Litigation Results in Employers Yanking Away Unpaid Internships

New decision suggests there’s no need for such an extreme reaction

By Allen Smith, J.D. Sep 2, 2016
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Employers now hesitate to offer unpaid internships following a spate of litigation claiming internships should be paid. Not all employers can afford to make their internships paid. And they shouldn't have to, an Aug. 24 decision suggests.

"The media and entertainment industry has been hit hard" by the litigation, noted Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C. "Other litigation challenging unpaid internships has been filed against sporting entities and financial businesses." Most of the litigation has settled.  

High-end fashion companies have been sued as well, said Adam Smiley, an attorney with Seyfarth Shaw in New York City. 

So have companies in the legal and advertising industries, said Camille Olson, an attorney with Seyfarth Shaw in Chicago and Los Angeles. 

"Some employers—especially in the media and entertainment industry—are doing away with internship programs altogether," she said. "Others are reassessing against the legal requirements and putting safeguards in place in order to continue to use interns in a way that is both legally compliant and mutually beneficial to both the company and the interns."

Hearst Decision

Employers that still want to provide unpaid internships got the green light to do so in Wang v. The Hearst Corp., 12-CV-0793 (S.D.N.Y. 2016), provided certain requirements are met.

The U.S. District Court for the Southern District of New York ruled against six former interns' claim that they should have been paid for their internships at various Hearst Corp. magazines.

The plaintiffs were:

  • Matthew Wagster, who interned in the marketing department of Esquire from July to December 2009. He sought but was denied academic credit for his internship because its duties were not applicable to his political science major. He created guest lists for events, compiled "VIP guest requests," and attended and took notes in staff meetings.
  • Caitlin Leszuk, who interned at Marie Claire between January and May 2010. She worked in the magazine's advertising department and received six academic credits for her internship. She was required to keep a weekly journal of her experiences for a class on business management. Leszuk also alleged she performed rote duties—largely Excel data entry—during much of her internship.
  • Erin Spencer, who interned in the bookings department at Cosmopolitan from June to August 2010. Her internship also qualified for academic credit. She learned how to book models for casting calls, held her own model casting, learned about photo shoots and conducted administrative tasks, including delivering and unpacking items.
  • Alexandra Rappaport, who interned in the fashion department at Seventeen from May to July 2011. She received academic credit equivalent to one college class for her internship. She organized and created inventories of clothing, went on "runs" to retrieve and return clothing samples, assisted stylists and created weekly fashion invoice spreadsheets.
  • Sarah Wheels, who interned in the editorial department at Cosmopolitan from May to August 2011. She received credit from a community college for her internship. She used LexisNexis to fact-check articles, conducted interviews and surveys, wrote blog posts and transcribed interviews. Cosmopolitan also hosted four one-hour "Cosmo U" sessions, where senior editors spoke about their career paths.
  • Diana Wang, who interned in the accessories department at Harper's Bazaar from August to December 2011. She sought academic credit before she started her internship and provided Hearst with a letter stating that her university had approved her internship for two academic credits. Wang catalogued and tracked accessories samples, maintained the accessories closet and created storyboards.
While some of the tasks were scut work, the court said that their internships were for the most part closely connected to the interns' formal education program. The court noted that Hearst required proof of academic credit. 

The court also emphasized that:

  • Each plaintiff entered the internship with an understanding that the position was unpaid.
  • The plaintiffs learned practical skills from their internships.
  • Academic commitments were accommodated.
  • The internships did not drag on too long.
 While there was some evidence that the interns' work displaced, rather than complemented, the work of paid employees, the majority of factors weighed in favor of deciding that the plaintiffs were not employees entitled to pay.

Unpaid to Paid Internships

Olson said she has seen companies convert unpaid internships to paid internships in the wake of the internship litigation. 

"If a company examines its unpaid internship program and determines that it does not meet applicable legal tests and, as such, is going to begin paying its interns, it's important to note that those interns must be paid minimum wage under the same standards as an employee would be," Olson said. "The difference between a paid intern and an employee is one of semantics—an employment relationship does exist between companies and their paid interns, and minimum wage and other legal protections applicable to employees are available to paid interns as well."

"The wave of lawsuits involving interns has made unpaid internships a much riskier proposition for most companies," Paul DeCamp, an attorney with Jackson Lewis in Reston, Va., said. Unless unpaid internships clearly satisfy the standards for remaining unpaid, "Businesses seem to view them as not worth the risk, especially if there are more than a handful of interns in the program."

But just because unpaid internships have been extinguished doesn't mean they can't be revived as paid internships. "Condé Nast received a lot of media attention for ending their unpaid internship program in response to a lawsuit, but they later created a paid fellowship program," Smiley noted.

"These lawsuits have raised awareness of the legal requirements of unpaid internship programs," he added.

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