In 2011, two unpaid production interns who worked on the set of the film, Black Swan, filed suit against Fox Searchlight Pictures, alleging the company had violated New York and federal minimum wage laws. These interns were required to perform tasks such as organizing filing cabinets, making photocopies, taking lunch orders and answering phones. In June of 2013, federal judge, William H. Pauley III, ruled these interns should have been paid wages and were in fact regular employees. This decision could upend the practices of industries who have become reliant on unpaid interns. [1]
Legally, an unpaid internship should only exist in an educational context (such as a part of a course or to receive college credit). In order to determine whether an intern at a for-profit company should be classified as a paid employee, Judge Pauley adopted a six point test promulgated by the Department of Labor:
- 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;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.[2]
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. Under this criteria, an unpaid intern, who regularly performs duties such as clerical work, filing and the occasional coffee run, who derives no educational benefit from the job, is an employee to whom wages are owed.
Although Fox Searchlight has decided to appeal the case in the Second Circuit, which will be heard later this year, the precedent has opened the gate for waves of similar action. In the wake of the “Black Swan” case, more than 15 lawsuits alleging FLSA violations against unpaid interns have been filed. [3] Among the companies defending these lawsuits are Hearst, NBC, Elite Models, Warner Music Group, Viacom and Conde Nast. Some of these lawsuits are getting resolved at a steep price to employers. In October 2014, NBC reached a settlement with a group of former interns for $6.4 million. [4]
Ideally, an internship is an opportunity for an entry level employee (usually college aged) to gain tools, training and a foothold in their respective industry, which eventually ends in meaningful employment. However, these lawsuits have revealed that in practice, unpaid internships were abused as a means of obtaining unpaid labor to perform entry level and menial tasks. These suits should not dissuade potential employers from implementing their own internship programs. However, if the purpose of the internship is not educational, and the intern regularly performs duties of a paid employee and does work which generates profit, they may be entitled to wages. In lieu of recent aggressive litigation, a for-profit business who employs unpaid interns, is asking for trouble.
[1]Greenhouse, Steven. “Judge Rules That Movie Studio Should Have Been Paying Interns.” The New York Times. The New York Times, 11 June 2013. Web. 22 Jan. 2015. <http://www.nytimes.com/2013/06/12/business/judge-rules-for-interns-who-sued-fox-searchlight.html>.
[2] “U.S. Department of Labor – Wage and Hour Division (WHD) – Fact Sheet.” U.S. Department of Labor – Wage and Hour Division (WHD) – Fact Sheet. U.S. Department of Labor. Web. 22 Jan. 2015. <http://www.dol.gov/whd/regs/compliance/whdfs71.htm>.
[3] Perlin, Ross. “Unpaid Interns: Silent No More.” The New York Times. The New York Times, 20 July 2013. Web. 22 Jan. 2015. <http://www.nytimes.com/2013/07/21/jobs/unpaid-interns-silent-no-more.html?_r=0>.
[4] Miller, Daniel. “NBCUniversal to Settle Suit by Former Interns for $6.4 Million.” Los Angeles Times. Los Angeles Times, 24 Oct. 2014. Web. 22 Jan. 2015. <http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-nbc-interns-lawsuit-settlement-20141024-story.html>.