The Quick Death of College Internships

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Owen wilsonIt’s no secret that internships are an important part of grads getting a head start on their careers.

A new survey by The Chronicle and American Public Media’s  Marketplace, found that employers valued real world experience, internships and work during college four times more then they did the college’s reputation.

Research by NACE shows that in terms of starting salary, there is a financial advantage for students who have internship experiences. The NACE 2010 Student Survey showed students with internships received an average salary of $41,580 versus $34,601 for students who didn’t have internships.

It’s no wonder the number of students participating in internships has been growing dramatically. A study by Northwestern University showed that in 1992 only 17 percent of graduating students held internships versus 50 percent in 2008!

However, a recent decision by a New York judge could spell the end of Internships as we know them.

Internships take the spotlight at the theaters and in court!

It was a bit ironic that the movie featuring Owen Wilson and Vince Vaughn, two 40 year olds who are vying for a spot in Google’s internship program, premiered at the same time a federal judge in New York ruled that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns who worked on the production of the 2010 movie “Black Swan.”

It turns out that one of the interns that brought suit against Fox Searchlight Pictures was a 42 year old MBA grad from Case Western Reserve University whose intern assignments included preparing documents for purchase orders, handling petty cash, and traveling around to obtain signatures on documents, as well as creating spreadsheets and tracking down missing information in employee personnel files.

Eric Glatt was one of over 100 interns that Fox Searchlight Pictures employed during the filming of the movie that did not receive compensation for their time and work. They were given an opportunity to tell future employers that they had “real world” experience.

I’m not privy why, after all these years, someone like Mr. Gatt decided to challenge the system, but he did. Perhaps Mr. Glatt, a keen accountant realized that a movie that took only $13 million dollars to make, then grossed over $300 million, could have afforded to pay him and his colleagues even minimum wage.

What ever the reason, Eric threw down a gauntlet that has Hollywood, board rooms, colleges, and non-profits quaking.  Quaking, because nearly all past interns could be invited by a TV ad to join a class action suit to sue the companies for which they interned.  I really don’t see students moving on this, but suspect out of work lawyers will see this as a way to right a system that has been “enslaving” college students for decades.  In fact, don’t be surprised if marketing organizations for attorneys call your office and ask you to post information or share information with students about a class action suit in which they could participate AND even offer a percentage of whatever they win from settlements.

What does the government consider an internship?

In the true spirit of an internship, the internship is all about the student.  The internship should be designed around advancing the student’s knowledge and experience and not designed to benefit the company or organization for which the student works.  That means the student should NOT be doing work that the company would normally hire people to do.

Under federal law, every employee in America is entitled to a minimum wage, additional compensation for overtime, and certain other benefits. In 1947, in the case of Walling v. Portland Terminal Co., the United States Supreme Court held that an organization does not have to provide compensation for labor for people who work for their personal advantages rather than that of their employers. The court looked at this person as a trainee instead of an employee, and offered six factors in which organizations could determine if their internship were for the intern’s own educational benefit or the advantages of their employers.

The six factors include:

  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.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Nearly all internships are loosely put together by companies who believe they are doing a student a favor by providing them a desk, computer and opportunity to handle day to day low risk assignments, like another student who joined Eric in the lawsuit against Fox Searchlight Pictures. The other plaintiff, Alex Footman, a 2009 Wesleyan graduate who majored in film studies, said his responsibilities included preparing coffee for the production office, ensuring that the coffee pot was full, taking and distributing lunch orders for the production staff, taking out the trash and cleaning the office.  You decide.  Did any of his responsibilities comply with the above six points?

The judge didn’t think so!

The judge, William Pauley III of the U.S. District Court for the Southern District of New York ruled that Fox Searchlight Picture’s use of interns in producing the movies “Black Swan” and “(500) Days of Summer” violated minimum-wage and overtime laws, and that the interns can file a class-action lawsuit against the studio. Their activities as I described them above were clearly designed to benefit the organization and not the students.

As a result of this ruling, Nancy J. Leppink, the acting director of the Department of Labor’s, wage and hour division warns business leaders,

” If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.”

Wow, after reading that I started to realize that very few internships are designed with this in mind. In fact, the Department Of Labor has taken the position that for the exemption to apply, all of the factors listed above must be met.

So what does that mean for organizations offering internships?

According to Ross Perlin, author of the book, Internation, there are estimated to be about 1.5 million internships in the United States. Of all internships, according to InternBridge, as many as 1/2 are unpaid. Ross Eisenbrey, vice president of the Economic Policy Institute, a liberal-leaning think tank suggests there are a million UNPAID internships alone!

At any rate, how many companies do you think have designed their internships to the guidelines described above?

Not many!

We’ll always have internships like Google’s that will attract Owen Wilsons and Vince Vaughns because they pay $6,000 per month, but it looks to me that after this ruling, those 1/2 million unpaid internships are going to go away very quickly.

What organization wants to be subject to a class action suit of their interns?

I can hear HR departments across the land getting memos from their management offices suggesting they not put the firm in the public relations position that Fox Searchlight Pictures is in, let alone in the legal fix.

There could be a silver lining to all this.

In a perfect world, every organization that offers internships would simply take the easy way out and just pay the interns! However, that will not be so easy for some organizations. The National Association of Colleges and Employers found that 55 percent of the class of 2012 had an internship or co-op during their time in college and almost half of those – 47 percent – were unpaid. Of those, one third of internships at for-profit companies were unpaid.

In tough economic times its not only difficult for companies to part with their cash, but its even more difficult for non-profits!

Regardless, we’ve got to put our heads together and find a way out of this mess. If suddenly 30 percent of 1.5 million internships disappear, that means 450,000 students will lose the opportunity to put one on their resumes and they need that treasured word, “internship.” It also means those students will lose out on the benefits provided by internships, namely jobs after they graduate–jobs at a higher pay grade.

Organizations, who already say they are having a difficult time finding the right grads to fill their positions will find it even tougher to bring on students who had real world experience during their internships.

Here’s my quick 2 cents on what organizations could be doing to keep internships alive:

  • Companies need to gain a better understanding of the law
  • Companies should put their staffs through training about how to manage an internship program
  • Companies should consider creating a letter of expectation that both the intern and the employer will sign
  • Colleges may have to step up to the plate and offer some incentives
  • Colleges could offer to subsidize the student pay for the company out of alumni contributions (and some have already done so)
  • Congress should offer incentives to companies, AS WELL as pay interns themselves!

What do you think?

Check out another article on the issue by Dr. Robert Shindell of Internbridge, “The Black Swan Case – Did The Judge Get It Right?”


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Don Philabaum
Love to find ways to use technology help more grads and alumni develop successful career strategies.
Don Philabaum
Don Philabaum
Don Philabaum

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