Fair Labor Standards Act ruling: Judge says unpaid student internships illegal

Unpaid internship

internship (Photo credit: Sean MacEntee)

On Tuesday, June 11, 2013, a federal judge ruled that three unpaid internships were in violation of the Fair Labor Standards Act. The ruling concerned interns for Fox Searchlight Pictures but it may have far-reaching effects that could eventually render the practice of unpaid student internships illegal. In recent years we have seen the number of unpaid internships grow as both employers and colleges take advantage of the fact that students who crave experience and references are willing to work for free.

Fair Labor Standards Act: It’s the law

The Fair Labor Standards Act dictated, among other things, that workers be paid a minimum wage. The Act says that anyone who is permitted to work must be compensated. Interns in “for profit” companies are generally considered to be employees and therefore must be paid. But there is an exclusion that allows for unpaid internships if the circumstances of the internship meet six criteria.

  1. The internship is similar to training or education
  2. The internship experience is for the benefit of the intern rather than the employer
  3. The intern does not displace a regular employee
  4. The employer does not get an immediate advantage from the activities of the intern
  5. The intern is not necessarily entitled to a job when the internship ends
  6. Both employer and intern understand that no wages will be paid to the intern

If an internship program meets all six criteria then it is not considered to be an employment relationship and wages do not have to be paid. For more information, visit the U.S. Department of Labor Wage and Hour Division (WHD) site.

Moral implications

What’s the problem with students paying their dues by working for free? Journalist and former intern Timothy Noah explained where the moral dilemma lies in his June 20, 2013 post for MSNBC.com titled, “The unpaid internship racket.”

According to Noah, such internship relationships are exclusive, making it easier for some students to take advantage of them. “Wealthier kids are in a much better position to work free of charge than non-wealthy kids, especially when you take into account the burden of college debt,” Noah said. In fact Noah went on to explain that it’s not uncommon for wealthy parents to purchase their child an internship by making a generous donation at a fundraiser.

Collecting tuition dollars and then sending the student off campus for the learning experience also raises Noah’s hackles. Students are paying for the privilege of working for free. Meanwhile, Noah observed that students are often “ghettoized” and rarely get real experience or the opportunity to meet and mingle with regular staff.

Unpaid internships and salaries

Will working in an unpaid internship have any effect on your future job prospects or salary? According to Amy Laskowski it will. In her June 21, 2013 article for BU.edu titled, “Unpaid Interns and the Law,” Laskowski mined information about salaries from the National Association of Colleges and Employers 2013 Student Survey.

The survey revealed that of 30,000 interns, half reported that they worked without pay. Those interns who were paid had a higher likelihood of getting a permanent job offer. Laskowski added, “Also revealed: the median starting salary for a newly minted graduate with paid internship experience is $51,930, compared with a starting salary of $35,721 for those with unpaid internship experience, a pattern that was consistent across all academic majors.”

The end of the unpaid internship

So is this the end of the unpaid internship? It could be. The ruling in the Fox case created a class action status that allows for a suit to be brought by any interns of Fox or its subsidiaries. The law firm that brought the Fox Searchlight case has even created a web site to find interns that might create the basis for another class action suit similar to those that the firm has already won.

Are you working as a student intern for the summer? If so, then are you being paid for your labor? How do you feel about unpaid internships and this court ruling?

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