As summer approaches and students are looking for work, which is scarce these days, they may be willing to accept any arrangement with a potential employer in order to get their foot in the door. From the employer’s perspective, what an opportunity – free labor in exchange for a reference! This is, in fact, an excellent opportunity for both parties, however, it needs to be structured properly or else the employer can face serious liability in the wage payment area.

Specifically, if it turns out that an intern does not meet the legal definition as such under the law, i.e., if the federal and/or state laws in which the employer is located construes the individual as an employee instead of an intern, the company would face state and federal minimum wage and overtime violations for the duration of the individuals’ employment. Further, such a violation may affect other similarly situated individuals, exposing the company to even greater financial penalties.

Fox Learned the Hard Way

Just recently, Fox Entertainment Group realized the reality of unpaid internships, structured the wrong way. When the two interns sued for wage payment violations, the court determined that:

Considering the totality of the circumstances, Glatt and Footman were classified improperly as unpaid interns and are 'employees' covered by the FLSA and NYLL. They worked as paid employees work, providing an immediate advantage to their employer and performed low-level tasks not requiring specialized training. The benefits they may have received -- such as the knowledge of how a production or accounting office functions or references for future jobs -- are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would receive in an academic setting or vocational school.

Although the above is not the exclusive test to determine whether an intern is appropriately classified as such, or may actually be an employee, it is a good starting point and may be used as a guide to employers.

Is an Intern Really an Intern?

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Some basic points to keep in mind when deciding whether that intern is really an intern or an employee:

• Is s/he paid v. unpaid?
• Who ultimately benefits from the work that the intern performs?  Where does the advantage lie, with the employer or the intern, or both?
• Is there any formal structure to the relationship, meaning, tasks followed by a review, etc.?
• Is there training for the individual other than simply performing the assigned tasks?
• What is the skill level of tasks that the individuals perform?
• Is the intern being used to perform work that an actual employee would otherwise perform, i.e., displacing an actual employee?

If your company has an intern and you are unsure of whether he or she is properly classified, be sure to seek out qualified employment counsel that can guide you through the ever growing popular area of the law.