The recent decision in Glatt v. Fox Searchlight Pictures, Inc. illustrates the dangers and potential liability that employers face when utilizing unpaid interns.  See No. 11 Civ. 6784 (WHP) (S.D.N.Y., June 11, 2013).  In Glatt, the U.S. District Court for the Southern District of New York rejected an employer’s argument that certain unpaid interns qualified as “trainees” and, therefore, were not entitled to wages under the Fair Labor Standards Act (FLSA).
Under the FLSA’s trainee exception, employers are not required to pay wages to interns or trainees who receive training from an employer for their own personal benefit.  For the trainee exception to apply, the Department of Labor (DOL) has identified six criteria that need to be satisfied.  If all six criteria are satisfied, then no employment relationship exists, and the minimum wage and overtime provisions of the FLSA do not apply to the intern or trainee.  See U.S. Department of Labor, Wage and Hour Division, Fact Sheet #71.
In Glatt, the unpaid interns who filed suit had worked for the employer without pay on the sets of the films Black Swan and 500 Days of Summer.  Applying the DOL’s six criteria for the FLSA’s trainee exception, the court held that the interns did not qualify for the exception and should have been paid as employees.  The court explained that:

They worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training.  The benefits they may have received—such as knowledge of how a production or accounting office functions or references for future jobs—are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would receive in an academic setting or vocational school.

Takeaway:  The trainee exception under the FLSA that permits unpaid internships in certain circumstances is narrow.  The Glatt decision illustrates the potential liability that employers can face if they utilize unpaid interns without first giving careful consideration to whether the FLSA’s trainee exception applies.