By: Cameron Keng, Contributor
Clearly, the title is a bit over-dramatic and overstated, but the question of whether hiring interns makes sense anymore needs to addressed. Fall seems to have arrived early this year and so have the intern lawsuits. Lawsuits against employers by unpaid interns are becoming common and very public. Fall is the season, when these cases come out of the woodwork because the interns have just returned to school and everyone is swapping stories. Next thing you know, the intern you hired is pissed and consulting an attorney on a class action lawsuit.
Frankly, the companies that are hit with these lawsuits are usually the only ones to blame for their predicament. Most recent examples include talk show host Charlie Rose settling an intern class action lawsuit for $250,000 dollars. P Diddy’s Bad Boy Entertainment and Donna Karan International are two other companies being sued by their former interns this fall. It’s not surprising these companies are being sued considering fashion and film are industries where unpaid internships are the norm and they usually involve menial work. But, they’re not the only industries that are being hit by these lawsuits. Publishing companies such as Hearst who owns ELLE, Cosmopolitan, Marie Claire, Esquire and The Oprah Magazine also lost a lawsuit filed by their former interns.
Most small and midsize businesses overlook the fact that interns are generally required to be paid under the Fair Labor Standards Act (“FLSA”). In Walling v. Portland Terminal Co., 330 U.S. 148 (1947), the Supreme Court outlines six requirements to satisfy in order to qualify for an exemption from paying interns.
- 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.
The factors above is a test that weighs the value provided for the Employer vs. the Intern. The intern needs to be the party receiving the greater amount of value. More importantly, the company needs to be receiving less value or a loss of value.
“The safe harbor that most companies rely on is providing college credits for their unpaid internships” in order stay on the right side of the law as Tom Morselli, a 15 year human resources senior executive at PulsePoint. This isn’t a magic bullet, but it is a strong argument that the intern derived a benefit from the internship.
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