Last week, a former unpaid intern sued her former employer for violating federal and state minimum wage laws. According to the lawsuit, Xuedan Wang alleged that she had worked around 40 hours per week at fashion magazine Harper’s Bazaar throughout the fall of 2011, where she “coordinated pickups and deliveries of fashion samples . . . .” Ms. Wang’s attorney stated that “unpaid interns are becoming the modern-day equivalent of entry-level employees, except that employers are not paying them for the many hours they work. The practice of classifying employees as ‘interns’ to avoid paying wages runs afoul of federal and state wage and hour laws.”
Ms. Wang’s claim is based upon much more than an abstract policy argument over the fairness of unpaid internships. Generally speaking, individuals who work in the private sector must be compensated under the Fair Labor Standards Act (“FLSA”). Exemptions from this federal statute’s wage and hour provisions are very limited, especially in regards to work performed by employees in the “for-profit” private sector. The U.S. Department of Labor, responsible for enforcing the FLSA, released a document in 2010 stating that six criteria must be met in order to exempt a “for-profit” private sector employer from having to pay interns. Those criteria are:
- The internship must be similar to training given in an educational environment (in other words, provides vocational skills…answering phones and getting coffee do not cut it).
- The internship must be for the benefit of the intern (the value of the educational experience must predominate over the value of the work that the employer receives).
- The internship must not displace regular employees.
- The employer must derive no immediate advantage from the intern’s activities.
- The intern must not necessarily be entitled to a job at the internship’s completion.
- The employer and intern must both understand that the intern is not entitled to compensation.
Photocopying, pouring coffee, and answering telephones certainly do not meet such requirements. Over one million Americans work as interns each year, and about half are not paid. Many of these unpaid positions should be paid under the Department of Labor’s criteria, but a lack of enforcement has allowed such non-payment to persist. Under the Fair Labor Standards Act, the unpaid interns have standing to sue their employers over wage and hour violations, but the Department of Labor can also bring such lawsuits (regardless of whether the “unpaid intern” wants such a suit to proceed). More vigorous enforcement of unpaid internships must start with the Secretary and not the unpaid interns themselves. Some interns do not know of their rights, others worry about offending their employer. There is also the worry that suing or even just complaining might make it prohibitively difficult to secure a “real job” in the future. As a result, it is unlikely that students will step forward—like Xuedan Wang has done—with any regularity.
The question thus becomes: should the Department of Labor, which has very scarcely enforced FLSA protections on behalf of unpaid interns, step up enforcement efforts and attempt to broadly enforce that interns be compensated (except for the uncommon situations in which the six criteria are met)? Last weekend, the New York Times got into the debate, posting the opinions of five different commentators that specifically addressed this question: “Do Unpaid Internships Exploit College Students?” In many ways, the answer is yes. Going back to Ms. Wang’s complaint:
“Employers’ failure to compensate interns for their work, and the prevalence of the practice nationwide, curtails opportunities for employment, fosters class divisions between those who can afford to work for no wage and those who cannot, and indirectly contributes to rising unemployment.”
If unpaid internships are allowed to persist when the six criteria have not been met, employers will continue to have a strong incentive to re-brand the division of labor within their businesses, replacing paid internships and/or full-time jobs with unpaid internships to save on labor costs. In this tough economic climate, employers have an even greater incentive to use unpaid labor, because there is a larger pool of students and employees who cannot find work, and many of these people will work for free in hopes of turning the unpaid work into a full-time job or believing that the resume addition will make it easier to find a job elsewhere. Additionally, unpaid internships exacerbate social class divisions. Certain industries in particular, such as publishing, journalism, and entertainment, “now virtually require a period of unpaid work, effectively barring young people from less privileged backgrounds [from entering those professions],” writes Ross Perlin, author of a book about unpaid internships. The extremely fortunate recent college graduates who can work for a publishing company in Manhattan without an income thanks to their parents have an enormous advantage in this competitive job market.
The Fair Labor Standards Act implies that the Department of Labor should enforce this provision vigorously, regardless of opinions about whether unpaid internships do more harm than good or vice versa. An economic argument can certainly be made that unpaid internships—assuming the intern chooses such a position voluntarily—make both parties better off: they provide valuable opportunities to both the employer and the intern that would not otherwise exist, and thus such opportunities should be permitted. The remedial nature of the FLSA, however, rejects this free-market approach. An analogous situation is arguing against having a minimum wage. There are meritorious economic arguments in favor of abolishing the minimum wage, but such arguments cannot free employers from paying it. By passing the FLSA, Congress implicitly decided that the protection employees receive from a minimum wage outweighs the downside of discouraging employers from hiring when employers cannot pay at or above this price floor. Requiring employers to pay most private-sector interns serves the same goals: protecting against exploitation that exists when there is an imbalance of bargaining power between employers and employees is presumed to be more important than the opportunities that are lost as a result of this mandate to pay. Nothing in the Fair Labor Standards Act lets employers treat “interns” any differently than “employees,” unless the internship is truly “training” that meets all six criteria described above.
Enforcing the statute vigorously (again, only in regards to the “for-profit” private sector) would not have any catastrophic affects; the argument that many opportunities would disappear because employers cannot presently afford to pay their interns seems unconvincing. If an intern’s work is worth less to the employer than the minimum wage, then the intern is probably not missing out on very much of an opportunity. Enforcement of the statute would compel most employers to pay their interns at least minimum wage as compensation for the enormous amount of value that hundreds of thousands of unpaid interns are creating each year.