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Will Businesses Be Too Scared to Offer Unpaid Internships?

Unpaid Internships too Risky for Small Businesses?

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Unpaid Internships too Risky for Small Businesses? Features Editor Kathryn Vasel explains how a recent court ruling has many companies, both big and small, re-evaluating their internship programs.

Offices across the country are flooded with fresh-faced interns looking to soak in the corporate world and gain resume-padding work experience, but the fate of the unpaid internship has become hazier after a recent court ruling has employers weighing whether the programs are worth the risk.

A New York federal judge recently ruled Fox Searchlight Pictures violated wage and hour laws by not paying interns. In the case, Glatt vs. Fox Searchlight, the judge ruled the plaintiffs -- two former interns -- were doing routine tasks that otherwise would have been performed by paid employees, and should therefore be entitled to the wage-hour protections of the Fair Labor Standards Act and the New York Labor Law.

“This ruling will have a lot of employers, especially smaller businesses, rethink their internship programs if they are unpaid,” says Francine Breckenridge, a labor and employment attorney at law firm Strasburger. “The potential fines and bad press that comes along with a violation of labor laws might not be worth the risk.”

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Fox Searchlight Pictures is owned by News Corp. (NASDAQ:NWSA), which is also the parent company of the FOX Business Network.

The Department of Labor uses a six-point test to define the legality of an unpaid internship, which says the intern must receive vocational training, benefit more from the experience than the employer, and cannot replace existing staff.

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