Recently, there have been three (3) separate and distinct lawsuits filed in New York dealing with unpaid interns and a company’s obligation to “pay them for their work” (Eric Glatt, et al. v. Fox Searchlight Pictures, Inc., et al.; Lauren Ballinger, et al. v. Conde Nast; Xuedan Wang, et al. v. Hearst Corp.). In all of these cases, interns are claiming that they are entitled to compensation from their employer because the employer “suffered and/or permitted the intern to work,” and perform duties that were performed by “other regular employees” (i.e. doing office work; delivering documents to customers; reconciling purchase orders and invoices; etc.). In essence, the “interns” did not work in a “learning environment” but were merely “manual labor.”

In 1947, the United States Supreme Court in the case of Walling v. Portland Terminal Company, 330 U.S. 148, established the fact that “trainees” are not employees under the Fair Labor Standards Act (FLSA) and established certain required standards to meet the trainee definition (i.e. the trainees did not displace any regular employees; the trainee’s work did not provide an immediate advantage to the employer; the trainee’s work was not primarily “manual labor”; and the work performed was for the benefit of the trainee, not the employer). After the Supreme Court Decision, the United States Department of Labor (DOL) put together a list of six (6) criteria for determining whether a trainee or intern may be unpaid:

• 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; and
• The internship experience is for the benefit of the intern, not the employer; and
• The intern does not displace regular employees, but may work under the close supervision of existing staff; and
• The employer that provides the training (internship) derives no immediate advantage from the activities of the intern and, on occasion, its (employer’s) operations may be impeded; and
• 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.

Based on DOL rules and regulations, all six (6) of the above standards must be met.

Any company that is employing an intern should clearly establish the “rules of the road” with regard to the internship and make absolutely certain that the primary purpose of the internship is the fulfillment of an educational opportunity. The closer the intern gets to working like an employee (i.e. doing manual office tasks; delivering employer product to customers; doing photocopying or addressing envelopes to customers; etc.), the more probable is the fact that the individual is no longer acting as an intern but is merely acting as an employee and thereby is entitled under the provisions of the FLSA and in almost every state’s Wage Payment Act, at least pay on the basis of the minimum wage for hours worked.

There is little doubt that because of the state of the economy and the rapid growth of “internships,” these types of cases will greatly expand. Plaintiffs’ attorneys get their fees paid by employers if they can win a portion of their case. “Put your house in order now” based on the DOL standards; do not wait for a court or the DOL to do it! As an aside, maybe providing an internship is not a good idea unless it is sanctioned by a college/university with a well-defined program.

Questions? Contact Walter J. Liszka in the Chicago office at waliszka@wesselssherman.com or by phone at (312) 629-9300.