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Unpaid Internships: Good for Intern or Company?

FILE - Interns run with a decision across the plaza of the Supreme Court in Washington, June 29, 2015.

FILE - Interns run with a decision across the plaza of the Supreme Court in Washington, June 29, 2015.

The issue of unpaid internships is growing in the U.S., where an appeals court recently ruled that the practice is legal as long as the work is linked to the intern's education.

Some see such internships as mutually beneficial for aspiring young people seeking job experience and for employers looking for help with work. But others insist they should be forbidden because they feel young interns are being exploited when they work for nothing.

In 2011, Eric Glatt, who interned for the Fox Searchlight Pictures’ Movie Black Swan, sued the company in a class-action lawsuit, alleging the company violated minimum wage and overtime laws.

In an interview with VOA, Glatt said his duties were all the normal job responsibilities of an accounting clerk at the company, including managing personnel files, reviewing and tracking purchase orders, and running errands to and from the set related to the accounting department.

Although interns were told in advance that they would not be paid, Glatt said he noticed the violations after he started working for the company.

Anybody who is “doing meaningful work that helps their employer should be paid at least minimum wage,” he said.

“It shouldn't matter if the person is in school, or is young, or is relatively inexperienced; what matters is if you help an employer’s operation, you are entitled to this minimal amount of money.”

New standard

The Federal District Court in Manhattan ruled in the interns’ favor in 2013, stating that they should be treated as employees using the six criteria established by the Department of Labor. The Labor Department says that an internship must be similar to training that would be given in an educational environment, and it must benefit interns rather than employers.

Judge John Walker of the U.S. Court of Appeals for the Second Circuit noted that “the purpose of a bona fide internship is to integrate classroom learning with practical skill development in a real-world setting.”

However, the Second Circuit Court reversed the lower court’s ruling this month, applying a new standard: the so-called “primary beneficiary test,” which says an intern can be only considered an employee if the employer benefits more from the internship than the intern. In other words, if the intern receives more benefits than the employer, the employer can use the intern without pay.

The case Eric Glatt and his friends brought to the federal court has now been sent back to the lower court for retrial using the new standard.

Employers satisfied

In an email statement to VOA, a spokesperson for Fox Searchlight Pictures, Scott Grogin, expressed satisfaction with the court’s ruling.

He said the real winners are students.

“Fox has always been very proud of its internship programs and continues to believe they offer tremendous benefits to those who participate in them,” he said.

But critics said such a ruling will make it easier for employers to use interns without compensation.

Glatt’s attorney, Rachel Bien, believes once the case is sent back down to lower court, the Federal District Court will rule in her clients’ favor because there was no link between the internship and their education as required by law.

“Because none of the lead plaintiffs were enrolled in school or... school -sponsored programs when they did the internship, and they had all graduated from school, so there was no link there,” she said.

In each case, the record supported the conclusion that their work replaced the work of a paid employee, and the primary benefit of their work went to the company and not to them, Bien added.

Bien said unpaid internships are very hard for interns, as many students have come out of college with a lot of debt, and they cannot pay off that debt until they start earning a living and making money.

She said in the last 10 to 15 years, more and more unpaid interns are replacing entry-level employees, who find it difficult to get a job.

Equal opportunity

Richard Reeves, senior fellow of economic studies at the Brookings Institution, believes the court’s ruling is a setback for equal opportunity in America.

“Internships, particularly unpaid internships, by definition are easier for more affluent and richer families to do than it is for someone who is poorer,” he said.

Anthony P. Carnevale, Director of the Center on Education and Economy at Georgetown University, noted so long as there are unpaid interns, there will be labor unions and others that will always be in favor of court cases to force employers to pay for interns’ time.

“Their fear is that if they can get free labor, why would you pay labor? If you can get free employees, why would you hire people and pay them? So they don’t want internship programs to become a way for employers to get free labor,” he said.

This report was produced in collaboration with VOA's Mandarin Service.