Are Unpaid Internships Nearing the End?

10.01.2013

Let’s face it, unpaid internships are opportunities for exposure to the inner workings of business that a person otherwise might not be able to obtain. In today’s economic climate, internships are often the only way people can get good experience and make invaluable contacts, which can also lead to a paid position within the organization.  If not, other potential paying employers are impressed with the experience, and not whether that experience was paid.

However, a recent wave of lawsuits may guarantee that unpaid internships will become a thing of the past. Last month, a federal judge in New York ruled that unpaid interns on the movie “Black Swan” should have received at least the minimum wage. The judge also allowed a class-action suit to go forward against the Fox Entertainment Group, the parent company of the film’s production division.

Since the Black Swan suit was filed, more than 15 other lawsuits have followed in its wake across the country.  Courts cannot even agree on which test should be used to determine whether someone should be paid.  There is a substantive difference among circuits over how much to rely, if at all, on the U.S. Department of Labor's six-factor test for determining whether an intern is a trainee or an employee under the Fair Labor Standards Act (FLSA).  Two circuits, the Sixth and the Fourth, dismiss the test out of hand, saying it conflicts with a Supreme Court ruling from 1947, which is the last time the court examined the trainee payment issue. But the Eleventh and Tenth circuits, along with Southern District of New York, apply the test with varying levels of deference.

Just recently, a pair of former unpaid interns have asked the U.S. Supreme Court to resolve the circuit split as to whether they qualify as employees who should be compensated under the FLSA.  If the Court accepts the case, it will decide what criteria to use to determine whether unpaid interns should be paid employees. 

The harsh reality is that many employers are terminating their unpaid internship programs in order to be safe.  If that trend continues, the litigants may be doing a huge disservice to potential interns.