June 12, 2013; The Atlantic

NPQ figures that a lot of its readers will be hearing about yesterday’s court ruling on unpaid internships where federal district judge, William H. Pauley III of Manhattan ruled that Fox Searchlight studios broke state and federal minimum wage laws by not paying two interns who worked on the (very creepy) movie, “Black Swan.” We wanted to give you a heads-up on the details of the ruling, and clarify (to the extent that the language does) what the exemption is for nonprofits with unpaid internships.

In his ruling, Judge Pauley calls for the use of a stringent, six-point test from the Department of Labor’s fact sheet on internship programs under the Fair Labor Standards Act:

The Test For Unpaid Interns

There are some circumstances under which individuals who participate in “for-profit” private sector internships or training programs may do so without compensation.  The Supreme Court has held that the term “suffer or permit to work” cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction.  This may apply to interns who receive training for their own educational benefit if the training meets certain criteria.  The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.

The following six criteria must be applied when making this determination:

  1. 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;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. 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;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

While it is clear that these six points apply primarily to the for-profit sector, the language in that same missive regarding public sector and nonprofit unpaid internships is worth reading:

The FLSA makes a special exception under certain circumstances for individuals who volunteer to perform services for a state or local government agency and for individuals who volunteer for humanitarian purposes for private non-profit food banks. WHD also recognizes an exception for individuals who volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations. Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. WHD is reviewing the need for additional guidance on internships in the public and non-profit sectors.

NPQ would love to hear from readers, especially those with a legal bent, on what effect they think this ruling might have on those in the nonprofit sector.—Ruth McCambridge