In case you missed the tiny article buried on page 10 of most local newspapers a few days before Christmas, you may not know that entrepreneurs will quite likely put their entire company at risk this summer when they answer the call of the local chamber of commerce or mayor’s office by bringing in high school interns to “learn about business”. For that matter, they may have already created enough liability in past years to bankrupt even the most successful small firms.
Just consider the recent settlement agreement by PBS TV personality Charlie Rose. A lawsuit was filed last March against Mr. Rose by Lucy Bickerton who served as an unpaid intern during the summer of 2007 learning the ropes of TV production first-hand. Five years later and now a college graduate she decided that she should have been paid minimum wage for her 25 hours of weekly interning. Sensing that the judge was going to agree with Bickerton, the Charlie Rose Production Company agreed to a $250,000 settlement for the 190 former interns that had trained with the show.
But Ms. Bickerton is not alone. Other suits have been filed against Harper’s Bazaar and Fox Entertainment (so far) and so far one has been granted class action status. As more former interns hear about easy free money, more lawsuits will be filed. It won’t be long before small business owners are in the crosshairs of activist labor attorneys who see a quick and easy win. The attorneys in the Charlie Rose case pocketed $50K which was paid separately by Rose.
Most entrepreneurs in small towns bring high school students in for unpaid summer internships. Most also view it as a civic responsibility and a way to help focus teen-agers on what kind of career they might ultimately be interested in – or perhaps of equal value is to learn what career they don’t want to pursue.
There are now legal land mines for any business if they continue to use interns and pay them less than minimum wage. If businesses do add them to the payroll for the summer, don’t forget the requirements for unemployment compensation contributions, FICA and Medicare contributions, vacation and sick leave that you would normally provide an employee – and perhaps even ObamaCare contributions. In order to meet the Labor Department (and now legal precedent) requirements for an unpaid internship, businesses must meet four criteria.
- The internship must be expressly educational – the business owner teaches, the interns sole purpose is to learn.
- The intern cannot do the work of paid workers even temporarily or occasionally - like answering the phones when the receptionist is out.
- The employer can derive no advantage from the intern’s service and “on occasion its operations may be impeded”.
- The intern is not eligible for a job at the company after the internship.
The judiciary has decided that business owners must donate their patience, expertise and valuable time for the privilege of having an inexperienced and naïve teen-ager underfoot in their offices. Most business owners will now simply say “thanks but I’ll pass up that opportunity this year”.
Once again the legal system has struck a blow against small business owners but this time they have also hit the future work force who will come into adulthood knowing only what they see on TV sitcoms about life in the business world.