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Unpaid Interns May Cost You in Court

By Brett Snider, Esq. | Last updated on

Using unpaid interns at your business this summer could land you in court, after a reminder by a federal judge that unpaid internships are not the same as free work.

U.S. District Court Judge William Pauley ruled Tuesday that Fox Searchlight Pictures violated state and federal minimum wage laws by not paying the interns who worked on the film "Black Swan."

Make sure that your business avoids being sued by knowing the proper way to handle unpaid interns.

'Black Swan' Interns Performed Regular Work

The key to the "Black Swan" unpaid intern lawsuit was that the two interns in question essentially replaced regular employees -- workers who would have been compensated for doing the same tasks as the interns.

The U.S. Department of Labor has issued regulations governing unpaid internships, making it clear that interns cannot be used like regular workers without paying them at least minimum wage.

So if you hire unpaid interns for your business, make sure that they are not displacing or augmenting your normal workforce by doing the same tasks, or you may pay for it in court.

Internships Should Be Educational

Most employers believe that internships are a fantastic way to gain first-hand knowledge of their business and industry. But courts and the Labor Department have mandated that business owners must make sure that their unpaid internships are educational.

A legal unpaid internship is one in which interns receive training "similar to training that would be given in an educational environment."

This doesn't mean teaching a college-level course in organic chemistry, but the Labor Department stresses that the valuable skills gained by doing clerical work or answering phones are not sufficient to relieve an employer from paying an intern.

Be Frank With Applicants

While it may be common practice in some industries or companies to deliver a paid job offer after an unpaid internship terminates, a business owner must emphasize, preferably in writing, that there is no guarantee of a job at the conclusion of the internship.

If you do not plan on offering any pay or stipend, be upfront with your intern applicants so they can decide whether to take the position without an illusion about being paid.

Draft an Unpaid Internship Agreement

An easy way to ensure compliance with Labor Department guidelines may be to create an unpaid internship agreement, preferably with assistance of an attorney, which spells out your interns' duties. It can also work to protect your business from potential legal action.

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