Higher Education, Human Resources, and Law

Miller Johnson attorney: Employers re-thinking unpaid internships

July 8, 2013
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The Grand Valley Career Center holds multiple career fairs each year. Image via fb.com

If your company is offering an unpaid internship this summer, you better be sure that it’s providing the educational experience required or you could end up on the losing end of a lawsuit.

Recently, unpaid interns have brought lawsuits against high profile companies like Warner Music Group and Atlantic Records, Conde Nast Publications, Hearst Magazines, Fox Searchlight (for the film “Black Swan”), and the “Charlie Rose Show” — and the interns are winning.

“I guess a more interesting question in my mind is, ‘Why are people filing lawsuits in the first place?’” said Miller Johnson attorney Gary Chamberlin, who works out of the firm's Grand Rapids office. “This is not new. Offering internships has been around for years and years and some are paid and some are unpaid. Offering unpaid internships is not a new phenomenon whatsoever.”

Chamberlin said he thinks there are two key factors that have fed the trend.

The first is the growing importance of internships on a resume.

“I think that’s a trend that has increased significantly over the last, say, 20 years,” Chamberlin said. “There are more internships. Colleges are putting pressure on employers to provide those internships and, of course, pressuring students to seek out and locate them. And employers don’t necessarily want to pay interns. So there are a lot more unpaid internships that employers are offering to college students.”

Rachel Becklin, assistant director and internal internship specialist at the Grand Valley State University Career Center, agreed that more students are seeking out internship opportunities each year. She noted that last year 7,000 GVSU students participated in some form of an internship, though she said she still sees a lot of paid internships being offered to college students.

According to Chamberlin, the second factor leading to the increase in lawsuits over wages is the recession and more and more interns being taken on who are not coming from the educational arena.

“I think that is one element of trying to save on labor costs: more employers began to offer unpaid internships at that point and time, really, as one creative way to get low cost labor and services provided.

“I saw lots of individuals who were out of work, who could not find work, and perhaps had been out of work for substantial periods of time, who were trying to get their foot in the door anyway possible — even offering themselves for hire in an unpaid internship. Many times those were not individuals who were affiliated with any educational institution. These were just laid off and out-of-work individuals who said, ‘I’ll do an internship,’ and, of course, once you get away from the college connection now you are running a little bit more exposed in that situation.”

Chamberlin said it seems like there are certain industries, such as the entertainment industry, where unpaid internships are a deeply ingrained piece of the business model.

“It appears to me that there are certain industries that have a longstanding history of using unpaid interns and using them in high volume, and that it appears to be a regularly expected element of their operations budgeting.

“From what I’ve read from these cases in the entertainment industry, TV and film, the use of interns is enormous and it is a budgeted aspect of the making of the TV show or film, in that they are going to have essentially free labor as part of it and as a means to cut costs.”

Becklin noted that the type of industry is often a more telling factor in whether an internship will be paid.

“The nonprofit sector, for example, can’t offer paid internships, so that’s one area that we do see the majority of internships being unpaid,” she said. “Most of our technical and business organizations do tend to offer paid experiences.”

So how can a company that offers unpaid internships protect itself from a wage and hour lawsuit later? Chamberlin said companies need to be sure their internship position is aligned with the guidelines set out by the Department of Labor in 2010.

According to the Department of Labor, the following guidelines must be met in order to offer an unpaid internship:

  • 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.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees, but works under close supervision of existing staff.
  • 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.
  • The intern is not necessarily entitled to a job at the conclusion of the internship.
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Chamberlin said displacing regular employees is a particularly important factor for an employer to consider.

“The third factor is that the intern doesn’t displace any regular employee, and there are employers that abuse that,” he said. “For example, if you have an unpaid intern that is operating a machine, punching out parts in your factory, almost always the argument could be made that that is otherwise engaging in regular, productive work that an employee would be doing and you are actually displacing someone, meaning the employer has decided not to hire someone or has laid off someone.”

Chamberlin said that employers should be paralleling the academic environment in creating an internship position. He noted that making sure students are receiving college credit for the experience and limiting its duration to a summer or academic semester are good steps to take.

“If you can break up the everyday activities that someone is engaging in and have some sort of attendance at group presentations, job shadowing along with regular workers who are doing their jobs, tagging along with a sales person on a sales call, attending meetings with vendors, but just observing and learning as opposed to participating and engaging in production or services, the better off an employer is going to be.”

He also noted that employers who provide unpaid interns with a formal document of some sort outlining the experience they are receiving and that it will be unpaid are doing themselves a favor.

Chamberlin does think that the recent lawsuits may result in employers rethinking their unpaid internships and encourage more of them to seek out college students who are earning credit for their internship, something that he advises companies to do anyway.

“It is a big pool out there, there are so many kids that want to do an internship in marketing and sales and engineering and other professions that there are plenty of college kids to dip into if you want to use someone in an internship that is getting college credit as opposed to someone who is just in between jobs,” he said.

Gary Chamberlin

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