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The Unpaid Internship Racket

msnbc.com—Timothy Noah

Last week, a federal judge in New York named William H. Pauley III ruled that three unpaid internships for Fox Searchlight Pictures were in violation of the Fair Labor Standards Act, paving the way for a monetary judgment for three plaintiffs and for class action lawsuits against Fox and other employers who have maintained unpaid internships. Might this be the end of our modern free-labor apprentice system? If so, good riddance.

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Eric Glatt, Alexander Footman, and Eden Antalik all worked as interns for Fox Searchlight (Glatt and Footman on the Fox-Searchlight-produced film Black Swan, and Antalik at Fox Searchlight’s corporate offices). They were not paid. Such an arrangement would seem on its face to violate the 1938 Fair Labor Standards Act, which set a minimum wage for all workers. But in 1947’s Walling v. Portland Terminal, the Supreme Court carved out an exception for “trainees,” on the (dubious) theory that trainees were more like students than like employees. After Walling, a boss could have an unpaid trainee if he could make a persuasive enough case that the training program was more educational than exploitative.

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 [...] Judge Pauley’s ruling in effect said: Enough is enough. Time to enforce longstanding labor law and Supreme Court precedent.

Unfortunately, Pauley’s decision didn’t address the biggest moral objection to unpaid internships: they’re starkly inegalitarian. Wealthier kids are in a much better position to work free of charge than non-wealthy kids, especially when you take into account the burden of college debt. Giving the rich more opportunities for career advancement than the poor isn’t against the law (except insofar as it might have a disparate impact on minorities, who are protected under civil rights law—an issue the plaintiffs in the Fox case didn’t raise). But rigging career success to favor rich kids does violate most people’s innate sense of fairness. One especially crass method to parcel out internships has been for wealthy parents to donate them at high-priced fundraising auctions for fancy private high schools that their children attend. The philanthropic impulse is sincere (especially since such auctions typically fund scholarships for lower-income students at the schools). But the effect is to rig opportunity so efficiently that the non-elect never have the opportunity to learn such internships exist much less acquire (i.e., purchase) them.

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Another moral offense largely unaddressed in Judge Pauley’s decision is the way colleges and universities use unpaid internships to line their pockets at students’ expense. To the halfhearted extent bosses previously enforced Walling for interns at all, they did so by persuading institutions of higher learning to grant college credit for unpaid internships. The colleges were only too happy to oblige, since from their perspective it amounted to free money; in effect, they could now charge tuition for “educational” services they didn’t themselves provide. From the student’s point of view, the arrangement amounted to a hefty fee paid for the privilege of performing labor. In his 2011 book Intern Nation: How To Earn Nothing And Learn Little In the Brave New Economy, Ross Perlin reports instances of students paying colleges $1600 and $2800 in tuition just to earn credits for unpaid internships performed outside their leafy groves. Such transactions were routine—and, again, perfectly legal.

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A final troubling issue beyond the purview of employment law is what the proliferation of unpaid internships has done to the internship experience itself. Since hiring unpaid interns costs employers nothing, employers have increasingly found it difficult to resist the natural impulse to over-hire them, reducing the likelihood that the interns will perform much work that’s meaningful either as labor or as “education.” 

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Rachel Bien, a lawyer who represented the Fox plaintiffs in the internship case, told me my experience resembles that of Fox Searchlight’s. In 2010, after the Labor department clarified its regulations about interns, Fox Searchlight ended its unpaid program and started paying interns. As a result, it ended up hiring fewer interns and giving those it did hire more one-on-one attention. “Their own HR people acknowledge they think their program is better now that it’s a paid program,” says Bien.

The unpaid-intern model has run its ignoble course. If Judge Pauley has dealt it a fatal blow, good riddance. And if he hasn’t—if other judges fail to follow suit, or if he’s reversed on appeal—then that’s a pity. Interns are workers, and workers are supposed to get paid.