Startups, Small Companies, and Unpaid Internship Programs

February 26, 2014

Gawker Media, LLC is an online media company and blog network based in New York City. Last summer, three former interns sued the online publisher in Manhattan federal court, alleging that it violated minimum-wage laws by requiring interns to work at least 15 hours per week without pay. The complaint, which was filed on behalf of all of the company's unpaid interns and seeks unpaid wages and overtime under the federal Fair Labor Standards Act (FLSA), alleges that "Gawker employs numerous other ‘interns' in the same way, paying them nothing or underpaying them and utilizing their services to publish its content on the Internet, an enterprise that generates significant amounts of revenue for Gawker."

Last week, PandoDaily reported that Gawker has begun filing documents in response to the lawsuit, many of which paint the company in a very hypocritical light. In several affidavits, Gawker employees, including managing editors, avert that the interns were rewarded with valuable experience that was all part of an informal training process: "Simply observing what it is like to work at a place like Gawker is valuable, and internships at Gawker sites are good for a person's resume." The hypocrisy: Last August, Gawker castigated Facebook COO Sheryl Sandberg for having one of her employees advertise for an unpaid assistant to help Sandberg on her book tour.

The case against Gawker was filed shortly after a federal judge ruled in favor of plaintiffs in a class-action lawsuit filed against Fox Searchlight Pictures in federal court in New York. In that case, two former interns who worked on the film "Black Swan," claimed that Fox violated federal and state minimum wage and overtime laws. The plaintiffs alleged that they had the duties and responsibilities of regular employees, but did not receive adequate training and supervision, as required by the FSLA (an employer using unpaid interns must provide training and gain "no immediate advantage" from the interns, such as displacing a regular employee by performing his/her duties).

The Gawker case is only one of many unpaid internship lawsuits that have been filed in the last year against large companies for similar FSLA violations, and legal analysts predict that more will follow. Startups are notoriously popular environments for students and recent college graduates, and internship programs are an excellent way to attract top talent from many different educational/professional levels. Unpaid internships are especially attractive to startups (and many small companies) because many are strapped for cash. But, as evidenced by the case against Gawker, using unpaid interns can land your startup or small company in a legal battle.

If your startup or small company has an unpaid internship program, or if you are considering starting one, the Law Office of Kristina M. Reed can help ensure that you are complying with all applicable federal and state laws. We are committed to helping entrepreneurs and all small business owners achieve their dreams by providing the foundation needed for success. Our goal is to help you grow into a successful business. We are highly experienced in all phases of business law, from startup to profitability, and we can help guide your young company through all phases of its growth and success. If you have questions about your California business or startup, please contact us.