Internships or Indenture?

American businesses have had a long history of providing opportunities for those seeking to gain practical knowledge and experience for little or no compensation.  These folks are typically young students, and they are commonly referred to as interns.  One internet dictionary defines internship as “any official or formal program to provide practical experience for beginners in an occupation or profession, or a period of time in which a beginner acquires such experience".  Although typically a business/intern relationship is born out of the business’s benevolence and altruism, not all internships are created equal.  One recent court decision scrutinized particular “internship” relationships and found them to be more like indenture than internship.  This case, entitled Glatt v. Fox Searchlight Pictures, Inc., out of the United States District Court for the Southern District of New York, is a case involving several individual Plaintiffs who were engaged by the Defendant film production company as unpaid interns instead of paid employees.  The Plaintiff “interns” brought the action against the company alleging violations of the Fair Labor Standards Act (FLSA) which requires all employers to pay employees a minimum hourly wage as well as overtime, if earned.  As part of its analysis the Court looked to a Department of Labor Fact Sheet which enumerated six criteria for determining whether the Plaintiffs were more properly categorized as employees and thus entitled to the protections of the FLSA.  Those six criteria are as follows:

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 interns 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. 

 

The key factors discussed by the Court appear to be whether the internship experience was for the benefit of the intern, and whether the Plaintiffs displaced regular employees.  Here the Court found that the Plaintiffs undoubtedly received some benefits from their internships including resume listings, job references and an understanding of how a production office works.  But those benefits, the Court said, were incidental to working in the office like any other employee and were not the result of internships intentionally structured to benefit them.  Resume listings and job references result from any work relationship, paid or unpaid, and are not the academic or vocational training benefits envisioned by this factor.  On the other hand, the Court stated, the employer received the benefits of the interns’ unpaid work, which otherwise would have required paid employees.  Specifically, the Court noted that one of the Plaintiffs performed chores for the employer production company including assembling office furniture, arranging travel plans, taking out trash, taking lunch orders, answering phones, watermarking scripts and making deliveries.  The Court concluded that, if this “intern” had not performed these tasks for free, a paid employee would have been needed. 

 

This recent court decision should serve as a reminder to employers who may consider engaging an intern to perform chores or work that benefits the company in order to save money on hiring an employee.  Through this recent decision, and others, employers are forewarned that an internship is not a means through which the employer should seek to have work performed for free.  Employers should engage interns primarily for the benefit of the intern and through a bona-fide training or educational internship program.

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Harrisburg Magazine Readers' Choice 2011