There’s a difference between unethical and illegal business practices. In some cases, unethical business practices are the reason there are laws that make those particularly scummy things illegal. Many times, those frowned-upon actions fall into more of a gray area. And sometimes, changes in culture or complaints about ongoing unethical treatment cause certain practices to shift from being just unsavory to actually against the law.
Some of those changes have brought about shifts in entire industries. Other times, it’s brought shady business deals of well-known companies into the light. And in some cases, the problems are so large that they cost employees millions of dollars each year. Take a look at the list below to be on guard against these practices at your company.
1. Hiring unpaid interns
The question of whether it is illegal to hire unpaid interns has always been clear in the law, but until only recently was largely ignored by many creative industries. The original ruling about the status of unpaid workers comes from the Fair Labor Standards Act of 1938, which also established the minimum wage.
Overseen by the Department of Labor, the act says that for-profit companies can only use unpaid interns if they meet six specific criteria. Of those standards, the internship has to mimic the kind of instruction the person would receive in an educational setting, and the employer must not receive any immediate advantage from the activities of the intern. (A la The Devil Wears Prada, fetching lunch orders or picking up dry cleaning do not qualify.) The arrangement must be for the benefit of the intern, not the to-do list of the company.
The clarity for the public at large about the law — including unpaid interns themselves — came in the form of a few recent lawsuits. A former intern at Harper’s Bazaar sued the magazine in 2012, saying that her long unpaid hours allowed the company to avoid hiring another staff member. “Unpaid interns are becoming the modern-day equivalent of entry-level employees, except that employers are not paying them for the many hours they work,” according to the lawsuit.
That lawsuit is on appeal in the Second Circuit, as is a ruling from June 2013 in which a judge said that Fox Searchlight Pictures should have paid production interns. That case is the first noted victory in the recent lawsuits, though another one brought by former Saturday Night Live interns for NBC was settled in October and worth a reported $6.4 million.
As one consequence of the onslaught, Condé Nast, the publishing company that produces magazines including The New Yorker, Vanity Fair, and Vogue, ended its unpaid internship program in 2013.
2. Horizontal price agreements (antitrust violations)
There are numerous facets to the Sherman Act, passed in 1890 to protect competition in the marketplace. Penalties for breaking the law can be severe, with criminal penalties up to $100 million for companies and $1 million to individuals plus 10 years in prison, not to mention the settlement prices that can be placed on top of that.
Many times, this can be seen in the example of price fixing, when competing companies collude to set a determined price on a product or service. But other arrangements between companies are also illegal, such as agreements not to compete in designated geographic areas or group boycotts against a person or other company.
In order to prove price-fixing or other violations, lawyers have to show proof of such agreements. That was done with the lawsuit against Apple, which alleged the company had colluded with five major publishers to fix e-book prices in 2010. The ruling came in July 2013, with a settlement agreement in November 2014.
3. Wage theft
Wage theft is one of the costliest crimes against American workers each year and often tends to affect people who are already working minimum-wage jobs. Though it can take several forms, it often includes not paying for overtime work, garnishing checks for no legal reason, or requiring employees to work off the clock for certain duties, such as setting up or cleaning up at the beginning or end of shifts.
The largest problem with this type of theft is that it isn’t easily detected: Unless employees are carefully monitoring pay stubs, a few dollars each week can be easily missed. But that can add up to thousands of dollars each year, the Economic Policy Institute notes.
To demonstrate the impact of wage theft in America, the institute compared the amount of money or goods stolen in robberies, gas station hold-ups, and other forms of theft to what was actually recovered in wage theft lawsuits or complaints. In 2012, the reported thefts that the Federal Bureau of Investigation tallied amounted to $340.9 million. Though no one tracks how much money employees lost from wage theft in that year, the institute did compile how much was recovered through litigation.
The total in 2012 was at least $933 million — almost triple that of other forms of theft. And that didn’t even include data from fives states and five attorneys general. Wage theft cases are somewhat common and even affected the Papa John’s brand when a franchise owner in New York was ordered to pay $800,000 in back wages to employees in seven pizza shops in Brooklyn and Queens.
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