Goldman Sachs restricts intern workday to 17 hours - in the light of the EU labour law

As many of you may remember, in 2013 a 21-year-old Bank of America Merrill Lynch intern was found dead in a shower at his London flat after working for 72 hours in a row, died of an epileptic seizure.

Goldman Sachs is quick to answer back.

Go home before midnight, and don’t come back before 7am. The new rules, introduced for this summer’s crop of investment banking interns, have been introduced “to improve the overall work experience of our interns”, a Goldman Sachs spokesman said. All of its summer interns across the world were informed of the new working hours rule on their first day in the office earlier this month. (Guardian)

The EU's Working Time Directive (2003/88/EC) stipulates minimum standards applicable throughout the EU. The Directive requires the member states to guarantee certain working conditions to the employees. One of them is the rule of daily rest. Article 3 reads that 'Member States shall take the measures necessary to ensure that every worker is entitled to a minimum daily rest period of 11 consecutive hours per 24-hour period.'  It seems that Goldman Sachs would fail this test - at least concerning its branches within the EU.

One can argue that Goldman Sachs' new rule concerns only summer interns who are not employees of the company. But in the context of the European labour law I beg to differ. The notion of 'worker' in the EU legislation, and notably in the Working Time Directive, has a large scope of application. The concept of 'worker' must be defined in accordance with objective criteria which distinguish the employment relationship by reference to the rights and obligations of the persons concerned (Blanpain).

The Karl Robert Kranemann case (Case C-109/04, Karl Robert Kranemann v Land Nordrhein-Westfalen) has ensured us that a trainee lawyer is covered by the protection as a  'worker' within the scope of the EU law, and such, is concerned by the stipulations of the Working Time Directive.  According to the case law, the term 'worker' has a specific Community meaning and it is not to define narrowly. The essential feature of an employment relationship is, the Court said, is the fact that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.

At least, Goldman Sachs pays for its interns. However, it puts them within the scope of the Working Time Directive in the EU.

Internship Programs Under The Fair Labor Standards Act

A few days ago we published an opinion about unpaid internships. The present post shows US Department of Labor's non-official point of view concerning “for-profit” private sector employers.

Background

The Fair Labor Standards Act (FLSA) defines the term “employ” very broadly as including to “suffer or permit to work.”  Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer.  Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met.  Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.

The Test For Unpaid Interns

There are some circumstances under which individuals who participate in “for-profit” private sector internships or training programs may do so without compensation.  The Supreme Court has held that the term "suffer or permit to work" cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction.  This may apply to interns who receive training for their own educational benefit if the training meets certain criteria.  The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.

The following six criteria must be applied when making this determination:

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 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 of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.  This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.  Some of the most commonly discussed factors for “for-profit” private sector internship programs are considered below.

Similar To An Education Environment And The Primary Beneficiary Of The Activity

In general, the more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).  The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training.  Under these circumstances the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent upon the work of the intern.  On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.

Displacement And Supervision Issues

If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific time periods, these interns should be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.  If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, then the interns will be viewed as employees and entitled compensation under the FLSA.  Conversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience.  On the other hand, if the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship, rather than training.

Job Entitlement

The internship should be of a fixed duration, established prior to the outset of the internship.  Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period.  If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.

Are Unpaid Internships Illegal?

Are any big companies willing to condemn publicly the practice of exploiting the vast army of young, unpaid workers we've come to call "interns"? A show of support from business is long overdue and would be an easy public relations win among the nation's young. So why the silence? Britain's business leaders are never normally shy. Could this suggest they have something to hide?

In recent weeks, the angry voices of exploited interns (and their poorer, excluded friends, currently flipping burgers and pulling pints) have grown louder – and their legal position has been strengthened. In July, a report by thinktank the Institute for Public Policy Research and social enterprise Internocracy condemned most unpaid internships as illegal. They asserted that private companies have a legal obligation to treat interns as "workers", since they are rarely just shadowing and almost always have set hours, obligations and duties to perform. This would mean employers must pay them the national minimum wage.

Even the politicians are on board – at last. All five Labour leadership hopefuls have backed pressure group Intern Aware's campaign for a fairer deal for interns. And David Willetts has finally announced: "The exploitation of interns is unacceptable and employment legislation must not be breached." (Hallelujah! What took you so long?)

But there's a problem. Having sought to clarify the law, the report's authors turned on those they say ignore it, saying:

"Employers often mistakenly believe there is a 'grey area' around internships in the national minimum wage legislation that allows them to take on unpaid interns as long as both sides understand it is a voluntary position – this is simply not the case. The law is, in fact, very clear and the problem is a failure of enforcement."

Where is the clear, decisive voice of British business in this discussion? So far, its only statements on this issue have been muddled and unconvincing. Following tip-offs from the users of my website Graduatefog.co.uk, I've investigated seven cases of well-known private sector brands advertising publicly for long-term, full-time interns, paying expenses only.

In the last few months, the contract publishers who produce the in-house magazines for Tesco, Sainsbury's, Superdrug, Morrisons and Weight Watchers have all openly recruited online for interns to work on their clients' publications for up to six months. These publishers were River, Cedar, Seven Squared and Result. Selfridges and Urban Outfitters went a step further, advertising on their own website for junior staff to work at their head office, also paying expenses-only for full-time roles. The latter's vacancy (in the planning department) was for a period of nine months.

I have contacted all these companies. Some were incredulous. The PR manager for Tesco said:

"I worked for many years as a journalist and work experience/internships are an invaluable way of gaining experience in an industry that is very difficult to get a foothold in. I personally worked on this basis for two national newspapers and was extremely grateful for the opportunity … How do you arrive at the conclusion that experience on a magazine, helping someone at the start of their career to build up contacts and a portfolio, is a guilty secret?"

Other replies were unpleasant. Sainsbury's press officer asked me to remove all mention of the story from Twitter, on the grounds that the three-month internship advertised was with Sainsbury's magazine, not Sainsbury's itself ("they are a completely separate commercial entity"). The HR director at their contract publisher, Seven Squared, also said: "Please remove references to Sainsbury's and Seven Squared from your website and blog." (I haven't.) Some replies were curt ("No comment, Tanya," from Urban Outfitters), while the rest were silent.

Superdrug and Weight Watchers both seemed keen to distance themselves from their contract publisher, River. Weight Watchers' PR manager said:

"As you know already Weight Watchers magazine is run by River Publishing, therefore they will be coming back to you with a response in due course as it is an issue relating to them directly that you are questioning."

Likewise, a spokesperson for Superdrug insisted:

"At Superdrug we take the safety and wellbeing of our colleagues very seriously and would like to confirm that we do not employ unpaid interns in any of our stores or at our head office. We work with a number of agencies who may have people on work experience in their office working on their projects. We have asked them to clarify the status of all such individuals."

A few other replies were downright bizarre. River, which publishes Superdrug and Weight Watchers magazines – both of which advertised publicly for unpaid internships of three months – insisted "our current position is that we do not offer unpaid internships". (Eh?) Cedar appeared to contradict their client Tesco's earlier claim that there was nothing wrong with advertising for an unpaid internship on their magazine, insisting it was a mistake. Their managing director said:

"This was an unapproved advertisement which had not gone through normal Cedar internal processes. It was lodged in error … While we do believe in offering internships on occasion as a way of providing valuable work experience and assessing potential future employees, we always respect the minimum wage legislation."

Morrisons' reply was the most confusing. Their spokesperson wrote:

"We have spoken to our publishing company and appreciate that this was intended as a work-experience placement and not advertised as an employed role. We believe the role was offered by our publishing company with the best intention of providing a valuable work-experience opportunity. We will continue to monitor the type of placements offered by our suppliers to ensure they are fair and transparent to all involved."

(Any idea what that means? Me neither.)

Then, another of my users discovered Dragons' Den entrepreneur James Caan publicly advertising for an unpaid intern. However, the pay and work rights helpline explained that his internship is legal, as the role is within the James Caan Foundation, a registered charity (current legislation means interns working for charities and other not-for-profit organisations are not protected by the national minimum wage laws. A loophole allows them to be defined as "voluntary workers", even when doing the job of a "worker", which must be a paid role if found in the private sector).

Nevertheless, I invited Caan to tea to discuss the matter further (along with my friends at Internocracy, Intern Aware and Interns Anonymous), in the hope of recruiting him as the British businesses' champion for this important cause that is currently demotivating our youth and crippling social mobility. I assumed it would be a PR no-brainer for Caan to get behind our nation's young people. But, 10 days later, I am still waiting for a reply.

When will somebody – anybody – from the commercial world stand up and be counted? At present, interns are stuck and desperately need help. The law seems to be on their side, but their position is too weak to allow them to claim their rights (you try demanding pay while trying to impress a newspaper editor or advertising boss). We need Britain's chief executives and entrepreneurs to take the lead on this, set an example and do what's right. Can they show that British business is great enough to treat its young workers fairly?

(Tanya de Grunwald, guardian.co.uk)