Recently, a federal judge in the Southern District of New York granted conditional certification of a nationwide class of former and current unpaid interns for Warner Music Group. The class of roughly 3000 unpaid interns allege that they were actual employees of the company under the Fair Labor Standards Act, and thus entitled to minimum wages and overtime pay. Warner Music Group is among several companies to have recently been sued over their unpaid internship practices. Other companies being sued include NBC Universal, Conde Nast, Hearst Corporation and Fox Searchlight.
Although the recent ruling centered on whether conditional certification of the class would be granted and not whether the claims had merit, this case serves as an important reminder of what standards a company should meet in operating an unpaid internship program. The Department of Labor has previously outlined the following six criteria to determine whether an intern is exempt from the Fair Labor Standards Act, thereby allowing the company not to pay the intern. All of the criteria must be met, and include the following:
Prong 4 of this test is difficult to meet, as it seemingly requires the company to not benefit from the intern's work. The question as to how "immediate advantage" should be defined has caused some confusion and a hesitation towards hiring interns at some companies. What this prong likely entails is that interns can act in support roles, or work on pieces of larger projects, but should not create a final product from start to finish that is then marketed to consumers. In the latter scenario, the intern would be providing an immediate advantage through their activities.
Internships may be appealing to small businesses and startups who operate on tight budgets, but they should be the most careful as lawsuits can quickly derail their path to success. If your business is considering an internship program, or already has a program, make sure that the internship meets the Department of Labor test.
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