Is The Unpaid Internship Dead?



Susan Adams, Forbes Staff

Headlines this week about a federal judge’s ruling in an unpaid internship case are shining a light on the murky, confusing world of internships and making it clear that in most cases the law requires private employers to pay a minimum wage, even if the interns have voluntarily signed on to work for little or no money.

On Tuesday a federal judge in New York ruled that Fox Searchlight Pictures broke federal labor law and New York state minimum wage laws when it employed two production interns, Eric Glatt and Alexander Footman, on the film Black Swan, for no pay.

Like many unpaid interns in creative fields, Glatt and Footman performed thankless tasks with no educational value, like ordering lunch, answering phones and taking out the garbage. Because so many people want to get a foA Supreme Court case from the 1940s prompted the Labor Department to lay out a six-part test employers must meet in order to have unpaid workers. (The DOL used to call them “trainees” but changed the language to “interns” in April 2010). Among the requirements: The internship has to be similar to training in a school, it has to be “for the benefit of the intern,” the intern doesn’t displace paid workers and the employer “derives no immediate advantage” from the intern’s activities. In other words, the internship’s goal is to train and teach the intern, rather than to provide free labor for the employer. If the employer doesn’t meet those six criteria, it is supposed to pay the intern minimum wage or better.

Though the laws are clear, employers in competitive, creative fields have ignored them. As the ranks of the unemployed have swelled and the surplus of jobless college students and grads has grown, increasing numbers of people young and old have been signing on for unpaid internships, wanting to make contacts and accumulate résumé lines that can help them get paying work. No one tracks the total number of interns in the U.S. but Robert Shindell, a vice president at Intern Bridge, a consulting firm, says that more than a million American students a year do internships. Roughly a fifth of those positions pay zero and offer no course credit.

In 2010, The New York Times reported that federal and state labor officials wanted to crack down on illegal internships. But plaintiffs were afraid to bring suit because they didn’t want to be known as troublemakers.

Since then the scene has shifted. Plaintiffs have filed at least six intern suits in the last two years claiming they were cheated out of wages, including a class action filed yesterday against Condé Nast by two former interns, one at W Magazine and the other at The New Yorker. Outten & Golden, the same plaintiff-side law firm that filed the Fox Searchlight case, is bringing the suit. It claims that the W intern, Lauren Ballinger, packed and unpacked accessories, ran errands and filled out insurance forms and was paid just $12 a day. The New Yorker intern worked three days a week reviewing submissions, responding to readers’ emails, proofreading, line editing and working on the online cartoon database. He got paid $300 to $500 for each summer he worked there. In other words, both got paid far less than minimum wage for jobs the magazines would have had to pay someone else a full salary to do. The plaintiffs are seeking class action status.

Outten & Golden also sued Hearst Magazines on behalf of a former Harper’s Bazaar intern, saying she worked up to 55 hours a week for no pay. Last July a federal court ruled she could move ahead with a collective action, meaning other Hearst plaintiffs can opt into the suit. An unpaid intern also reportedly sued Elite Model Management for $50 million.

After unpaid interns sued TV news personality Charlie Rose and his production company, the defendants settled last December for an amount that came to $110 a week in back pay for a maximum of 10 weeks, to be paid to each of 189 interns.

Then on May 29 a former intern sued fashion designer Norma Kamali. The intern claims she spent three weeks working more than 40 hours a week and that her only compensation was three metrocards. According to the complaint, she was hired for a month, during which she did the same kind of work and put in the same long hours, until she was laid off and Kamali advertised for an unpaid “apprentice” to do the job.

The rash of suits is leading some lawyers who represent employers to advise their clients that they should either shut down their internship programs or start paying a minimum wage. “The legal standards have always been challenging for employers who use unpaid interns,” says Daniel O’Meara, chairman of the employment law division of Philadelphia-based Montgomery, McCracken, Walker & Rhoads. “Now that there is an increased awareness among interns, and more importantly, among plaintiff lawyers, the likelihood of a challenge to an unpaid internship is dramatically higher,” he adds. “Given a choice between using unpaid interns and litigating, or not using the intern, most employers will not use the intern.”

Jeffrey Landes, a partner at New York’s Epstein, Becker & Green, which also represents employers, agrees. “We tell our clients that it’s not prudent to have an unpaid internship program,” he says. “They should pay minimum wage and you could also have some liability for overtime.”

One way companies try to protect themselves from legal challenge is to hire student interns who get credit from school while they are on the job, since a school’s stamp of approval can bolster the idea that the internship counts as educational training that benefits the intern. Often students must write papers about their experiences and attend an academic seminar about what they are learning. But Justin Swartz, an Outten & Golden partner who worked on the Fox Searchlight and Condé Nast cases, says that non-paying internships for credit can still run afoul of the law if the student is doing “productive work” for the employer. At Forbes we have used journalism students who accumulate academic credit while they work for us, usually less than 20 hours a week. These are not always the best arrangements for students, because they have to pay their schools for the academic credit, which can come to thousands of dollars per term.

As I was reporting this story, I felt torn about whether interns should be able to choose to work for little or no pay—call it volunteering rather than interning–to beef up their résumés and make contacts, even if the experience includes drudgery. Certainly the New Yorker intern was learning marketable skills that would have been impossible to get in a classroom. And what about that old concept of paying dues? Plaintiffs’ lawyer Swartz set me straight: “The law says that when you work, you have to get paid,” he says simply. In other words, you should get paid to pay your dues.

I can’t argue with that, though I find O’Meara’s prediction chilling: Instead of paying interns, many employers may decide to eliminate internship program altogether “and just tell everyone to work a little bit harder.”

At least some employers have decided to pay their interns rather than axing their programs. Fox Searchlight has changed its policy and now pays its interns. NBC News started paying its interns as of this January. Let’s hope that internships in the creative fields continue and that employers find a way to pay at least a minimum wage.ot in the door in the film world, for years interns have been willing to do scut work in exchange for proximity to movie producers and talent. But it turns out that arrangement breaks laws that date back to 1938, when Congress passed the Fair Labor Standards Act, which includes many of the basic labor laws we take for granted today, like the minimum wage.