When a business owner hires a person to perform work for the company, how the individual is classified becomes extremely important. Whether he or she is a volunteer, an intern, a contractor, or a full employee will have legal and financial ramifications for the company.
We’ve talked about the IRS and DOL penalties for misclassifying employees already. And now, the outcome of a recent lawsuit demonstrates the legal penalties that an employer faces when the company misclassifies employees.
This lawsuit, filed by two interns who worked on the film Black Swan, accused Fox Searchlight and parent company Fox Entertainment Company of violating the Fair Labor Standards Act and New York Labor Law, according to an ABC news article.
The lawsuit stated, “This practice runs afoul of basic wage-and-hour laws, which require that employers pay all of their employees – even those desperate for the work – the minimum wage…In misclassifying many of its workers as unpaid interns, Fox Searchlight has denied them the benefits that the law affords to employees, including unemployment and workers’ compensation insurance…”
Judge William Pauley, in his decision, ruled in favor of the two interns. Fox Searchlight plans to appeal the decision.
Because they are cheaper, companies often strive to hire interns and independent contractors—rather than paying for the workers’ compensation insurance and other benefits that full employees receive.
But—as this case demonstrates—just because a company classifies its workers as unpaid interns or contractors does not mean that they will be classified as such under the law. In the case of the unpaid interns at Fox Searchlight, they were found not to be interns because any benefits they received “were not the result of internships intentionally structured to benefit them.” In short, the judge found that the company skirted their responsibility to its interns in misclassifying them.
Cases like these demonstrate why it is critical for workers to know their rights and consult with an attorney if they feel their rights have been violated. Even if your employer classifies you as an intern or independent contractor, you still may be considered an employee under the law.
And if you are injured on the job—whether or not you are classified as an employee—you should schedule a free consultation with a workers’ compensation attorney to determine if you are eligible for workers’ compensation benefits.