginning to reconsider their commitment to internship programs.

Defining Employment

The Fair Labor Standards Act (FLSA) defines the term "employ" as to "suffer or permit to work"2 and "employee" as "any individual employed by an employer."3 The FLSA lists some exceptions to the definition of "employee," including certain people employed by public agencies, individuals employed by a member of their family working in agriculture and volunteers for public agencies.4

The U.S. Department of Labor takes the position that, under the FLSA, students are not allowed to volunteer their services for employers, whether they are for-profit or non-profit entities, unless certain criteria are met. The Labor Department has issued a "Fact Sheet" detailing a six-factor test for determining whether an internship is a training program, and therefore exempt under the FLSA.5 The department derived the six-factor test from the Supreme Court's 1947 decision in Walling v. Portland Terminal6 These factors are:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that 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.

Although this is not the place to discuss Portland Terminal, it is not clear from the court's decision that all six factors were necessary to allowing an unpaid training program in that case. Nor is it clear that all of these factors are relevant, or relevant to the same degree, to an unpaid internship program.

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