Companies that use interns aren’t breaking any new ground, with the most contentious issue usually being whether or not to pay them. But now, a recent article states that unpaid interns and unpaid internships may actually cost companies, even if they’re not paying for the initial outlay.
Paid versus Unpaid Internships
According the Labor Department, unpaid internships are technically allowed if six criteria are met:
1. The intern has to be given tasks that are similar to training they’d receive in a school course or class.
2. The intern has to gain benefit from the experience that’ll help them in the present or future.
3. The intern can’t take the place of other employees, and is instead given their own unique “job”
4. The intern isn’t there to directly and immediately help the employer, with the latter understanding that business might get occasionally interrupted because the intern is learning and growing for their own benefit
5. The intern isn’t promised a job when their internship is over
6. The intern and employer both know and agree that wages aren’t legally necessary for the time of the internship
If all these conditions are met, then theoretically the company doesn’t have to pay interns. But if the company doesn’t meet all six points and the intern still doesn’t get paid, they can file a complaint with the toothless Wage and Hour Division. The problem with this is, there’s no follow-up and essentially no one on the side of the intern to go to bat for them.
Interns Strike Back
In February 2013, unpaid interns mounted a $50 million class-action lawsuit against Elite Model Management for “deliberately misclassif[ying] its interns as exempt from wage requirements.” That lawsuit has reached its conclusion and while the ex-interns won’t get $50 million, EMM does have to pay 123 of them $450,000 in back pay—the largest ever settlement in a class suit by unpaid interns.
Other interns have also successfully won their cases against former employers, although not on as large a scale as the one against EMM. Two unpaid interns who worked for Fox Searchlight Pictures during Black Swan successfully sued this past June, but Fox is attempting to appeal that case currently.
In terms of pending lawsuits, unpaid interns from Condé Nast and Warner Music Group are both in the process of suing their respective former employers for unpaid wages, so it’s yet to be seen if they’ll be successful or not.
A bit of simple math shows how much employers can stand to lose if they break the Department of Labor’s six points on interns: if all 123 former interns for EMM shared the settlement equally, they’d each get $3,658.54. At the federal minimum wage of $7.25 an hour, that means interns would have had to put in almost 505 hours of work, or the equivalent of about 12.5 weeks of work—hardly an unreasonable expectation for an internship.
But the thing about lawsuits is the claimant(s) always have the possibility of getting every penny they sue for, even if it’s a huge amount of $50 million. Breaking out the calculator again, if the EMM interns were successful in suing for $50 million, each of the 123 would have received $406,504.10. And if that amount was applied to the same 505 hours/12.5 minimum wage work weeks, that means they would have been working for an average of $805 an hour.
Kind of a high hourly wage to page interns, no?