Offering a paid or unpaid internship can be beneficial foremployers in any industry, allowing companies to recruit talent,increase productivity and gain fresh insights while providingmentorship and leadership for a young worker.

But summer interns may increase the risk of employeelawsuits. 

"Just because you have an extra cubicle or computer doesn't meanyou're ready to hire an intern," says Roy Tyson, worldwidedeputy employment practices and fiduciary product manager for theChubb Group of Insurance Cos. "Before you bring an intern on board,make sure your company has a formal internship plan and that itcomplies with federal and state regulations."

Unpaid internships offered by for-profit companies are subjectto the U.S.Department of Labor's Fair Labor Standards Act (FLSA), whichestablishes minimum wage and overtime standards. The company may beexempt from FSLA regulations if the internship program offerseducational experience for the benefit of an intern under a"trainee" exemption. Unpaid internships offered by non-profits andgovernment agencies are also exempt.

Though it was passed in 1938, the FLSA's six-point test is stillused today for hiring unpaid interns. To be compliant with FLSA, anunpaid internship must:

1. The internship must be for the benefit of the intern
2. The internship must provide similar training that would begiven in an educational environment
3. The employer should not derive any immediate advantage from theintern
4. The intern must not displace regular employees, and should workunder close supervision of existing staff
5. The intern is not entitled to a job at the end of theinternship
6. The intern understands that he is not entitled to monetarycompensation

For employers considering offering internships, compliance withFLSA should be a top priority. The Chubb Group of Insurance Cos.also suggests addressing the following factors:

• Paid or Unpaid? Internship programs arechanging as a result of recent lawsuits by unpaid interns. Althoughthese cases usually concern compensation, to reduce the risk forlitigation, Chubb suggests that companies consider how to treatinterns with regard to anti-discrimination and anti-retaliationpolicies, handling grievances and other protections offered to theother employees.
• Work Hours? Different states have differentdefinitions of adequate compensation or hours worked. Employersmust be aware of state wage and hour laws.
• Program Information? Interns, like any otheremployee, should be provided with a detailed description of theinternship, training experience and a statement that indicates thatan internship program is compliant with labor laws.

"While businesses may believe they have met all the necessaryguidelines regarding unpaid programs, they may find that more oftenthan not, they haven't," says Tyson. "When in doubt, it's always agood idea to check with the Department of Labor or your humanresources or general counsel departments."

Some interns have retaliated against their employers in big waysif they feel as though their rights are violated. Click through thefollowing slides for three major internship lawsuits where the sixstipulations of the FLSA are put to the test.

 Hearst Corp.

Former intern Xuedan "Diana" Wang for fashion magazineHarper's Bazaar filed a class action lawsuit against thepublishing company Hearst Corp., seeking damages for five months ofunpaid labor for her work in the magazine's accessoriesdepartment.

Wang claimed that her work of 40 to 55 hours a week as a "headintern," supervising eight other unpaid workers, violated herrights under FLSA, as the group served as merely a messengerservice for the magazine, carrying bags of clothes and accessoriesto and from PR firms. According to Wang, the work did notconstitute an internship because of its lack of educationalvalue.

Hearst, on the other hand, maintained that the internship waslegal. The publisher issued a statement claiming that theirinternships are designed to enhance the educational experience forstudents who receive academic credit for their participation.

Wang had already graduated from Ohio State when she began theinternship, and received course credit by contacting theuniversity, and ultimately paying approximately $700 for two credithours to be added to her transcript.

On May 8, 2013, however, the court denied the classcertification, siding with Hearst. Judge Harold Baer, Jr., of theU.S. District Court for the Southern District of New York,determined that four of the six factors of the FLSA wereinconclusive, making the summary resolution of the caseinappropriate. He also stressed the importance of the primaryrecipient of benefits from the relationship between employer andintern. This ruling seems to provide employers with considerablefreedom in the design of unpaid internships.

 Fox Entertainment Group

Natalie Portman may have won an Oscar for her work in "BlackSwan," but Fox Searchlight interns Eric Glatt and AlexanderFootman, who worked on the film, won their court battle against thefilm's production company, Fox Entertainment Group.

The interns first launched their civil action case on behalf ofthemselves and more than 100 other Fox Searchlight interns inSeptember 2011. Federal District Court Judge William H. Pauley IIIruled that the production company should have paid their employeesbecause the intern's status was equivalent to that of a regularemployee.

According to the ruling, the internships did not foster aneducational environment and the studio, not the interns, receivedthe primary benefits of the work. Mr. Glatt and Mr. Footman citedthat their work on the film included chores such as taking lunchorders, answering phones, arranging travel plans, taking out thetrash and assembling furniture. These tasks are usually undertakenby paid employees.

"Undoubtedly Mr. Glatt and Mr. Footman received some benefitsfrom their internships, such as résumé listings, job references andan understanding of how a production office works," Judge Pauleywrote. "But those benefits were incidental to working in the officelike any other employees and were not the result of internshipsintentionally structured to benefit them. Searchlight received thebenefits of their unpaid work, which otherwise would have requiredpaid employees."

Bad Boy Entertainment

Another lawsuit due to "un-educational" free labor was filed byRashida Salaam against Sean "Diddy" Combs' record label Bad BoyEntertainment.

Salaam claims that her tasks were menial, consisting ofanswering phones, picking up lunch or bringing coffee to paidemployees, making deliveries, giftwrapping and decorating theoffice for holidays.

This case comes after the Fox Searchlight lawsuit, which waslargely considered to be a watershed moment for cases involvinginternships and violations of the FLSA. Free labor that cannot beconstituted as "educational" violates the stipulations of the FLSAand since the Fox lawsuit, academic credit alone is no longer anacceptable policy for justifying unpaid internships.

Since the lawsuit against Diddy's Bad Boy Entertainment, severalother record labels, including Warner Music, Columbia and AtlanticRecords have been subject to similar class-action lawsuits.