The $50 million question: Can businesses use unpaid interns?

iStock_000019751746XSmall.jpg[Note: The Department of Labor guidance relevant to this article, Fact Sheet #71, has been superseded.  See the discussion of the revised policy here.]

Two years ago we discussed whether nonprofit organizations and businesses can lawfully use unpaid interns. One of the key questions is whether the intern is actually an employee subject to the Fair Labor Standards Act. If so, the intern must be paid at least minimum wage and overtime pay if the intern works more than 40 hours in a week. The answer?

I don’t know very much about the fashion industry, but apparently it makes wide use of interns. And according to a class action lawsuit recently filed against a New York modeling agency in U.S. District Court for the Southern District of New York, many of them are unpaid.

The case is Davenport vs. Elite Model Management Corp. The plaintiff, a former unpaid intern, alleges that the agency uses interns as a source of free labor, which is precisely what the Fair Labor Standards Act forbids. According to the complaint, “Without the free labor of its interns like Ms. Davenport, Elite would be forced to do what every other reputable employer in this country does: pay an honest day’s wage for an honest day’s work.”

The complaint steps through the six criteria for determining whether Ms. Davenport and the other interns at Elite qualify as trainees and argues that they do not. Whether that’s correct remains to be seen, but the stakes are significant: The complaint alleges that Elite owes damages of at least $50 million for unpaid wages, overtime, and benefits for a class of plaintiffs that includes at least 100 interns.

If you’d like to discuss the use of interns, please feel free to contact us for an initial consultation.