Hiring Unpaid Interns Is Only Allowed If They Are Useless -- Glatt v. Fox Searchlight

Many employers maintain programs in which inexperienced "interns" perform work for no pay.   The idea is that the transaction is a win-win: The company gets a little low-level help; while an intern who is too inexperienced to have ever been hired as a regular employee in the first place gets some real-world work experience and a resume boost that should help in getting a permanent job later.  

This "unpaid intern" model is at odds, however, with federal and state minimum wage laws, which are designed to ensure that all workers receive minimum pay for time spent working.  Employers thus cannot avoid paying workers merely by calling them "interns," "trainees," or "learners."  Rather, the only way to avoid paying these individuals is to show that they add so little value that they can't even be considered to be productive "employees" at all.  

The key precedent is the 1947 U.S. Supreme Court decision in Walling v. Portland Terminal Co.  In that case the Court held that certain trainees were not covered employees because they did "not displace any of the regular employees," their work did "not expedite the company business," and instead "sometimes does, actually impede and retard it."  Thus, because the employer received no "immediate advantage from any work done by the trainees" they were "not employees" entitled to the legal minimum wage.   

The recent 2013 New York District Court case of Glatt v. Fox Searchlight Pictures, Inc., applied this same test to determine that interns who worked on the film "Black Swan" and other projects were employees who should have been paid minimum wage.  The interns did classic "gofer" work  -- they "obtained documents for personnel files, picked up paychecks for coworkers, tracked and reconciled purchase orders and invoices, and traveled to the set to get managers' signatures."  The problem for the company was that it actually got some benefit from this work that otherwise "would have required paid employees."  Nor could the company prove that the interns "ever impeded work" by their activities.  Thus minimum wage was owed.  

For employers the message is clear -- if you want to hire an unpaid intern you must be prepared to prove that he was utterly useless and, preferably, just got in the way.  (Note to Interns: When describing your internship duties on your resume you may want to punch up this description to sound a bit better.)               

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