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March 9-15, 2012

Today’s unpaid intern could be tomorrow’s plaintiff

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Today’s unpaid intern could be tomorrow’s plaintiff

By Lisa van der Pool

lvanderpool@bizjournals.com

Employers, take note of that eager-to-please, yet unpaid, intern sitting next to the photo copier.

He or she could wind up costing your company a hefty pile of cash.

Two high-profi le national lawsuits brought by disgruntled unpaid interns in recent months highlight the little-known fact that many companies do not follow specifi c federal guidelines that must be met in order to have unpaid interns kick-ing around the offi ce doing everything from mundane data entry to helpful, en-try-level tasks.

Local lawyers say that there are likely many local executives unwittingly ex-posing their companies to lawsuits when it comes to unpaid interns and there are plenty of plaintiffs attorneys sniffi ng around for their next big wage-and-hour case.

Firms must meet the six-part test from the Department of Labor to avoid li-ability for unpaid internships. For interns who aren’t getting college credit for work, those criteria are: the internship must be similar to training received in an educa-tional environment; the internship has to benefi t the intern; the intern cannot dis-place regular staff and must work closely with staff; the employer can “derive no im-mediate advantage” from the work of the intern; the intern is not entitled to a job at the end of the internship; and both the em-ployer and intern have to understand that the intern will not be paid.

“What I generally tell my for-profi t companies is that because the intern’s daily activities cannot benefi t the com-pany ... that is usually the prong where the for-profi t fails,” said Sara Goldsmith Schwartz, managing partner of Andover-based law fi rm Schwartz Hannum PC. “The best way for companies to avoid legal liability with internships is to pay mini-mum wage.”

In Massachusetts, companies are re-quired to prove that the unpaid internship

is part of an educational program. Compa-nies that break the law could wind up pay-ing treble damages, plus legal fees to the plaintiff’s lawyers.

One of the lawsuits that has brought scrutiny to the issue was fi led late last year by two former Fox Searchlight in-terns who worked on the production of the Oscar-nominated fi lm “Black Swan.” The interns, who were not paid for their work, are alleging that Fox Searchlight misclas-sifi ed dozens of workers as unpaid interns, in an effort to keep production costs low.

“Unpaid interns are becoming the mod-ern-day equivalent of entry-level employ-ees. ... This practice runs afoul of basic wage-and-hour laws, which require that employers pay all of their employees — even those desperate for work — the mini-mum wage as well as overtime for hours over 40 in a workweek,” stated the com-plaint in Glatt v. Fox Searchlight.

Gary Oberstein, managing partner and an employment partner at Nixon Pea-body LLP in Boston, says “lots and lots” of Boston-area companies are likely mis-classifying workers as unpaid interns.

“I fi nd this unpaid-intern issue to be yet another example of where the law runs directly counter to what’s often in the mutual best interest of the employer and would-be interns,” said Oberstein. “Many industries have a long, rich history of un-paid internships.”

Lawyers say that fi rst and foremost, employers should draw up detailed intern-ship agreements that state exactly why the interns are not being paid.

“When people ask me, ‘Should I worry about this?’ I say yes, because there’s po-tential liability,” said Joshua Davis, an employment lawyer at Ogletree Deakins in Boston.

Mark Pomfret, an employment partner at K&L Gates, said that he’s noticed in the slow economy that more companies are seeking interns for cheap labor. But that’s a potentially disastrous strategy.

“Short of meeting that six-part test, the recommended course is to pay minimum wage,” said Pomfret.

W. MARC BERNSAU | BUSINESS JOURNAL

Sara Goldsmith

Schwartz of Schwartz

Hannum PC in Andover says

she urges clients to pay

minimum wage to avoid

legal liability with interns.

Employers, take note of that eager- to-please, yet unpaid, intern sitting next to the photo copier.

He or she could wind up costing your company a hefty pile of cash.

Two high-profile national lawsuits brought by disgruntled unpaid interns in recent months highlight the little-known fact that many companies do not follow specific federal guidelines that must be met in order to have unpaid interns kick-ing around the office doing everything from mundane data entry to helpful, entry-level tasks.

Local lawyers say that there are likely many local executives unwittingly expos-ing their companies to lawsuits when it comes to unpaid interns and there are plenty of plaintiffs attorneys sniffing around for their next big wage-and-hour case.

Firms must meet the six-part test from the Department of Labor to avoid liabil-ity for unpaid internships. For interns who aren’t getting college credit for work, those criteria are: the internship must be similar to training received in an educational envi-ronment; the internship has to benefit the intern; the intern cannot displace regular staff and must work closely with staff; the employer can “derive no immediate advantage” from the work of the intern; the intern is not entitled to a job at the end of the internship; and both the employer and intern have to understand that the intern will not be paid.

“What I generally tell my for-profit com-panies is that because the intern’s daily activities cannot benefit the company ... that is usually the prong where the for-profit fails,” said Sara Goldsmith Schwartz, man-aging partner of Andover-based law firm Schwartz Hannum PC. “The best way for companies to avoid legal liability with internships is to pay minimum wage.”

In Massachusetts, companies are re-quired to prove that the unpaid internship

is part of an educational program. Compa-nies that break the law could wind up pay-ing treble damages, plus legal fees to the plaintiff’s lawyers.

One of the lawsuits that has brought scrutiny to the issue was filed late last year by two former Fox Searchlight interns who worked on the production of the Oscar-nominated film “Black Swan.” The interns, who were not paid for their work, are alleging that Fox Searchlight misclassified dozens of workers as unpaid interns, in an effort to keep production costs low.

“Unpaid interns are becoming the mod-ern-day equivalent of entry-level employ-ees. ... This practice runs afoul of basic wage-and-hour laws, which require that employers pay all of their employees — even those desperate for work — the mini-mum wage as well as overtime for hours over 40 in a workweek,” stated the com-plaint in Glatt v. Fox Searchlight.

Gary Oberstein, managing partner and an employment partner at Nixon Pea-body LLP in Boston, says “lots and lots”

of Boston-area companies are likely mis-classifying workers as unpaid interns.

“I find this unpaid-intern issue to be yet another example of where the law runs directly counter to what’s often in the mutual best interest of the employer and would-be interns,” said Oberstein. “Many industries have a long, rich history of unpaid internships.”

Lawyers say that first and foremost, employers should draw up detailed intern-ship agreements that state exactly why the interns are not being paid.

“When people ask me, ‘Should I worry about this?’ I say yes, because there’s potential liability,” said Joshua Davis, an employment lawyer at Ogletree Deakins in Boston.

Mark Pomfret, an employment partner at K&L Gates, said that he’s noticed in the slow economy that more companies are seeking interns for cheap labor. But that’s a potentially disastrous strategy.

“Short of meeting that six-part test, the recommended course is to pay minimum wage,” said Pomfret.

By Lisa van der Poollvanderpool@bizjournals.com

www.shpclaw.com