Court: If interns perform work, pay them!

In a decision issued just in time for this year’s crop of college students to report for summer internships, a federal court in New York has ruled that Fox Searchlight Pictures violated wage-and-hour laws by failing to pay interns who did menial tasks during production of the Oscar-nominated movie “Black Swan.”

Plus, the June 12 opinion by the U.S. District Court for the Southern District of New York green-lighted a class-action lawsuit covering everyone who worked unpaid internships for Fox Searchlight from 2008 to 2010.

This case—Glatt, et al. v. Fox Searchlight Pictures—is a timely reminder that, in almost all cases, employers must pay interns at least the minimum wage, no matter how basic their work is.

Glatt was the first real court test of U.S. Department of Labor (DOL) guidance on unpaid internships issued in 2010.To comply with the Fair Labor Standards Act (FLSA), the DOL says an unpaid intern program must meet all six of these criteria:

1. The internship resembles training offered by an educational institution.
2. It exists to benefit the intern.
3. The intern doesn’t displace a regular employee, and works under close supervision of existing staff.
4. The employer derives no immediate advantage from the activities of the intern. Sometimes, its operations may actually be impeded.
5. The intern isn’t necessarily entitled to a job after the internship ends.
6. The employer and intern understand the internship is unpaid.

If the internship fails to meet any of those tests, the DOL says interns must be paid at least the minimum wage.

The case: Eric, Alexander, Eden and other unpaid interns worked as production assistants, bookkeepers, secretaries and janitors while Fox Searchlight was filming “Black Swan” in New York.

They sued, claiming failure to pay them violated the FLSA.

The court agreed, focusing primarily on the second and third DOL criteria. “Searchlight received benefits from their unpaid work, which otherwise would have required paid employees,” the court wrote. “The fact that they were beginners is irrelevant.”

Also irrelevant, according to the court: Whether any of the interns received academic credit for their internships. It said that’s between students and their colleges.

The court ruled that the plaintiffs were, in fact, Fox Searchlight employees under both the FLSA and New York law, and are entitled to back pay. A separate class-action case will determine if more than 40 other studio interns will also get back pay. (Glatt, et al. v. Fox Searchlight Pictures, SD NY, No. 11-Civ.-6784, 2013)

Advice: Have your attorney review your internship arrangements in light of this decision, which could prompt courts nationwide to apply the DOL criteria. That could spell the end of unpaid internships.

Hiring interns: The 4 steps to keeping it legal

Courts view interns the same as employees: as “agents” of your organization. So should you.

If you use interns or plan to, advise supervisors to manage them as closely as employees, if not more so. And apply your workplace policies to them.

Reason: Your organization can be held responsible for the actions of anybody, including unpaid interns, while they perform work for you. The activities of interns are under the employer’s control, not the school’s.

Some courts have ruled that employment-discrimination laws don’t apply to unpaid interns. But that doesn’t mean you can allow intern harassment. In fact, interns may be able to pursue claims under Title IX, which bans sex bias in education programs.

Also, if your intern program reaches out to high schoolers, remember to follow federal child labor laws. For further details, visit www.dol.gov/dol/topic/youthlabor, and check your state’s child labor laws.

To help structure a legally sound intern program, follow these four steps:

1. Define supervisory roles and supervisor/intern evaluations. Reliable supervision is the key to preventing problems, including injuries, discrimination and poor performance. Make sure all supervisors know who oversees each intern’s work.
2. Draft an intern policy. It can reduce misunderstandings that can lead to lawsuits. The policy should define the program, such as compensation structure (or the fact that interns won’t be paid), eligibility requirements and the intern’s at-will status. Never imply the promise of employment.
3. Pick up formal documentation from the intern’s school that explains the educational relevance of the internship if the student will earn credit.
4. Ask whether the school provides liability insurance to cover any damage caused by a student. Many schools carry it. If your organization carries employment-practices liability insurance, see if it extends to interns.