Unpaid Interns – Risky or Savvy?

By Stephen Swalsky, PactUS Expert

As we get to be, ahem… of a “certain age” in the film and television industry, we can all reflect fondly, or perhaps less than fondly, on our experiences while making our bones in an unpaid internship.  Sure, there were a lot of long hours and relentless drudgery from making tape dubs, arranging furniture on set, doing coffee runs, to answering phones, but the networking opportunities and the chance to observe and learn at the elbow of experts have helped many of us become the professionals we are today.  These unpaid internships have long been the stepping stones on which we’ve built our resumes.

In the last several years, former interns have started bringing legal actions against companies for not paying them for what they alleged was real work.   Fox Searchlight Pictures, Lionsgate Television, NBC Universal, and Hearst are but a few of the large media corporations that have had to deal with lawsuits brought by former interns alleging that they were not being educated but were really employees performing menial work for which they deserved to be paid wages.

Intern or Employee? – Consider These Factors

We all want to keep our costs down.  At the same time, we also know the value of the internship experience, both as the intern gaining an education, real skills and contacts, and/or as the employer getting unglamorous, but necessary, work done.

To stay out of trouble, you need to know if your intern is truly an “intern” and not an “employee”. So keep in mind the following test questions put forth by the US Department of Labor under its Fair Labor Standards Act.  At the core is a simple query: Who gains the most? If your production company is the primary beneficiary, the intern is an employee. If not, he/she is an intern, unentitled to pay. Every intern and every situation is to be looked at on an individual case-by-case basis.

To help you answer the simple question, you need to dig into the following more complicated ones, lest a judge do it for you during a lawsuit:

1. Is the experience, even though it includes actual operation of the facilities of the employer, similar to training which would be given in an educational environment?

  • The more that the internship experience appears to be educational and akin to an academic program rather than “business as usual”, the more likely it will be viewed as an internship and not just unpaid labor.  Think in terms of training on broad transferrable skills like Avid editing rather than those that are only specific to your particular project or production company.

2. Is the internship experience for the benefit of the intern?

  • This is probably the toughest to define as it is that balancing act between educating the intern to develop them as professionals yet also dealing realistically with the fact that interns often have to do  and can only do grunt work.  If you are having the intern do more runs to the local bagel shop than real work that provides educational value, you run the risk that your interns may seek minimum wage protections and other sanctions.

3. Is the intern displacing regular employees, working under close supervision of existing staff?

  • You have to be careful that the intern isn’t seen as merely a free substitute for a regular worker that you would have hired otherwise.  At minimum, you should have the intern job shadow your regular staffers to learn from them and be supervised.

4. Is the company that provides the training deriving any immediate advantage from the activities of the intern? Will its operations potentially be impeded teaching the intern?

  • The Department of Labor ideally wants the company to gain no benefit from having an intern which is unrealistic.  Essentially, they believe that you should not be able to, or expect to, depend on the work product of your unpaid intern nor should the intern perform your company’s routine work.   This is not how the real world operates as the intern’s work will undoubtedly benefit your company; otherwise, internship is of absolutely no value to you, beyond altruism or satisfying your need to “pay it back”. To help get around this, and remembering that the answers to these questions are viewed in the balance, ensure that there is an actual training/education program in place.

5. Is the intern entitled to or promised a job at the conclusion of the internship?

  • This one is pretty easy; make it crystal clear to the intern that there is no job guaranteed at the end, and that the internship will conclude on X date. 

6. Do both the employer and intern understand that the intern is not entitled to wages for the time spent during the internship?

  • Clarity is key; before any potential intern starts, inform them in writing that this is to be an unpaid position.

These are not easy hurdles to get over but you will not be required to pay wages (or overtime) if you can establish that, seen as a whole and upon balancing, the benefit to the potential intern is greater than that for your production company.

Note that school credit for your intern doesn’t exempt your company from federal and state laws.

The winds have clearly shifted to interns expecting to get paid for their learning experience. Many of the larger media/production companies have opted to move into the paid internship realm (although Conde Nast killed their internship program entirely and replaced it with a minimally paid fellowship program for college graduates).  If you want to continue with an unpaid internship program, definitely put the time and effort in to having a substantive learning program in place that can establish that, when seen as a whole, the intern is the primary beneficiary of the unpaid internship experience via opportunities to be educated in and perform real production work side-by-side with your staffers, etc. Otherwise, you may need to provide a minimum wage and overtime for the hours that they are working.