(LEGAL) What Are Your Legal Liabilities of Internships?

Radio Ink asks:  What are the legal liabilities of a station for having internships, independent contractors, and the like, involved with the operations of a radio station...and how can a station protect itself from such liabilities?

John Garziglia says:  A discussion of interns and independent contractors raises a huge variety of both FCC and non-FCC issues for radio stations. Let's try to briefly go through the issues with the caveat that for confronting any of these issues, the advice of an experienced attorney or human resources person is the next step.

First, must interns be paid? The Fair Labor Standards Act has six criteria for identifying when an intern (usually called a "learner/trainee" rather than an intern) may be unpaid.

Those criteria for whether an intern must be paid include: whether the training is similar to a vocational school, whether the training is for the benefit of the intern, whether the intern displaces regular employees and works under the close observation of a regular employee, whether the employer derives an immediate advantage from the activities of the intern, whether the intern is entitled to a job at the conclusion of the internship, and whether the employer and intern understand that no wages are to be paid.  While not all six factors are equally considered,  generally the internship experience must look more like a training or learning experience than look like a job for an intern not to be paid.

It is also worth noting that while unpaid internships are common in the radio industry, the U.S. Department of Labor takes a narrow view on the issue of unpaid interns. Depending on what the intern does,  it is often difficult to make an airtight case that the internship qualifies as one that can be unpaid.

Past the issue of whether an intern is paid or unpaid, further issues arise as to whether an unpaid intern is covered under a station's workers' compensation insurance. Questions that can arise include whether it is advisable for unpaid interns to sign a hold-harmless agreement, an indemnity agreement, or a release of liability. Unpaid internships can also present issues of employment discrimination, harassment, ADA, wage and hour compliance, unemployment compensation, and other employment-related issues.

With independent contractors, the primary issue is whether the worker is actually that -- an independent contractor.  The more a relationship with a worker looks like an employer/employee relationship, the more likely it is that the relationship will be regarded as employer/employee by courts and taxing authorities.  

Some of the criteria used for determining if a worker is an independent contractor are:  is the worker required to follow specific instructions, are there a set number of hours to be worked, who supplies the equipment needed to accomplish the work, must the work be performed on the employer's premises, is the worker trained by the employer, is the work part of the employer's regular business, how long does the relationship last, can the employer assign additional projects to the worker, is the person paid in the same manner as employees, can the worker hire assistants, does the worker provide services to more than one unrelated entity, does the worker make his or her services available to the general public, is there a written contract delineating rights and responsibilities, can the relationship be terminated at will, and is the worker making any investment into facilities or equipment and will the worker realize a profit or have a risk of loss? 

While none of these criteria as to whether a worker is an independent contractor standing alone are definitive in and of themselves, they usually do point in one direction or another.  For instance, at one end of the spectrum is a radio station's "contract engineer" who divvies up his or her time among a dozen or so different station groups, brings along his or her own tools, and is paid by the project. The station's contract engineer under these circumstances is almost certainly an independent contractor. On the other end of the spectrum, a station's engineer who works only for that radio station, is supplied tools by the radio station and is paid on an hourly or weekly basis, is almost certainly not an independent contractor. 

Regarding a worker as an "intern" or as an "independent contractor" can also have FCC ramifications. The FCC's EEO rule is fairly specific in that any worker in a position whose regular work schedule is 30 or more hours per week working for the station is to be regarded as a full-time employee for EEO wide outreach and record-keeping purposes. While there is not much FCC case law on the dividing line between interns, independent contractors and full-time employees, there will be great FCC woes to the station owner that tries to game the system by disregarding interns and independent contractors who would otherwise be in positions of full-time employment. The FCC will take a dim view of any radio station that regards those who should be full-time employees as either independent contractors or interns in order to evade the FCC's EEO wide outreach responsibilities.

There are tax ramifications for incorrectly regarding a worker as an unpaid intern or an independent contractor. John Pueschel, my law firm's labor and employment guru, warns that "right now, state labor and tax departments are paying a lot of attention to this issue. Due to the tax revenues created by the employment relationship (which are avoided in the contractor relationship), in many places, labor departments and taxing authorities are working together to investigate these contractor arrangements and recover unpaid wages and taxes."

John advises that when either unpaid interns or independent contractors are brought on board, there should be appropriate documentation (an offer letter, internship agreement, or contractor agreement, for instance) so that both parties acknowledge the nature and terms of the relationship. The documentation will be valuable if the relationship is ever challenged in a court or an administrative action.

There are also a variety of other significant issues that can arise. Consider, for instance, the required coverage the radio station enjoys with workman's compensation insurance, and whether the station wishes to be without that umbrella of protection if an independent contractor or unpaid intern gets horribly injured on the job. Or consider the gray areas that arise if a young unpaid intern is harassed or molested on the station's premises since the station's liability insurance may not cover claims made by an unpaid intern.

The closing thought is that the use of unpaid interns or independent contractors as workers at a radio station to do duties that otherwise would likely be performed by regular employees should be carefully considered by radio station managers and owners. Before any such workers are brought on board, knowledgeable legal and human resources advisors should be consulted to be sure that the radio station is not engaging in either questionable hiring practices, or an activity that could subject station ownership to significant unintended consequences or liabilities.  For specific advice in this area, John Pueschel of my firm can be reached at (336) 721-3726.

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