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By Erin Sylvester Torcello

Gov. Andrew M. Cuomo signed a bill last week that amends the New York Human Rights Law by outlawing discriminatory practices relating to unpaid interns.

This has notable impact on interns and especially the for-profit companies hiring them.

The amendment prohibits employers from discriminating against unpaid interns and prospective interns on 12 factors – race, creed, etc. – with respect to hiring, discharge and other terms and conditions of employment.

As many interns working this summer know, unpaid internships frequently benefit the employer and the student. The student gains real-life experience, resume enhancement, networking opportunities and perhaps a step toward a paid position after graduation. The employer has a low-cost opportunity to evaluate a potential applicant. But employers must exercise caution in the way the internship program is set up and in the functions the intern performs.

The U.S. Department of Labor in 2010 issued rules reminding employers that unpaid interns may be “employees” under the federal Fair Labor Standards Act, the minimum wage and overtime law. For employers considering unpaid internships, the key question is whether the unpaid intern is “suffered or permitted” to work within the meaning of the Fair Labor law. The Department of Labor stresses that in the “for-profit” sector, internships will most often be viewed as employment.

A determination that an unpaid intern is, in fact, an employee can have consequences beyond minimum wage and overtime obligations. Discrimination laws, workers’ compensation coverage, state and federal tax laws, employee benefits and unemployment insurance coverage are all implicated in the event of a misclassification.

The New York legislation was introduced following a 2013 case in which the U.S. District Court for the Southern District of New York dismissed a sexual harassment claim asserted by an unpaid intern who alleged that her boss groped her and tried to kiss her.

The court was bound by the language of the existing statute, which applied only to paid employees. The amendment gives unpaid interns the same rights to be free from workplace discrimination and harassment as paid employees.

Employers who have unpaid interns should consider revising their anti-discrimination and anti-harassment policies to explicitly provide that discrimination and harassment against interns will not be tolerated. Also, that complaints made by interns regarding unlawful harassment will be investigated in the same manner as complaints made by employees.

Erin Sylvester Torcello is a labor attorney with Bond Schoeneck & King in Buffalo.