"But P.A.s learn so much!"
Since the beginning of independent film, music, and theater, production companies have hired young high school and college-aged (and older) workers in search of "breaking into the industry," and have chosen to not pay them. Those days of getting real work in exchange for credit (college or screen) seem to be disappearing.
"Who Will Notice?"
A fly-by-night production company may go unnoticed by the Department of Labor. But a production company that is acting outside of the good faith scope of a business may have its "corporate veil pierced;" in other words, a lawsuit involving the company may also include the individuals behind the company as defendants.
The U.S. Department of Labor has outlined a test of the legitimacy of an unpaid internship:
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:
- 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.
The U.S. Department of Labor stresses that its test is to be construed narrowly; some states such as New York have even stricter guidelines than the federal guidelines. As the years go by, the attempts by companies--even in film, media, and the arts--to get around paying workers are being met with harsh penalties and lawsuits.
Update (July 17, 2015): The 2nd Circuit has sent the "Black Swan" case back to the lower court and applied a "Primary Beneficiary" test rather than the 6 factors above. Still, that likely will have more impact on the ability to bring class actions in New York, because the primary beneficiary test is more case-by-case, but unless there is an educational component, it is very likely the unpaid internship will be considered illegal. Also, note that a settlement was reached in California in a class-action unpaid internship case against the agency ICM, and the court there was pointed in its disagreement with the 2nd Circuit. Unpaid internships are still usually dicey propositions.
The seven factors the 2nd Circuit considered more important than the Department of Labor's Fact Sheet were:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
- The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.