Unpaid internships are used by some family businesses as a way of testing a recent college graduate as a potential employee before actually putting them on the payroll. Do they share the same values and work ethic as the family that owns the business?
“One family restaurant business created an internship position in conjunction with a professor at a local college. It was a win-win situation for both the business (the internship was about social media marketing, a skillset not held by the family) and the college students got some real-world experience that became a valuable resume enhancement,” notes leading family business expert Don Schwerzler.
“But there are some pitfalls about unpaid internships that every family business owner with an internship program should know about,” says Schwerzler
To better understand how unpaid internship issues may adversely impact your family business, we are republishing an article co-authored by our friend Patricia Hill who is a partner in the prestigious law firm of Smith, Gambrell and Russell. SGR has offices in Atlanta, New York, Washington DC, Jacksonville and Frankfort Germany.
Unpaid Internships Might Be Expensive To Employer
An unpaid internship can provide an individual with valuable experience, business contacts, an improved resume, and a possible paid job. However, employers who improperly classify an individual as an unpaid intern can face liability under the Fair Labor Standards Act ("FLSA") even if the individual "volunteered" to work.
Employers often misclassify temporary workers or "trainees" as unpaid "interns," instead of as paid employees. Several high profile lawsuits were recently filed based on misclassifications. Two former unpaid interns who worked on the film "Black Swan" sued Fox Searchlight Pictures, Inc. The Court recently ruled that the plaintiffs were misclassified as "trainees" rather than employees and were entitled to minimum wage and overtime pay. Two former unpaid interns sued NBC Universal, Inc. on July 3, 2013, claiming that they were misclassified under the FLSA and should have been paid minimum wages. Interns who worked for W Magazine and The New Yorker filed a complaint on June 13, 2013, alleging 14-hour work days and the magazines received an advantage from the "internships" because they were not paid minimum wage and overtime. In late 2012, PBS journalist Charlie Rose settled for approximately $250,000 in back wages to a class-action consisting of approximately 189 former unpaid interns. Each intern received approximately $110 for each week that the intern worked.
Even though not all of the courts use it, the U.S. Department of Labor's Field Operations Handbook has the following six-factor test that if satisfied will result in a worker not being entitled to minimum wages or overtime and should minimize the litigation risk for an employer:
Patricia J. Hill is a partner in and head of Smith Gambrell & Russell, LLP's Labor & Employment Law Group. Ms. Hill regularly counsels clients on compliance issues, dispute avoidance, and union issues. When litigation becomes necessary, she regularly represents employers in employment litigation matters pending in state and federal courts.
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