In "The Internship," currently playing in movie theaters, actors Vince Vaughn and Owen Wilson play unemployed salesmen-turned-interns competing for jobs at a well-known Internet company.
Their misadventures as interns include solving Rubik's cubes, competing in team sports events and locating a curmudgeonly professor. Their unpaid internship looks hilarious, but it is far cry from the educational experience real-world companies must provide their unpaid interns in order to avoid federal and state minimum wage laws.
With summer now here, it is a good time to review the rulings in some recent class actions coming out of the entertainment and media industries, as well as the rules on unpaid internships.
Last month, in Wang v. The Hearst Corporation, a New York court denied class certification in a case brought by interns at various Hearst-owned magazines. The interns challenged Hearst's practice of classifying them as unpaid interns, allegedly to avoid minimum wage and overtime laws under the Fair Labor Standards Act and New York state law.
The court found that the plaintiffs could not satisfy the commonality requirement for class certification. While plaintiffs could demonstrate a corporate-wide policy of classifying proposed class members as unpaid interns, the nature of the internships varied greatly from magazine to magazine. The court noted there was no evidence of a uniform policy among the magazines regarding the interns' specific duties, training, or supervision.
Days later, attorneys for the defendant in Glatt v. Fox Searchlight Pictures Inc.,made a similar argument to defeat class certification in a case in which Fox interns challenged their unpaid status under federal and New York state minimum wage and overtime laws. In that case, the interns worked on the sets of different films, or were based out of corporate offices, and weren't governed by a centralized policy or procedure.
The defendant in Glatt argued that class certification should be denied because of the lack of uniform policy. While the court in Glatt has not yet ruled, these two cases suggest that, although claims by unpaid interns may persist, plaintiffs may find it increasingly difficult to sustain them as class actions.
When hiring unpaid interns, review the rules. According to the Department of Labor, internships in the for-profit private sector will be viewed as employment relationships for which the federal minimum wage and overtime rules will apply, unless the intern is truly receiving training which meets six criteria:
(1) the internship is similar to training that would be given in an educational environment;
(2) the internship experience is for the benefit of the intern;
(3) the intern is not replacing employees and works under close supervision;
(4) the sponsor of the intern does not derive immediate benefit from intern's activities and at times, its operations may actually be impeded;
(5) the intern is not entitled to a job at the conclusion of the internship;
(6) the sponsor and the intern understand the intern is not entitled to wages for the time spent in the internship. As of 2010, the California Division of Labor Standards Enforcement relaxed the multi-factor test it previously applied and now uses the same criteria as the Dept. of Labor.
While the Hearst ruling is good news for employers, the case did not address the merits of the interns' claims and does not mean employers can relax their compliance efforts. If an employer improperly classifies an internship as "unpaid," the employer could be liable for failure to pay minimum wage and overtime, penalties for failure to provide meal and rest breaks, as well as potential liability for violations of anti-discrimination and anti-harassment laws that apply to employees.
The bottom line is that employers should apply six-factor test and if their internships do not meet the criteria, the interns should be paid at least minimum wage.