Many of those working in the film and television industry can remember a time when they would—and did—take any opportunity to work on a film set, paid or not. Unpaid internships still exist as a path by which young filmmakers can gain critical experience. Changes to state and federal regulations in recent years have placed limits on unpaid internships, however, and introduced strict criteria that employers must meet in order to be eligible not to compensate their interns. This article explores laws on the federal level, as well as those in California and New York, regarding when an internship must be paid.
Fair Labor Standards Act sets minimum requirements to exempt interns from wage and employee protections
The Fair Labor Standards Act (FLSA) is the set of federal regulations governing hours of work, minimum wage, and other national standards for employees. As a default rule, the FLSA mandates that for-profit employers are obligated to pay the people who work for them. There is an exception under federal case law for interns and students. Federal courts use a seven-factor test called the “primary beneficiary test” to determine whether someone is properly classified as an intern or should instead be labeled an employee (and paid accordingly). The court uses these factors to determine which party should be labeled as the primary beneficiary of the relationship. If the intern is the primary beneficiary, then this benefit is considered compensation enough. If the employer is the primary beneficiary, then the intern is considered an employee and should be paid. No one factor is determinative of the outcome of the test.
The US Department of Labor’s guidance describes the seven factors as follows:
1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. If there is any mention or hint of compensation, then the implication is that the worker is in fact an employee.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
California’s additional requirements for unpaid internships
California imposes additional requirements on for-profit businesses that attempt to use unpaid interns. The California Division of Labor Standards Enforcement (DLSE) requires that California businesses that wish to operate an internship program file a proposal that describes said program, which must receive DLSE approval. The DLSE requires that participants in an internship program:
- Not receive benefits (insurance, workers’ compensation, etc)
- Receive training for their desired industry, and not just training to work in a given business
- Are interns as a component of an educational curriculum, meaning that a school must participate in the program or offer credit for the internship
- Are fully aware that the internship is not paid
If the DLSE determines that these factors are unmet, the organization will not approve the program and will require that workers be treated as employees.
New York’s standards for unpaid internships
If you are planning to operate an unpaid internship program in the State of New York, be prepared to meet all eleven factors that will exempt businesses from paying their interns. Many of these factors overlap with the requirements under federal law, but employers in New York must nevertheless meet them all in order to avoid the obligation to pay interns at least a minimum wage. New York imposes the following additional factors on top of federal requirements:
- Advertisements for the internship program make it clear that the program is designed to educate and train, not employ
- Interns and employees are screened differently so that potential interns are assessed using criteria that might be used for a related educational program
- Similar to California law, New York interns must receive training that educates the intern for work in a similar field, not just for the individual company
- The interns receive no benefits, again similar to California’s requirement
- If the interns receive clinical training, it is under the supervision of someone experienced in the field
- The interns receive written notice that they will not be paid or treated as employees for other purposes
As you can see, the requirements for unpaid internships in New York are rigorous. Employers should act with care if choosing not to pay their workers at least minimum wage if they wish to avoid liability under the law. Seeking the advice of an attorney before initiating an unpaid internship program could end up protecting for-profit organizations from thousands of dollars in liability down the road.
On a final note, the rules discussed in this article are meant to apply to for-profit enterprises. Non-profit charitable organizations can generally offer unpaid internships without having to meet all of the above criteria, so long as it is clear to both the organization and the individual that the person is volunteering with no expectation of compensation. Volunteer interns at non-profits could still earn academic credit for their internships consistent with the rules of the academic institution. Depending the state in which the institution is located, there may still be issues around interns replacing employees, so the determination, even for non-profits must be made on a case by case basis.
If you are facing a legal question as an entertainment professional regarding employment, copyright, trademark, or another area, contact New York media and entertainment lawyer Laverne Berry for a consultation.