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Wage & Hour – Development & Highlights To Highlight Recent and Noteworthy Developments In Cases And Regulations on Wage and Hour Laws That Affect Large and Small Businesses

Unpaid Internships – Under the Fair Labor Standards Act: A Thing of the Past

Posted in Working Time

Students and recent grads looking for work experience are often routed towards the path of the “unpaid internship.” These young people work for free, and often have to subsidize the cost of commuting, while performing the same work as paid employees.   The days of working for free, however, may be waning, after a New York federal judge ruled that Fox Searchlight Pictures violated minimum wage and overtime laws by failing to pay the interns who worked on production of the movie “Black Swan.” The case is entitled Glatt v. Fox Searchlight Pictures and was filed in the federal court in the Southern District of New York.

The decision adheres to the six-part test outlined by the USDOL for gauging whether an intern is an “employee” or not. According to the test, the determination of whether an internship can be unpaid depends on the facts and circumstances of each program and the application of the following six factors:

1.     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;

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.

Significantly, only if all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.

This decision and others like it that have recently been issued stand as a warning to employers who seek to engage (not “hire”) young people to work as interns. If the six-part test is not met in its entirety, then the person or persons will be deemed employees and entitled to the minimum wage (and overtime, if applicable). That potentially dramatic liability must make employers act very cautiously in these matters.