By Michael J. deBarros

PBS talk show host, Charlie Rose, and his production company recently agreed to pay as much as $250,000 to settle a class-action lawsuit brought by a former unpaid intern who claimed minimum-wage violations under New York State labor laws.

The Complaint, brought on behalf of a potential class of 189 interns, alleged that The Charlie Rose Show used unpaid interns to perform background research to prepare Rose for guest interviews, escort guests through the studio and set, break down the set, and clean up after each taping. The Complaint also alleged that unlawful unpaid internships are prevalent in white collar professions, “especially in fields like politics, film, fashion, journalism and book publishing.”

So, how can an employer avoid Charlie’s folly when bringing on interns?

If you are a “for-profit” private sector employer, the answer to this question lies in an analysis of the on-the-job experience that the prospective intern will have in relation to the six criteria the U.S. Department of Labor (“DOL”) has promulgated for determining whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (“FLSA”). The six criteria only apply to “for-profit” firms and do not apply to non-profit firms or government organizations. Individuals at non-profit firms and government organizations are considered “volunteers,” and are therefore excluded from the definition of interns.

To be excluded from the requirement to pay minimum wage and overtime under the FLSA, an internship program of a “for-profit” employer must meet the following six requirements: 

  1. The internship must be similar to training which would be given in an educational environment;
  2. The internship experience must be for the benefit of the intern;
  3. The intern must not displace regular employees and must work under close supervision of existing staff;
  4. The employer must not derive immediate advantage from the activities of the intern (occasionally, the employer’s operations may actually be impeded);
  5. The intern must not automatically be entitled to a job at the end of the internship; and
  6. Both employer and intern must understand that the intern is not entitled to wages.
     

The DOL advises: “If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the act’s minimum wage and overtime provisions do not apply to the intern.” Although it is far from clear that each of these factors is statutorily required to avoid employee status, the DOL has taken the position that all of the foregoing criteria must be met. In fact, a few years ago, Nancy J. Leppink, then-acting director of the DOL’s Wage and Hour Division, warned that “[i]f you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.” Thus, to ensure a positive outcome for both parties, any employer would do well to heed the forgoing warning and to keep the six criteria in mind when creating or continuing internship programs.