Interns Rejoice: A Recent New York Ruling Could Mean Minimum Wage and Overtime Pay for “Unpaid Interns”

Unfortunately, for younger generations, the current status of the American economy has led to a shortage of employment for even the brightest college graduates and young adults.  In fact, job scarcity has made even unpaid internships more. But employers beware: as colleges across America release thousands of promising young adults into the workforce for the summer, “hiring” these students as unpaid interns could lead to legal liability for your company.

Many employers breathed a sigh of relief last month when Judge Harold Baer, a U.S. District Judge in New York, denied class certification for unpaid interns who had worked for Hearst Corporation. Although this ruling still allowed the individual plaintiffs to sue Hearst for their minimum wages, denial of class certification alone is likely to be chilling nonetheless because interns rarely feel incentivized to bring these lawsuits outside of the context of a class action lawsuit because individual recovery would likely be overwhelmed by the legal fees required to get to that point.

However, in a June 11, 2013 ruling by Judge William H. Pauley III, another U.S. District Judge in the Southern District of New York, the Court sided in favor of the intern Plaintiffs in a case involving similar allegations.  This suit was brought by two unpaid production interns who had worked on the set of the popular blockbuster, ‘Black Swan.’ The two young men asserted that they should have been classified by Fox as employees based on the type of work that they preformed. According to the men, they were misclassified by Fox as unpaid interns and did not receive the minimum wage and overtime pay mandated by the Department of Labor.   Judge Pauley agreed and ruled that the men should have been classified as employees. Additionally, the Department of Labor is ordering Fox to pay the men minimum wages for the hours that they worked.

In his ruling, Judge Pauley explained that in order for an unpaid internship to be lawful, the intern must not displace traditional employees and the employer must not receive any immediate advantage from the intern’s work. Instead, employers who have unpaid interns must educate and train their interns as a school or vocational program might.  The ‘Black Swan’ interns regularly obtained documents for various files, made coffee, picked up paychecks for other employees, photocopied documents, tracked and reconciled purchase orders, and traveled to the set to get managers’ signatures.

An intern’s willingness to work for free, recognition of the internship as unpaid, and classification of one’s intern as an “unpaid intern” are not enough to make the situation a legal one.  Although college students and their parents may view coffee fetching, paper filing, and errand running in an internship as a rite of passage, the ‘Black Swan’ ruling means that these interns may be entitled to overtime and minimum wage compensation, provided they are not displacing traditional employees.