Why Unpaid Internships Should be Illegal

The proliferation of young unpaid interns hoping to advance their career prospects in the contemporary workplace has provided a boon for employers in glamorousindustries, like entertainment and journalism, as well as to institutions of highereducation. Employers have been gaining free work from young interns hoping to get a“foot-in-the-door” or a line on their resume that will help them launch careers nototherwise open to many.

Colleges who offer or require internships as part of theiracademic programs gain the benefit of charging tuition while delegating most educationalsupervision to the employers that benefit from the students’ work. And, as long as thestudents gain some promised educational benefit or “leg up” on future employment, theunpaid internship may seem to provide benefits to all parties. All parties, that is, otherthan the workers who are displaced from paid employment by the work of the unpaidworkers.

Unpaid Internships Displace Paid Workers

Because unpaid internships that provide work for employers that otherwise wouldbe done by paid workers displace those workers, they should be treated as illegal underthe Fair Labor Standards Act (FLSA) and analogous state laws that require the paymentof a minimum wage to all employees. One of the FLSA’s primary concerns is thepreservation of minimally paid work. Although compensation may be a condition ofemployment for most regulatory statutes, such as the employment discrimination lawsand the labor laws, the FLSA defines employ more expansively to include “to suffer orpermit to work.” Those who are permitted to provide productive work for employers areemployees under the FLSA, whether they are compensated by pay or rather bynetworking connections, a line on a resume, some training, or educational credits.

TheFLSA contains no exemption for interns or other trainees. Relying on analysis andlanguage in an early Supreme Court interpretation of the FLSA, Walling v. PortlandTerminal Co., 330 U.S. 148 (1947), the Department of Labor (DOL) expressed anappreciation of all of this in an informal guidance in a Field Operations Handbook on thetreatment of trainees.

In 2010, the DOL published similar guidance for the treatment ofunpaid interns in the for-profit private sector. That guidance (which is available at the bottom of this piece) states that an intern is not anemployee only if each of six criteria are met, the most important of which are: (1) theintern’s training is similar to that which would be provided in an educationalenvironment; (2) the internship is for the intern’s benefit; (3) the intern does not displaceregular employees; and (4) the employer derives no immediate advantage from theactivities of the intern, and on occasion its operations may actually be impeded. Togetherthese criteria ensure that employers do not use unpaid interns to take work that otherwisewould need to be done by paid employees, but rather only provide training to interns,either for charitable community service or perhaps through compensation from someeducational institution.

Second Circuit Undermines the DOL's Efforts to Apply the FLSA in Glatt v. Fox Searchlight

In Glatt v. Fox Searchlight Pictures, Inc., however, the Court of Appeals for theSecond Circuit this year joined some other lower courts in undermining the DOL’sefforts to apply the FLSA to unpaid internships consistently with the Court’s decision inWalling. Rejecting the DOL’s strict requirements that the employer not benefit at all fromthe work of the intern and that the internship be only for the benefit of the intern, theCourt of Appeals panel in Glatt held that the FLSA does not prohibit unpaid internshipsif the intern rather than the employer is the “primary beneficiary” of the internship.

Thecourt did not explain how the ‘apples’ of the intern’s educational benefits could becompared to the ‘oranges’ of the production benefits gained by the employer. Instead, thecourt offered a “non-exhaustive set of considerations” to be weighed. Although some ofthe considerations are similar to those set forth in the DOL guidelines, because they areframed not as independent hurdles to be cleared, but rather as factors to be weighed,using in each case, “extent to which …” language, the court’s test, like most multifactortests, offers no clarity or predictability. This lack of predictability will discourage anylawyers considering whether to challenge an unpaid internship under the FLSA. Thecourt’s discouragement of further challenges to unpaid internships was compounded byits holding that its fact-specific multifactor weighing test required the vacation of theDistrict Court’s conditional certification of an FLSA collective action of similarlysituated unpaid interns, as well as the vacation of the certification of a class action underthe analogous New York state minimum wage law.

Glatt Discourages Challenges to Unpaid Internships

The Court of Appeals’ message of discouragement to further challenges to unpaidinternships perhaps was most forcefully delivered by its decision to remand to the districtcourt to reconsider, under its “primary beneficiary” test, whether summary judgementshould be entered for two of the named plaintiffs, notwithstanding the egregious facts onwhich the lower court had based its earlier grant. The responsibilities of one of theplaintiffs, Eric Glatt, “included copying, scanning, and filing documents; trackingpurchase orders; transporting paperwork and items to and from the Black Swan set;maintaining employee personnel file; and answering question about the accountingdepartment. … His post-production responsibilities included drafting cover letters formailings; organizing filing cabinets; filing paper-work; making photocopies; keeping thetake-out menus up-to-date and organized; bringing documents to the payroll company;and running errands, one of which required him to purchase non-allergenic pillow forDirector Darren Aronofsky.” This glorified ‘gopher’ position offered no particulartraining or educational credits; it was for the benefit of only the employer, FoxSearchlight, as it enabled Fox to gain work for which it would otherwise have to pay adisplaced employee at least a minimum wage.

Similarly, the responsibilities of unpaid intern Alexander Footman “includedpicking up and setting up office furniture; arranging lodging for cast and crew; taking outthe trash; taking lunch orders; answering phone calls; watermarking scripts; drafting dailycall sheets; photocopying; making coffee; making deliveries to and from the filmproduction set, rental houses, and the payroll office; accepting deliveries admitting gueststo the office; compiling lists of local vendors; breaking down, removing, and sellingoffice furniture and supplies at the end of production; … and other similar tasks anderrands, including bringing tea to Aronofsky and dropping off a DVD of Black Swanfootage of Aronofsky’s apartment.” Footman was another glorified ‘gopher’ who receivedno directed training or course credit and whose work enabled Fox to avoid paying at leastminimum wages to someone who could not afford to work without pay.

Despite its refusal to confirm summary judgment even in the egregious Glatt andFootman cases, the Court of Appeals’ resistance to applying the FLSA to unpaidinternships seemed to derive primarily from its concern that academic institutions be ableto continue to use internships as part of their programs. Thus, the court stressed that“internships are widely supported by educators” as well as “employers looking to hirewell-trained recent graduates.” Further, one of the “considerations” in its multifactor“primary beneficiary” test is “[t]he extent to which the internship is tied to the intern’sformal education program by integrated coursework or the receipt of academic credit.” Another is “[t]he extent to which the internship’s duration is limited to the period inwhich the internship accommodates the intern’s academic commitments bycorresponding to the academic calendar.” However, internships that are part of anacademic program can result in the displacement of paid workers as readily as can non-academic internships, like those of Glatt and Footman, if the interns do work thatprovides benefits to the employer for which it would otherwise have to pay.

Unpaid Interns Typically from More Affluent Backgrounds than Displaced Workers

The three judges on the Court of Appeals panel do not seem to take into accountthat the unpaid interns who gain valuable experience, a resume line, and perhaps contacts,are likely to be from more affluent backgrounds than the displaced workers who require awage and are denied experience and other benefits. This is usually true regardless ofwhether academic credit is extended to the unpaid interns.

Furthermore, the Glatt court’srejection of the DOL test was not necessary to preserve academic internships. There is noreason that legitimate educational institutions cannot coordinate internships that provideminimum wages. If an internship really provides real world valuable experience, theemployer should be benefitting sufficiently to be willing to contribute such wages and theeducational institution should be willing to reduce tuition in line with its decreasededucational responsibilities.

The DOL April 2010 Fact Sheet on Internship Programs Under The Fair Labor Standards Actis available in full below:

(Photo credits from top to bottom: Ellis Henican, New York Times, Odyssey, ABC News)