As summer approaches, many companies will face the tempting invitation from students to work “for free” as interns. While some companies may consider jumping at the chance to enhance their workforce without incurring the costs of compensation, health insurance and other benefits of being an employee, as the U.S. District Court for the Southern District of New York just reminded the business community, having unpaid interns can be perilous if you don’t know – or if you ignore – the law.
Like many businesses, Fox Searchlight Pictures, Inc. hires a number of unpaid interns every year. In 2011, however, several of their “interns” sued, claiming that they should have been paid for the hours they had worked performing routine tasks that would otherwise have been performed by regular employees in connection with the production of the film Black Swan. On June 11, 2013, U.S. District Court Judge William H. Pauley III issued a ruling in which he agreed that two interns, Eric Glatt and Alexander Footman, were “classified improperly as unpaid interns and are ‘employees’…” of Fox Searchlight. Judge Pauley went on to say that these putative interns:
…worked as paid employees work, providing an immediate advantage to
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As summer internship season approaches, employers should carefully institute internship programs which comply with the requirements of the Fair Labor Standards Act (FLSA).
In the case of “for-profit” companies, unpaid internships must meet the strict criteria of the FLSA. Specifically, as stated in U.S. Department of Labor’s (DOL) FLSA Fact Sheet #71 unpaid interns must:
- Receive training similar to that provided in an educational environment
- Be for the benefit of the intern, and not the employer
- Not displace regular paid employees
- Be closely supervised by existing staff
- Not be used for the immediate advantage of the employer (and in some cases, may impede the employer’s operations)
- Not necessarily be entitled to a job after the end of the internship
- Understand that the intern is not entitled to wages for time spent in the internship
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Even the most sophisticated employer in the most intellectually demanding industry may misclassify its workers as “exempt” when they are, in fact “non-exempt.” The increasing number of misclassification litigation is a sure sign that no one is completely immune from inadvertently misclassifying workers.
What exactly are the workers “exempt” from anyway? The federal Fair Labor Standards Act (FLSA) requires that workers be paid a minimum wage for every hour they work and an overtime premium for any hours in excess of 40 hours worked in a week, but it permits employers from excluding certain types of employees from each of these requirements; hence, they are “exempt” employees. The most common areas of exemption are known as the “white collar” exemptions. These exempt employees are:
Of course, these “white collar” classifications may appear straightforward, but like the roads in the Tuscan hillside, they can become quite foggy and have twists and turns from time to time. Don’t fall for the typical myths about exempt classifications.
Myth No. 1: If the employee is paid a “salary” rather than “hourly,” the employee must be “exempt.”
Although any employee who is paid on an “hourly” basis … Keep reading
Most employment claims can be avoided by simply being aware of what the law requires. Here are three recurring issues which plaintiffs’ class action attorneys and government agencies are targeting across the country and which can be easily avoided by taking action now.
1. Misclassification of Workers as Independent Contractors
The Internal Revenue Service (IRS) and US Department of Labor (US DOL) have been increasingly cracking down on independent contractor misclassification. Last year, Massachusetts, along with several other states, signed a Memorandum of Understanding (MOU) with the IRS and DOL, formally agreeing to cooperate in investigating independent contractor misclassifications. If a violation occurs, the government agency investigating the matter is obligated to report it to the other state and federal agencies which may be affected by the misclassification, potentially opening up the company to an audit by the IRS or the US DOL.
Massachusetts has one of the toughest tests to be met in order to classify someone as an independent contractor, and the penalties for misclassifying vary with the legal requirement which was not met as a result of the misclassification. For example, if a worker was not paid accrued wages or vacation time upon termination, the … Keep reading