This week’s ruling in New York by a Federal judge that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns should lead nonprofit organizations to reassess their policies for using interns.

In the ruling, the judge held that Fox Searchlight Pictures should have paid the two interns who filed the lawsuit because they did the same work as regular employees, provided value to the company and performed low-level tasks that did not require any specialized training.

To avoid employee status, interns generally must be engaged primarily for educational purposes, rather than to assist the company they are interning for. Unpaid internships for nonprofit organizations, where the intern volunteers without expectation of compensation, are generally not treated as employees. However it is important that nonprofits understand the applicable tests for interns, outlined below.

The U.S. Department of Labor (and California) require that all six of the following criteria be satisfied for an individual to be deemed an intern and not an employee:

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.

Now is a good time to review intern programs and policies to make sure they satisfy the criteria above.

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Donella Wilson

Donella Wilson, CPA, leads GHJ’s Nonprofit Practice and is also President and Chief Philanthropy Officer of GHJ Foundation, GHJ’s vehicle for purposeful and proactive giving to the community. A leader in both the nonprofit and accounting communities, Donella was named a finalist in the 2021 Los…Learn More