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Employment Law Alert

June 20, 2013

 Employers Beware:
Unpaid Internships can Cost Big Bucks

Summer sometimes means free labor in the form of unpaid interns – but you should know by now that nothing in life is free.  As Fox Searchlight Pictures learned earlier this month when a judge ordered it to pay back wages (and additional potential penalties) to previously unpaid interns, it is nearly impossible to avoid incurring minimum wage and overtime obligations for your workers – even your interns.  In a nutshell, unpaid internships are permitted under the federal Fair Labor Standards Act only when the internship experience is primarily for the intern’s own educational benefit.  Although the legality of an unpaid internship is a fact-intensive question, these six factors are instructive:

  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 intern, 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.

According to the Department of Labor, a relationship that meets all six criteria is not an employment relationship and is not subject to minimum wage laws.  However, because employers who unlawfully neglect to pay employees minimum wage can incur stiff penalties, it is advisable to seek the advice of legal counsel if unsure about an intern’s status.

Importance of Having Comprehensive Policy
Against Discrimination, Harassment 
and Retaliation

Employers that have policies against harassment that include complaint and investigation procedures have better a chance of avoiding liability in the event an employee brings a claim. The U.S. Court of Appeals for the Fourth Circuit recently affirmed summary judgment in favor of an employer on the ground that the employer took reasonable steps to prevent harassment by enforcing its established anti-harassment policy, and the employee unreasonably failed to take advantage of preventative or corrective opportunities under the policy.  

Following its policy, the employer investigated its employee’s complaint of sexual harassment.  During that investigation, the employee failed to fully cooperate by failing to provide certain information regarding the alleged harassment. The fact that the employer’s policy contained a complaint and investigation procedure, which the employee failed to properly utilize, allowed it to avoid liability. Employers should review their policies against discrimination, harassment and retaliation to ensure that they contain complaint and investigation procedures.

The contents of this Alert are for informational purposes only, and do not constitute legal advice. If you have any questions about this Alert, please contact a member of the Shulman Rogers Employment and Labor Law Group or the Shulman Rogers attorney with whom you regularly work.


Gregory D. Grant

Meredith “Merry” Campbell