Unpaid Internships: The High Cost of Free Work
This is the first in a series on unpaid internships, covering what they are, the law regulating them, and their effect on society. In part two we’ll be discussing how companies have reacted to an increasing number of lawsuits from former unpaid interns demanding wages for the time they worked. And, in part three we’ll talk about public sector and non-profit internships to see how the law treats them differently.
For those unfamiliar with the dynamics of the unpaid labor market, its sheer size is staggering. In 2010 there were about 1.5 million people working in internships, with about half of those people working for free. The problem got a lot of attention last year when Diana Wang, an intern at Harper’s Bazaar (a subsidiary of the Hearst Corporation) sued. In Great Recession America, Ms. Wang’s experience wasn’t all that uncommon. Her internship at Harper’s was her 7th unpaid internship, and she was hoping for an experience that would give her the practical skills needed for paid work, or even a job offer. Instead, she found herself working as many as 55 hours a week, doing menial tasks like shuttling hats and bags around. In other words, work that otherwise would have had to be done by a worker making at least minimum wage.
What makes some of these unpaid internships particularly bad is that many of the organizations that offer them are some of the wealthiest corporations, governments and non-profits in the country. Hearst Corporation, for example, set corporate records for profits and revenue in 2011. And, the federal government, despite sequestration, is expected to spend in the neighborhood of 3.8 trillion dollars in 2013.
Fair Labor Standards Act (FLSA) and Internships
In the midst of a public outcry over unpaid internships in 2010, the Wage and Hour Division of the Department of Labor (DoL) created a six-part test for unpaid internships in the private sector to determine whether they would be excluded from Fair Labor Standards Act requirements that individuals that are “suffered or permitted” to work must be compensated for their services. What the test boils down to is whether or not the internship is a training experience that is conducted for the benefit of the intern. In fact one of the specific criteria provided by the DoL says the employers cannot immediately benefit from the services of the intern, and that they might expect interns to actually impede their operations.
The DoL’s test might sound well and good, but it ignores many of the realties of unpaid internships. The U.S. Court of Appeals for the Sixth Circuit said as much in Solis v. Laurelbrook Sanitarium. There, the court said that the test was a “poor method for determining employee status” and “overly rigid.” The fact is that, for better or worse, the reason employers maintain unpaid internship programs is to derive some kind of benefit from it. Most employers, including governments and non-profits, are in the business of making or doing something, aside from providing workplace training. Similarly, most employees take unpaid internships to “break-in” to a new industry and make an impression on potential employers, without the employer having to take the risk of making a new salaried hire.
Social Ramifications of Unpaid Internships
Socially, unpaid internships advantage people who have the financial resources to work unpaid for long periods of time, accumulating the experience that they’ll need to succeed at the next level. People with out savings or a financial cushion have no choice but to take the job at Starbucks that pays now, but doesn’t provide the future career benefit that some unpaid internships do. In that way, they perpetualize class disparities into the next generation at a time when inequality in the country is at banana-republic levels.
Finally, employers in all sectors of the economy have used unpaid interns to do grunt work, like getting coffee, making copies, and other office chores that really provide no portable skills to the intern. This not only makes those unpaid internships unquestionably beneficial to the employer, but it has the effect of displacing paid labor for the economy, because there are so many people willing and able to work for free in the labor market of the Great Recession.
Unpaid Internship Litigation
In part two, we’ll see how employers have reacted to a new wave of unpaid internship related litigation. But for now, I’ll leave you with a quote from the New York Law Journal, “The safest course is to pay interns the statutory minimum wage and overtime.” If you’re looking for someone to answer calls, and make copies, pay them $7.25 an hour, it’s really that simple.