Business Litigation Alert: "Summer Help Could Lead to a Legal Mess"

Structuring Unpaid Internships to Avoid the Courtroom

In May, we addressed the issue of unpaid internships and the risks involved if these are not structured properly.

And now, a federal district court in New York has issued an opinion holding that Fox Searchlight Pictures violated federal and state labor laws when it did not pay production interns on the film “Black Swan.” In light of this ruling, a new lawsuit has recently been filed against the web-based media firm Gawker, with interns making similar claims.

Both the Fox and Gawker cases center around a 1947 U.S. Supreme Court ruling that an unpaid internship must be structured to benefit the intern, cannot displace regular workers, and cannot provide an immediate benefit or profit to the company.

In the Fox case, the interns claimed that the work they did on “Black Swan,” while routine and menial, was essential to the film’s production; therefore, they should have been compensated. The Court agreed, and now the interns at Gawker are claiming the same – their work writing for Gawker blogs, researching, editing, etc. was also essential and generated revenue for the company.

While unpaid internships can be a win-win for both interns and employers, they must be structured properly to ensure that companies are in compliance with all regulations.

So what can you do to make sure that your company is avoiding the unpaid internship trap? The key is to follow the letter of the law.

  1. Ensure your interns are directly benefitting from their work. What are they learning beyond simple menial tasks? How will this work benefit them when they enter the workforce?
  2. Make sure they are not displacing any full time or regular employees. The work they are doing should be outside the regular tasks your employees perform – they should not be taking over the roles of full time employees.
  3. Is their work providing a direct monetary benefit to the company? It’s a fine balance, but make sure that while they are being productive, they are not directly performing tasks that are essential to the company, to a key project, or that directly generate revenue.

These two high profile cases have brought a great deal of attention to this issue, so properly structuring internships is more important than ever. Remember to structure your internships so that you are following the regulations that have been clearly set out for us all to follow.

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