In June, a ruling from a Federal court in New York, (Glatt v. Fox Searchlight Pictures Inc., S.D.N.Y., No. 11-06784, 6/11/13), made headlines when it determined that unpaid interns were entitled to back pay for their services in connection with the production of various films, including “Black Swan” and “500 Days of Summer.” This case ignited conversation across many industries that have come to rely on unpaid internships, but the decision did not herald a change in the law so much as reiterate the US Department of Labor’s standards for internships, which the court said were essentially identical to New York State’s.
If nothing else, the Glatt case should serve as a reminder to businesses to take care in structuring internship programs. Using the free labor of non-student adults for regular employee functions is a particularly dangerous practice, as Fox Searchlight found out.
Fox Searchlight had set up an interim production company separate and apart from the studio itself for production of the film. The interns ostensibly worked for the studio’s production companies. However, the court found that the studio had both complete formal and “significant” functional control over the interns and thus could not escape liability, and held the studio responsible as a joint employer of the interns.
The court looked to a 1947 US Supreme Court case, Walling v. Portland Terminal Co. (330 U.S. 148 (1947)) that permitted an exemption from minimum wage is for trainees, where there was sufficient on-the-job training for railroad employees. The Fair Labor Standards Act (FLSA) was passed subsequent to Walling, and established the minimum wage, overtime pay, recordkeeping and youth employment standards for all private and public employees at the federal, state and local level. The US Department of Labor has issued a Factsheet that reflects both the FLSA standards and the Walling decision, and the court in Glatt examined the Factsheet for the 6 factors that determine whether an internship program is exempt from minimum wage laws.
Those six factors are:
- Training Similar to an Educational Environment.
Internships must provide more than on-the-job training. In Glatt, the court said “It is not enough that an intern may learn ‘through experience,’ as any paid co-worker would also have the same opportunity.” Because none of the interns in this case were enrolled in school, or using the internship for credit, the court did not address those scenarios.
- Whether the Internship Experience is for the Benefit of the Intern.
“Incidental” benefits, such as “resume listings and job references” are the result of any work relationship and are not enough to establish an internship. By contrast, the studios received the benefit of “unpaid work” and were thus the “primary beneficiaries.”
- Whether Interns Displace Regular Paid Employees.
In Glatt, the court wrote that an intern should not be performing “routine tasks” that would otherwise be performed by regular employees. If the intern were not doing the work for free, paid employees would be required to “work longer hours,” or additional paid staff would have to be hired to do the same tasks. In Glatt , the supervisor conceded that “[i]f Mr. Glatt had not performed this work, another member of [the supervisor’s] staff would have been required to work longer hours to perform it, or [they] would have needed a paid production assistant or another intern to do it.”
- Whether the Employer Obtained an Immediate Advantage From the Intern’s Work.
In Glatt, the studios did not dispute that they “obtained an immediate advantage” from the interns’ work. Even “menial” work is essential, and the only exception is for certified “learners” and “apprentices” to be paid less than minimum wage. But they must still be paid.
- Whether the Interns Are Entitled to a Job at the End of the Internship.
Here, the interns did not expect to be hired. Presumably this factor is to prevent unpaid training periods, which are permitted only in very limited circumstances.
- Whether the Interns Understand They Are Not Entitled to Wages.
The right under FLSA to wages for employment cannot be waived. It should therefore be stated – and the court in Glatt did state – that, even if interns understand that they are not entitled to wages, they cannot “waive their entitlement to wages.”
While the court in Glatt did not offer clear instructions as to what employers should do to ensure that their programs comply with the law, it seems apparent that school credit alone will not be enough to satisfy the test if the employer company is receiving an immediate benefit and/or displacing regular workers.
By contrast, in a different case this year in the same federal court (different judge), intern plaintiffs for various Hearst Corp. publications were denied summary judgment even with many similar facts to Glatt. Wang v. The Hearst Corporation, Civil Action No. 12 Civ. 0793. In Wang, Hearst successfully argued that there was an issue of material fact to be litigated regarding, among other things, whether there was a sufficient training/educational component to its internship program. The case is now on appeal to the 2d Circuit Court of Appeals on the separate question of whether the plaintiff interns should have been permitted to sue on behalf of all similarly-situated Hearst interns, as a class action. The district court judge had rejected that claim as well.
Interestingly, there is yet another internship suit pending in the same court, this one against Hearst competitor Conde Nast (Lauren Ballinger and Matthew Leib, et al., v. Advance Magazine Publishers, Inc. d/b/a Conde Nast Publications, No 13 Civ. 4036). The Ballinger case involves former interns for W Magazine and The New Yorker. Training programs for interns and general applicability of skills learned in internships can be viewed differently in different cases, particularly in different industries such as magazine publishing and films. For example, Dan Prochilo writes in Law360 that Lauren Ballinger claims that “Regardless of how many hours she worked, she was paid $12 a day.” Fox Searchlight paid its interns nothing.
Kristine Sova’s story on the Glatt case, published by the New York State Bar Association, reported that representatives for Fox Searchlight have indicated that the company intends to pursue an appeal in Glatt. This case drew a lot of attention due to its high-profile parties, but did not signal any changes in the law or set forth any definitive instructions to employers. However, the appeal and the decisions coming down the pike in the parallel cases may provide meaningful guidance.
Andrew Mirsky, Principal with Mirsky & Company, PLLC, contributed to this post.
1 Comment
Add Comment