Litigation Trends: Unpaid internships under scrutiny

Last week NBCUniversal announced it would pay $6.4M in back wages in a record settlement with unpaid interns. This classaction suit, based on allegations of the employer violating the Fair Labor Standards Act, involves as many as 8,975 interns receiving a portion of the settlement.

The New York Times reported that undergraduates work in more than one million internships a year, half of which are unpaid. And the number of unpaid internships are increasing in a saturated market where even college graduates struggle to find employment.

Unpaid internships must meet criteria set out by The Department of Labor (DOL), including the following:

• Internships must be beneficial to the interns and not be to the immediate advantage of an employer
• Internships should be educational and resemble vocational training
• The work performed by interns must not replace paid employees.

Lawsuits filed by unpaid interns have been on the rise, with suits against Sony, Madison Square Garden, CBS and Warner Music to name a few. A Manhattan Federal District Court judge ruled in Glatt v. Fox Searchlight Pictures Inc. (case number 13-4478) that Fox Searchlight Pictures violated minimum wage laws by not paying interns on the set of the movie Black Swan, who performed the same tasks as paid employees. Fox appealed the decision and the matter is ongoing.

Despite an increase in litigation and these high profile cases, ProPublica points out that the Labor Department only cited 11 employers with wage violations in the first three years after setting the standards for unpaid interns, waiting for complaints to be filed with them rather than investigating advertised unpaid internships. This is put into perspective by noting that the Labor Department only has approximately 1,000 investigators to monitor 7.3 million employers and protect 135 million employees.

Al Jazeera America reported that despite a trend of unpaid internships being challenged in court (including class action suits), unpaid nonprofit internships are still the norm in the nonprofit field. Internship positions without pay are most common at nonprofit organizations – 57% unpaid compared to 34% at for-profit businesses. The DOL does allow more lenient rules for nonprofit organizations, where interns are often classified as volunteers. As many nonprofit paid jobs only consider candidates with internship experience, the nonprofit field is becoming less accessible to those who cannot afford to work without pay during and after college.

Further reading:

Unpaid-Intern Lawsuits Explained from Bloomburg Businessweek

Tracking Intern Lawsuits from ProPublica

Outten & Golden’s timeline of Glatt v. Fox Searchlight

Wang v. The Hearst Corp. (case number 13-4480)