Hot Topic – Unpaid Internships

In the past few years, interns at major entertainment companies have filed lawsuits against their employers for wages they should have earned for work performed during unpaid internships. Although unpaid internships are an important way for students and entry-level to gain invaluable experience, it is no secret that internships can be grueling, abusive, or simply free work for an employer. With the economic downturn, more and more companies are using unpaid interns to perform regular work for free, and desperate workers are taking these jobs, hoping that they will turn into full-time paid work or yield fruitful personal connections.

But companies cannot simply designate any position an unpaid internship. Since 1947, the law has required that unpaid training programs and internship meet certain basic requirements. Do these interns have a real case?

The Rule:

The law regarding unpaid internships stems from a Supreme Court case from 1947, Walling v. Portland Terminal Co., 330 U.S. 148. In Walling, Supreme Court likened unpaid training periods to vocational school and set basic guidelines that courts continue to follow today. The Supreme Court ruled that the activities of an trainee or “learner” should benefit the trainee, not the company – noting that it may in the short term impede the company, as regular workers must supervise the “learner” – and should not displace regular workers. The program at issue in Walling was a 7 day, unpaid training period of observation and closely supervised work, which all workers in the business needed to complete to be certified as competent. Based on the Supreme Court’s Walling decision, the Wage & Hour Division of the Department of Labor has set forth six factors that should be considered in determining whether unpaid internships meet the requirements of federal employment law.

In short, interns should not do the type of work that is normally done by paid employees but rather should be in a position to learn about the business and the industry. Interns should not be viewed as a source of free labor, but rather employers should strive to teach and train interns in important skills. Interns should not merely perform routine work, and internships should not be considered unpaid trial or probationary periods.

The Cases:

Hearst (Wang v. The Hearst Corp., 12-cv-793): The Plaintiffs worked at Harper’s Bazaar, Cosmopolitan, Marie Claire, Esquire, Rebook and Seventeen – all published by the Hearst Corporation. Their tasks included conducting online research, cataloguing and organizing samples, maintaining clothing and accessories, organizing files, assisting at photo shoots, running errands, responding to emails, creating and editing content, contacting public relations, and managing deliveries and pickups. Some of the interns attended educational or career seminars, and most received academic credit for their internships.

The district court denied the plaintiff’s motions for class certification, meaning that the case cannot proceed as a class action. The Court found that the duties of the interns and the policies regarding internships varied too much between magazines to create a cohesive class. The Court did not rule on whether the individual internship programs violated the law or not. The Plaintiffs appealed this decision to the Second Circuit, and the appeal remains pending.

Fox Searchlight (Glatt v. Fox Searchlight Pictures, Inc., 11-cv-6784): Plaintiffs worked on production of “Black Swan” and “500 Days of Summer” and at a corporate office of Fox Searchlight. The interns performed mostly administrative tasks such as picking up documents, tracking orders and invoices, obtaining signatures, drafting cover letters, organizing files, making copies, running errands, assembling office furniture, arranging travel plans, taking lunch orders, disposing of trash, answering phones, making deliveries, and watermarking scripts.

The district court found that the interns should have been classified as employees and paid as required by law. At least one intern stated that he did not learn any new skills except for minor aspects of that particular film’s operations. The internships benefitted Fox Searchlight because otherwise it would have needed to pay employees for the work performed by the interns, and the interns in return did not receive any particular benefit besides the general benefits of any employee (e.g. résumé lines, references, office experience).

The Fox Searchlight decision is also significant because the Court agreed with the plaintiffs that Fox Searchlight was the interns’ joint employer. This is important because the standard practice in the film industry is to create a unique corporation for each production, which is controlled by a larger studio and terminated immediately following the end of production. The judge found that Fox Searchlight was an employer of the interns because it exercised significant control over staffing and working conditions during film production, so the interns can recover from Fox Searchlight. The Defendants have appealed this case to the Second Circuit, and the appeal remains pending.

Gawker (Mark v. Gawker Media LLC, 13-cv-4347): Plaintiffs allege that they worked at least 15 hours per week performing work such as writing, researching, editing, creating stories and multimedia content, promoting stories, moderating comments and managing the Gawker community. They claim that their work was central to Gawker’s business and permitted Gawker to keep costs low and revenues high. This lawsuit was filed on June 21, 2013, and plaintiffs sought conditional certification in December 2013.

In 2013, the Second Circuit agreed to hear appeals of both the Hearst and Fox Searchlight decisions. The outcome of these decisions, expected to come in 2014, has the potential to revolutionize the unpaid internship model in New York and the United States. Internships are extremely common in a wide array of industries, as evidenced by the cases that have already been brought. In fact, federal courts themselves often engage law students as interns. (Full disclosure: the author of this piece worked as law clerk in federal court and supervised law student and college interns).

Internships can allow students and entry-level individuals to acquire skills and make contacts that help them set out on exciting new careers. But it is essential that employers using unpaid interns follow the law and create a truly educational, engaging experience for interns instead of viewing them as free labor. We hope that these recent cases will shed light onto the potential abuses of unpaid internships and push companies to view internship programs as an investment in the future of the industry, not just another cost-cutting measure.

(Other sources: New York Times, The Unpaid Intern, Legal or Not, Steven Greenhouse, Apr. 2, 2010)