Employers Should Pay Their Interns. Here's Why
This spring luxury shoes and accessories company Salvatore Ferragamo posted an unpaid internship listing on LinkedIn. “Retail Intern for its New York Flagship Store,” it reads. “This position will provide a valuable learning experience for those interested in the day-to-day operations of a luxury goods environment.” Really? “90-95% of the time will be spent on the sales floor working with product, sales associates and answering client questions when possible,” it goes on to say. The interns don’t ring up sales, but instead walk around and presumably try to convince shoppers to buy shoes, scarves and jewelry. They also fix the displays and manage the stock. One of the requirements: “A letter from your school confirming that you can receive school credit.”
This listing exemplifies the messy state we’re in when it comes to unpaid internships. Now that it’s intern season and hundreds of companies, non-profits and government agencies are relying on free labor, we should be asking whether these arrangements are legal. Search “unpaid internship” on job aggregator Indeed and you get 1,880 listings, including big players like Cablevision, radio broadcaster Clear Channel, fashion house Marc Jacobs and the Mayo Clinic. Though a federal judge has said that school credit doesn’t make unpaid internships legal if they don’t meet other criteria, all of those companies make college credit a requirement for getting the job.
What’s more, the law isn’t clear as it applies to non-profits and even to government agencies like the White House, says David Yamada, a professor at Suffolk University Law School in Boston, who wrote the first law review article on unpaid internships back in 2002.
Proponents of unpaid internships say the jobs help aspiring professionals get on-site experience and résumé entries that can spur their careers. Detractors insist that unpaid positions exploit workers, take jobs from would be entry-level employees, favor the privileged who can afford to make no money, and perhaps most importantly, break longstanding labor laws. Now that some 35 suits have been filed against employers by unpaid interns (11 have settled, including one for $450 million against the Elite modeling agency), employment defense lawyers are increasingly advising clients to start paying interns at least the minimum wage or cancel their programs. Condé Nast ditched its internship program in October after unpaid interns at The New Yorker and W sued.
After writing three posts and doing another round of interviews with lawyers on both sides of the issue, in addition to a plaintiff and an employer, I believe most if not all employers should pay their interns. At the very least, I agree with defense lawyers who say employers are asking for trouble if they don’t pay at least a minimum wage and instead try to hide behind school credit.
When I called Ferragamo, a spokeswoman sent me an email statement saying the interns “shadow our most seasoned employees.. . participat[e] in a multitude of activities and projects with tangible outcomes that will undoubtedly benefit the student’s career growth.” In the fall and spring, the company only accepts interns who get school credit and in the summer, when school is out, it pays them, which suggests the fall and spring internships should be paid as well. While I can see how it would be useful to have Ferragamo on your résumé, I imagine that after a week on the sales floor, the interns don’t learn a whole lot and that Ferragamo enjoys the services of lowly employees it would otherwise have to pay.
The reason that learning is important: A year ago a federal judge found against film production company Fox Searchlight when unpaid interns sued, claiming it had violated a stringent six-part test laid out by the Labor Department in 2010. Employers must pass all of the criteria if they want to have unpaid interns on staff, says the DOL. One of the requirements is that the position be “similar to training which would be given in an educational environment.” I think that’s where the school credit trend comes from, though Judge William Pauley ruled it didn’t matter. More important are much more difficult-to -satisfy requirements like the employer “derives no immediate advantage” from the intern’s work, and “the intern does not displace regular employees.” In the Fox Searchlight case, plaintiffs Eric Glatt and Alexander Footman answered phones, took lunch orders and made employees’ travel plans. Glatt, 42, who has an M.B.A. from Case Western and had previously worked at AIG, toiled in the accounting office. “I got paperwork signed, delivered petty cash, got checks signed, picked up purchase orders,” he says. In other words, he did the work that a bottom-rung employee would have done, but he did it for free.
The confusion may clear up a bit over the coming months, when the Second Circuit Court of Appeals will make a decision on the appeal of the Fox Searchlight case and a class action against Hearst magazines. As in the Hearst case, name plaintiff Diana Wang, who worked as an intern at Harper’s Bazaar, said she did work that the company would have otherwise needed to pay an entry-level worker to do, logging 55 hours a week, hauling heavy bags around New York, arranging shipments to London and supervising eight other interns, all for no pay. Harold Baer, the judge in the Hearst case, refused to certify the plaintiffs as a class and he said that the court should look at the “totality of the circumstances,” in order to decide whether the internship is for the benefit of the intern and didn’t run afoul of the labor laws.
The Labor Department has filed a brief in the Second Circuit, arguing that the six-part standard should apply. Since courts almost always side with the federal government agency that enforces the law, Yamada, who also filed a brief in favor of the plaintiffs, predicts the Court will side with the test.
I tried to reach Elise Bloom, who is representing Fox and Hearst but she didn’t return my calls. However I did talk to Steve Lehotsky, a lawyer for the Chamber of Commerce, which filed a brief in favor of the defendants. “I think in this instance the Department of Labor is just wrong on what the law is,” he says, referring to the 1947 Supreme Court case that was the precursor to the Labor Department’s fact sheet. “The district court here erred in relying on the Department of Labor’s six-factor guidance from a 2010 ‘Fact Sheet’—that is not, and should not be, the law. The Supreme Court clearly said what the law was more than 60 years ago when it set forth the “primary benefit” test.” That’s one of the DOL’s six criteria but not the only one.
What’s intriguing to me about Lehotsky’s argument is that he maintains that the plaintiffs in the Fox Searchlight and Hearst cases were getting more of a benefit than the employers. This is where the question gets thorny and where I think employers are foolish to keep unpaid interns on staff. In that 67-year-old Supreme Court case, the question was whether “trainees” who spent a week learning to be railroad brakemen should be paid. The Court found that the trainees did not substitute for paid workers and that they didn’t “expedite” the railroad’s operations but rather, in some cases “impede[d]” it. It’s easy to imagine a week-long apprenticeship where the trainees spend most of their time learning, rather than doing productive labor. But it’s tough to imagine one that stretches for three to six months.
It seems clear to me that even if the Second Circuit tosses out the Labor Department’s six criteria, which is unlikely, that a judge would ultimately agree that those Hearst and Fox Searchlight interns weren’t filling their employers’ needs. I also think that’s the case with almost all unpaid internships. I agree that the interns are learning and growing, but so are many paid employees. Just because a job is instructive doesn’t mean it’s not a job.
I also checked in with one of my regular defense-side employment law sources, Daniel O’Meara, chairman of the employment law division of Philadelphia-based Montgomery, McCracken, Walker & Rhoads. “Unless it’s a sweeping legal decision in the Second Circuit, it’s not going to change my advice to clients,” he says. “Using unpaid interns is asking for trouble.”