Internships Can Be Costly For Employers

By: Joyce Mocek

A few weeks ago, an unpaid intern that worked for fashion house Alexander McQueen sued the British fashion label alleging that she should have been paid at least minimum wage during her four month internship. Unpaid internships have become the modern day equivalent of entry level positions, except that there is no pay. These internships have gained increased attention over the past year as misclassifying individuals can result in litigation and fines to employers.

The Fair Labor Standards Act (FLSA) establishes minimum wages and overtime requirements. One exception to the FLSA requirements is that a "for-profit, private-sector employer" may hire individuals for internships or training programs without compensation if it is primarily for the individual's educational benefit. However, this exception is narrowly construed. The Department of Labor (DOL) lists six criteria that must be met for the exception to apply, and only if all the factors are met, do the FLSA's minimum wage and overtime pay requirements not apply. Courts, in addition to considering the DOL factors, also look at the "totality of the circumstances."

There has been a growing trend of cases filed by unpaid and underpaid interns claiming violations of minimum wage and overtime laws. As a result, employers that are interested in having internship or training programs, should carefully evaluate the circumstances and consider formalizing written agreements with their interns. Employers should also consult with counsel for further guidance in this area. These steps will help ensure that the interns are not misclassified and/or underpaid, and aid in avoiding costly litigation and potential fines.


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