The $7.21 Million Question: Are Your Unpaid Internships Illegal?
Last month, Viacom, Inc., the world’s sixth largest mass media company, settled a class-action lawsuit with 12,500 former interns. Viacom, the owner of Comedy Central, MTV and Nickelodeon, will have to pay out $7.21 million to interns who claim that they were paid less than minimum wage or not paid at all. While the initial suit was filed by an ex-MTV intern Casey Ojeda on August 2013, the deal will include all interns who worked in the company’s NYC offices from 2007-2013 as well as those who worked in their California offices from 2010-2013. By not paying these interns for doing similar work as paid employees, Viacom violated both federal and state labor laws.
The key words are “for doing similar work as paid employees.” The law on unpaid internships has been clarified in recent years. Employers can only use unpaid interns if the real benefit of the internship is almost exclusively to the intern. Otherwise, making them work for free for the employer’s benefit violates state and federal minimum wage laws. In this case, Viacom’s interns were doing work that was not solely to their benefit.
The Department of Labor has given employers a 6-point test to use to determine if an internship in the private “for-profit” sector can be unpaid. Specifically, (1) the internship has to provide training similar to what would be provided in an educational environment; (2) the experience has to be for the benefit of the intern; (3) the intern cannot displace regular employees and work under the close supervision of existing staff; (4) the employer can derive no immediate advantage from the activities of the intern and, on occasion, its operations may actually be impeded; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern must have an understanding that the intern is not entitled to wages.
Though other companies such as NBC/Universal, Saturday Night Live, and Condé Nast have had similar suits filed against them, this intern settlement case marks one of the largest in the media industry. The Viacom settlement is almost a million dollars more than a similar resolution in the NBC/Universal case six months ago.
Note, however, that the Department of Revenue does make a special exception for people who volunteer for a state or local government agency and for those who volunteer for humanitarian purposes for private non-profit religious, civic, or humanitarian organizations. Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.
If you would like additional information about unpaid internships, please contact Beresford Booth.