Interns and the Entertainment Business - Is it Slavery?

An internship program is meant to provide the intern with supervised training in a profession or occupation such as a medical student working in a hospital assisting and learning from experienced doctors. 

 

However, many companies, and especially those in the Entertainment field, have turned internship programs into free labor camps.  Instead of providing supervised training in a specific area, many entertainment companies require the interns to simply work for free doing dull menial tasks such as entering names into a database.

 

College students eager for a chance to work in entertainment are taken advantage of and turned into free labor.   The "internships" are usually not educational or training oriented and instead amount to drudgery with no pay.

 

Certain radio stations owned by Cumulus Radio, for example, use interns to perform routine clerical tasks for free or to serve as free roadies who travel to locations and set up stages or equipment for promotions.   They also work inside the stations doing routine administrative or marketing support work like entering the names of contestants into a computer program.   They do all of this for free.  

 

These radio interns are not being trained or educated, instead they are being exploited for free labor.   They just do the work that another paid worker could do and there is often no educational component.  Importantly, these internship programs do not benefit the intern, instead the intern is exploited and the company benefits from free labor.     

 

In the past, the U.S. Department of Labor turned a blind eye to it, but now the law has changed and interns can no longer be forced to work for free.  Last month, the U.S. Department of Labor issued Fact Sheet #17: Internship Programs Under the Fair Labor Standards Act.   This document sets for the new rules for internship programs.  Fact Sheet 17 states that most all interns at private companies will be deemed employees who are entitled to wages and overtime pay.  This means that there is a presumption that the interns are really employees who must be paid for their work. 

 

In order for a company internship to be deemed a bona fide internship program, the following six criteria will be applied:

 

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 the 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.

 

If all six of the above criteria are met, the intern will not be considered an employee who is entitled to wages and overtime pay.  Under these rules, I would bet that most internship programs in the entertainment industry are suspect.  The ones that I have heard about in the radio industry fail miserably and the interns are really just employees who must be paid wages and overtime pay.    

 

 

Are Interns Abused: Their Right to Minumum Wage and Overtime Pay

Lately, there has been a crack down on internship abuse by the Federal Department of Labor and many states such as California, New York and Oregon.  The recession has created a unique climate for abuse because many companies need to lower costs and there are now thousands of eager young college students clamoring for a chance to get real world work experience.   As a result, many companies recruit interns with the prospect of educational and career experience but what the interns get instead is forced drudgery and no pay.   See the New York Times article on this subject.  

 

Many corporate internships are unpaid - the interns believe they will get a genuine resume building experience but instead wind up packing boxes or shinning door knobs.  Normally, employees must be paid minimum wage and overtime pay.   But the free interns are not protected - they work for free. 

Proponents of the free internship programs claim that it is a great opportunity for students and employers alike.   But others believe that the unpaid internships are grossly unfair because only well heeled students can afford to work for free and the free programs are rife with abuse.   See The Harvard Political Review article "Weighing In: Are Interns Slaves?  

 

The free internship party is now over as government agencies are targeting these programs.  Now, companies can only offer free internship programs if the program meets a rigorous six part test developed by the U.S. Department of Labor’s Wage and Hour Division.   The goal is to prevent companies from converting internship programs into forced free labor and to instead ensure that the programs are truly educational training programs.  

 

As for the interns, they stand to recover back pay for all of those hours worked - they are entitled to be paid for their work and now they have the legal right to recover that pay.      

The 3 Things to Know about Rest Breaks in California

In California, employees ARE entitled to rest breaks.   Here are the 3 key points to remember:

1.  You are Entitled to a 10 minute break every 4 hours

California employees must be provided with a 10-minute paid rest period for every four hours worked. The 10 minute rest period should be in the middle of the work period. 

 

2.  If You Don't Get a Break, You are Entitled to an Extra Hour of Pay

If your employer does not let you take your 10 minute break after four hours, then your employer must pay one extra hour of pay at your regular rate for every day that a rest break is not provided.  

 

3.  You can Enforce Your Rights if a Break or Extra Pay is Not provided

If your employer does not provide the required rest break or pay you the extra one hour of pay at your regular rate, then you can file a wage claim with the the Division of Labor Standards Enforcement.

 

 

If I Work Unapproved Overtime, Am I Still Entitled to Overtime Pay?

People call and ask this question all of the time. We always tell them that yes, your employer does have to pay you overtime even if they did not approve it.

Federal and state labor law requires that employers pay overtime, whether authorized or not, at the rate of one and one-half times the employee's regular rate of pay for all hours worked in excess of 40 hours per week.  In some states, overtime rates apply to all hours worked over 8 in a day and require double pay for each hour worked over 12 in a day.  

An employer can discipline an employee if he or she violates the employer's policy of working overtime without the required authorization. However, the wage and hour laws require that the employee be compensated for any hours he or she is "suffered or permitted to work, whether or not required to do so." Case law holds that "suffer or permit" means work the employer knew or should have known about. Thus, an employee cannot deliberately prevent the employer from obtaining knowledge of the unauthorized overtime worked, and come back later to claim recovery. The employer must have the opportunity to obey the law.

Whole Foods Employee Fired for Eating Shrimp

A Whole Foods employee was fired this week for eating shrimp from a free sample offerred to customers at the organic grocery store.   The employee said that it was common for employees to eat free samples while they were cleaning up from events as the food would be thrown away.   But a new manager wanted to stop employees from eating the samples and he fired her to send a message.

The fired employee was shocked and upset and called our law firm to see if we could do anything about it.   Unfortunately, Whole Foods did not violate the law by firing her.   A person can be fired for eating shrimp even if eating shrimp used to be allowed.  

Since the grocery store worker was an employee at will, Whole Foods was free to fire her for any reason or no reason.   An employee at will has no right to keep her job.   At will employees are free to quit at any time for any reason and a company is free to fire at will employees for any reason.  No advance notice is required.  It may seem arbitrary and unfair, but that is the law in America.   There was nothing we could do to help this person. 

 

 

The Difference Between Independent Contractors and Employees

Companies try to reduce overhead by hiring independent contractors instead of employees. We get a lot of calls from people who want to know what the difference is between these two labels and how impacts them.

First, the independent contractor label is usually good for the company and bad for the person. The company saves money because Independent contractors are not entitled to receive any benefits such as health insurance or overtime pay. This is a huge savings for companies.

I write this post so people who are working as independent contractors can tell if they are being illegally deprived of benefits and legal protection.  The key factor is whether the employer has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Courts typically consider these factors in determining whether a worker is an employee or independent contractor:

1. Whether the worker is engaged in an occupation or business distinct from that of the employer;
2. Whether or not the work is a part of the regular business of the employer;
3. Whether the employer or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged worker's investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The worker's opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the employer retains pervasive control over the operation as a whole, (2) the worker's duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)

Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, Id.at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. (Toyota Motor Sales v. Superior Court (1990) 220 Cal.App.3d 864, 877).

You Cannot Waive Your Right to Overtime Pay

Companies sometimes try to trick their employees into thinking that they waived their right to overtime pay.  These underhanded corporations circulate overtime waiver forms and have their employees sign them and it leaves the employees thinking that they are not entitled to overtime pay.  

These overtime waivers are not valid - not enforceable.  If you signed one of these, then you know two things: first, your employer is a slimy cheapskate. Second, you still have the right to overtime pay.

California law requires that an employee be paid all overtime compensation notwithstanding any agreement to work for a lesser wage. Consequently, such an agreement or "waiver" will not prevent an employee from recovering his overtime pay. See Labor Code Section 1194. Federal law also says that an employee cannot waive their right to overtime pay.

How To Avoid an Overtime Pay Lawsuit

A friend of mine runs a retail chain store with about 20 stores in California. Each of his stores has a manager and several assistant managers. He pays his assistant managers by the hour and gives them overtime pay for all hours over 8 per day or over 40 per week as required. But, he pays his store managers a set salary and does not provide them with any overtime pay. A true store manager would be exempt from overtime pay under the executive exemption.  He asked me if he should convert his mangers to hourly pay to avoid a potential overtime suit. Here is my answer:

The terms of the exemption for your store managers are set forth below. If your managers clearly fit, then you can keep them as salaried employees. However, if there is any doubt that all of your managers clearly fit this exemption, then you risk a wage and hour suit and if one person sues - the odds are that it will be a class action. Or, under California's new Public Attorney General Act, a single person can sue for wage and hour violations on behalf of all other employees without even making it a class action. It is now easier than ever for a single employee to cause a big problem - so make sure you follow the wage an hour rules. Be conservative. If you have any doubt, error on the side of assuming that your employees are not exempt.

Even if you are correct that your managers are exempt and you win in court - you still lose because you will have to pay some law firm a lot just to win. So avoid litigation - be every up front and open and err on the side of compliance. If an employee ever complains, take it very seriously and keep the employee informed at all times and clearly explain what you are doing. If you are wrong, admit it to the employee and pay them for the error.

California Executive Exemption:
The California Executive Exemption applies to employees who spend over half their work time managing businesses or departments of a business. CA labor law on executive exemptions requires that the following occur to meet the tests for the CA Executive Exemption.

1. Manage the entire company or department or subdivision.
2. Direct the work of at least 2 subordinates in your department or division.
3. Have the power/authority to hire or fire - either directly or indirectly.
4. Exercise independent business judgment.
5. Spend more than 50% of your time doing the above tasks.
6. Be paid at least $640 per week (as of this writing).

Loan Officers Should Get Overtime Pay - Says U.S. Dept. of Labor

On March 24, 2010,  the U.S. Department of Labor issued a ruling finding in favor of loan officers around the nation.  Now, most all loan officers are clearly entitled to overtime pay.   This question had been hotly disputed for years.  In fact, the U.S. Department of Labor had previously said that loan were not entitled to overtime pay and courts around the nation had come to inconsistent rulings.

In the past, federal courts and the U.S. Department of Labor held that most loan officers were exempt from the overtime pay laws because they were "administrators."  Administrators are exempt from overtime under the Fair Labor Standards Act. 

The new opinion letter from the Department of Labor, however, reversed course and concluded that loan officers are production employees.  Production employees are those who work on producing the product or service provided by the employer. In this case, loan officers help produce the companies product - loans.   Since loan officers are production oriented, they are not considered administrative employees and therefore they are entitled to overtime pay. 

It is now clear that standard loan officers are entitled to overtime pay.  This long running dispute has been resolved in favor of the loan officers.  

Independent Contractors are Not entitled to Overtime Pay and Benefits

People who are classified as independent contractors are not entitled to the following benefits and protections:

- No right to overtime pay

- No right to minimum wages

- No right to pay for rest breaks or meal periods

- No right to reimbursement for business expenses

- No right unemployment insurance, disability insurance or social security

- An independent contractor is also responsible for paying taxes that are normaly paid by an employer.

- Companies usually do not provide indendpenent contractors with the health benefits that are provided to employees

The only true benefit of being an independent contractor is some measure of freedom and flexability.   If a person is truly an independent contractor, then they will have control over their hours, the location of the work, the pay structure, and the nature of the work being performed.  Unfortunately, companies often misclassify people as independent contractors and treat them like employees.  In this situation, the individual does not realize any of the benefits of being an indepdent contractor and loses the benefits of being an employee.   

It is illegal for a company to classify an employee as an indepedent contractor.  Emmployees have challenged the independent contractor classification and recovered money for unpaid overtime.   In an upcoming post, I will explain how you can determine if you are an employee or an independent contractor.