Snapshot of NBCUniversal Settlement
This past month NBCUniversal, which is a unit of Comcast Corp, settled $6.4 million dollar class-action lawsuit with a number of unpaid interns who had worked on Saturday Night Live. Specifically, the allegation was that NBCUniversal violated labor laws by misclassifying the plaintiffs as “non-employee interns” rather than “employees”, thus denying benefits such as minimum wage, overtime pay, social security contributions, and unemployment insurance.
The settlement still must be approved by a judge, but of the settlement amount: $1.18 million would go to the plaintiffs’ attorneys; $10,000 would go to lead plaintiff Monet Eliastam as a service payment; five other plaintiffs would receive service payments; and the remaining interns would receive an average settlement payment of $505.
Fair Labor Standards Act
Pursuant to the Fair Labor Standards Act (“FLSA”), internships in the for-profit private sector will most often be viewed as employment, unless certain requirements related to “trainees” are met. The distinction is that interns in the for-profit private sector who qualify as “employees” typically must be paid at least minimum wage and provided overtime compensation, whereas qualifying internships or training programs may be offered without compensation.
The determination of whether an internship or training program meets this compensation exclusion depends upon all of the facts and circumstances of each such program, but the following six criteria must be applied when making this determination:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.
Recent Trend in Litigation
There has been a recent trend in this type of litigation. Last June a New York Federal Court held that unpaid interns of Fox Searchlight Pictures Inc. were “employees” pursuant to the FLSA. The court reasoned that the functionality of NBCUniversal’s internship program was not that of a unique education to the intern. Instead it was the employer who received the immediate benefit of the interns’ work, while the interns’ experience mirrored that of any other employee of the company (simply providing them knowledge of how a production office functions).
Additionally, a number of similar class-action suits have been brought against other large companies such as Atlantic Recording, Bad Boy Entertainment, Condé Nast Publications, Donna Karan, Fox Entertainment Group, Gawker Media, Sony, Universal Music Group, Viacom, and Warner Music Group.
What the Future Holds
The ultimate result could be these larger companies having to weigh the costs of: (a) creating policies, supervising, and operating an appropriately qualified internship program where pay is not required; versus (b) simply classifying interns as employees and paying them at least minimum wage.
However, with certain companies already believing in compensating interns and looking at them as potential future assets, those employers who have been taking advantage of free labor may be forced to compete fairly if they want to attract young talent.
If the threat of litigation and a cracking down in FLSA compliance results in paid internships becoming the norm rather than optional, why would interns seek out positions where the only benefit they receive is on-the-job training and exposure to a certain industry? Many companies have exploited interns for free labor, while said interns, craving experience and resume firepower, have had to endure paying expenses such as commuting, local housing, meals, or course credit out of their own pockets. The bottom line is that interns deserve to be adequately compensated for the work that they perform, and it appears that enforcing this notion just might come to fruition.