Unpaid interns in U.S. sue former employers for minimum wage

Unless academic requirement, unpaid internship likely illegal: Lawyer
By Amanda Silliker
|Canadian HR Reporter|Last Updated: 03/27/2012

In February, Xuedan Wang a former intern at Harper’s Bazaar, sued the magazine’s publisher, Hearst, saying her internship violated labour laws because it was unpaid, according to a lawsuit filed in federal court in New York.

“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,” said the class-action lawsuit.

Wang was an intern in the magazine’s accessories department from August to December 2011 where she typically worked at least 40 hours per week, and sometimes as much as 55 hours, without pay, according to the lawsuit. Wang is seeking minimum wage pay and overtime pay in damages.

“These sorts of positions are fairly exploitive, they’re unpaid… and young people are becoming more aware of their rights vis-a-vis internships,” said Andrew Langille, a Toronto-based lawyer. “The class-action lawsuits are the next logical step in contesting the position of young people within the labour market.”

This has become such a hot topic lately that law firms are starting to pop up in the United States that are devoted exclusively to intern law, he said. And while this is something gaining a lot of attention in the U.S., it is an area that will continue to develop in Canada.

“In Canada, I’ve seen a number of large corporate organizations that are using this form of employment and misclassifying employees as interns,” said Langille. “The environment exists where a class-action lawsuit could possibly work, the trick is you have to find the people — but they’re out there.”

To avoid lawsuits that could cost tens of thousands of dollars, employers need to understand the employment standards regulations for unpaid workers, said Nav Bhandal, a lawyer at Keyser Mason Ball in Mississauga, Ont.

In Ontario, the Employment Standards Act (ESA) excludes “an individual who performs work under a program approved by a college of applied arts and technology or a university.”

“If an organization is using unpaid interns and those people are not in an accredited academic program that has a work-study, internship, co-op component to it that’s listed in the university’s calendar — so if they’ve graduated or are just doing this as summer employment — it’s probably going to be illegal,” said Langille.

If employers are using interns who are not part of an academic program, they need to determine if the interns are actually considered employees under employment standards legislation, since only employees are covered by the act.

“Nine times out of 10, an unpaid intern will actually be an employee and that opens up the employer to a complaint under the ESA,” said Langille.

The ESA in Ontario sets out a six-part test to determine if an individual receiving training from an employer should be considered an employee. An individual would be considered an employee unless all of the six conditions are met.

The first condition is that the training is similar to that given at a vocational school.

“You have to show some somewhat formal instruction, so you have to show the training is akin to the kind of instruction you would get in a school,” said Bhandal. “Like a typical classroom setting or a practical skills-based course.”

The second condition is that the training is for the benefit of the individual and the third is that the person providing the training receives little, if any, benefit from the activity of the individual while she is being trained.

“If you’re doing research, writing articles, photocopying, bringing coffee, filling in databases, making phone calls to customers, conducting regular business, then that’s a benefit to the employer,” said Langille. “It essentially goes back to if it looks like a duck, quacks like a duck, it probably is a duck.”

To help employers satisfy these requirements, an internship training plan is essential, said Shruti Bhasin, HR consultant at Solertia in Montreal.

“Training is important because they’re not there to twiddle their thumbs. The employer has to be conscious and be serious that if you’re taking an intern, you have to make sure they’re busy, challenged, stimulated and gaining an interest in their field,” she said.

The fourth condition is that the individual does not displace employees of the person providing the training. In September 2011, two interns who worked on the movie Black Swan filed a class-action lawsuit against the film’s production company Fox Searchlight in New York. The suit alleged the company used unpaid interns to perform “menial tasks” that should have been performed by paid employees.

“You have to show you’re not hiring these interns in place of actual workers because they’re at a cheaper rate,” said Bhandal. “You have to show the work they’re doing is not the kind of work you would give to an entry-level person because an entry-level person will already have the skills to do those tasks.”

The fifth condition is that the individual is not accorded the right to become an employee. Employers should make it clear that once the intern completes her internship, she is not guaranteed a job — she might be hired in the future but it is only a possibility, not an inherent right, said Bhandal.

But hiring an intern is something employers should consider, said Bhasin.

“The cost of integrating an intern in the future that becomes a permanent employee is largely decreased because they have learned about the company already, company standards, the way things work,” she said. “(And) you had some very young people that ended up building Microsoft or Apple — you don’t know who you’re going to end up meeting.”

The sixth condition is that the individual is advised he will receive no remuneration for the time he spends in training.

“Often, some places will give stipends or honorariums (and) if you’re giving an honorarium, you’re breaching the ESA,” said Langille.

Ontario is one of the only provinces where employers can actually structure a program where it’s legal to have unpaid interns, he said. British Columbia has a somewhat similar system as Ontario but the other provinces do not, said Langille.

“All employment standards legislation in other provinces speaks to the definition of an employee and it’s rather narrow the exclusion that one could get under, so I would say in other provinces it’s a bigger concern,” he said.

If an employer has an internship program in place or is considering launching one, the best practice would be to pay the interns at least minimum wage, said Langille. This will not only ensure the company is in compliance with the ESA and other workplace laws but yield better-quality candidates and position the company as an employer of choice for young people, he said.

“As baby boomers start retiring en masse, there’s going to be very stiff competition and if your organization gets a reputation for taking advantage of young workers, it can be quite detrimental.”

Add Comment

  • *
  • *
  • *
  • *