Is the era of the unpaid internship nearing its end?
That question hovers over two cases challenging the legality of the wage-free quasi-apprenticeships long common to many white collar settings.
More than 30 cases have been filed on behalf of unpaid interns in the past four years. The two most prominent are Glatt v. Fox Searchlight, known familiarly as the “Black Swan” case, and Wang v. Hearst Corp. Both cases are on federal appeal before New York City’s Second Circuit. Both involve interns who worked for communications companies that offered entree to a glamorous work environment — a movie studio in one instance, glossy magazine offices in the other — in lieu of wages.
“I think this practice has gotten incredibly out of hand,” said Eric Glatt, the lead plaintiff in the Black Swan case. “It’s partly the fault of Washington by normalizing the practice, and the fact that there are very few mechanisms in the place … for people to push back.”
In September 2011, Glatt and Alexander Footman, production interns on the ballet film “Black Swan,” sued Fox Searchlight, alleging that the company’s unpaid internship violated minimum wage and overtime laws. Glatt and Footman said they were asked to perform menial tasks that should have been done by paid employees. In June 2013, a federal district court judge ruled in favor of Glatt and Footman, finding Fox Searchlight failed to meet a six-part test that the Labor Department uses to determine whether unpaid internships comply with the Fair Labor Standards Act. At oral arguments Friday in Manhattan’s Foley Square for both the Black Swan and Hearst cases, much discussion turned on whether that test was the proper tool.
The test was initially developed more than half a century ago to determine whether employees could be classified as “trainees” under an exception to the FLSA that the Supreme Court granted in 1947. But it wasn’t until 2010 that the Obama Labor Department adapted the six-part test to apply it to internships without pay. Under the new rules, a for-profit company could refrain from paying an intern only if the internship were similar to training that would be given in an educational environment; if the internship existed for the benefit of the intern; and if the internship were not a substitute for hiring a paid employee. In addition, the employer could not derive an immediate advantage from the intern’s activities; the intern would not necessarily be entitled to a job at the end of the internship; and the intern could not be hired without it being made clear that he or she would not be paid.
“It sets a high bar for the type of training if the test is that all six points [must] be met,” said Juno Turner, a lawyer for Outten & Golden LLP who is representing Glatt and Footman.
Business interests, including the U.S. Chamber of Commerce, would seem to agree about the six-part test’s severity, and seek its elimination. In particular the Chamber objects to the component prohibiting businesses from deriving any immediate advantage from the work of unpaid interns.“Prohibiting interns from performing any productive work is antithetical to a meaningful internship,” said the Chamber’s amicus brief in support of Fox Searchlight. “If unpaid interns are confined solely to unproductive tasks such as shadowing senior employees and participating in training, the benefits of the internship may be significantly diminished.”
In Friday’s court hearing ... the lawyer representing Fox, argued against the six-part test, saying courts should instead apply a “primary beneficiary test” to evaluate the “totality of circumstances.” Under a primary beneficiary test, an intern must receive compensation if his or her work benefits the employer more than it benefits the intern. Rachel Bien, the lawyer representing the plaintiffs, disagreed. She told the court that the question should not be about who benefits more, but rather about whether the internship qualifies as a “bona-fide training experience” under the DOL standards
A challenge for intern advocates has been that interns are often unaware of the six-part test, or are hesitant to invoke it against a former employer. In addition, the Labor Department’s Wage & Hour Division, already strained for resources, has devoted few resources to policing unpaid internships, focusing instead on violations in industries that pose a higher known risk of exploitation, such as retail, construction, restaurants and hotels. Indeed, Wage & Hour has no formal procedure to track internships, because interns are not classified as employees, and it’s received comparatively few complaints about unpaid internships.
The Labor Department did file an amicus brief for Friday’s hearing supporting the unpaid interns, and Labor Department attorney Maria Van Buren showed up to defend the six-part test. But that defense was somewhat qualified, with Van Buren conceding “there may be unusual circumstances” in which the test might not apply. From the judges’ comments, it was not clear that the court would eventually uphold the test.
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Wang v. Hearst concerns unpaid interns for the magazines Harper’s Bazaar, Cosmopolitan, Marie Claire, Esquire, Redbook and Seventeen. In that case, the lower court expressed strong skepticism about the six-part test’s value, which it found confusing, and denied class certification.
Ross Perlin, author of the 2011 book “Intern Nation,” believes unpaid internships proliferated in years past for a variety of reasons that included the rise of an educational movement that favored applied forms of learning; enormous growth in temporary and other forms of contingent employment; and tight enforcement budgets at Wage & Hour.
Colleges and universities may have played the largest role by granting academic credit for unpaid internships. That made it much easier for employers to argue that they were providing an educational rather than employment opportunity. At Friday’s hearing, Hearst Corporation’s in-house counsel, Jonathan Donnellan, said the court ought to give “very heavy weight” to the granting of college credits. “It’s not like an educational environment,” Donnellan said of the unpaid magazine internships. “It is an educational environment.”
Others view colleges’ collaboration with employers over unpaid internships less favorably. “The most guilty party,” Glatt said, “is the colleges and the universities that rubber stamp this practice, with zero oversight, with zero scrutiny.” Financially, the arrangement is mutually beneficial; businesses acquire free labor, while colleges pocket some portion of tuition dollars without supplying any teaching in return.
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Quite apart from however the legal questions will eventually be settled, employers newly grappling with them are starting to question whether unpaid internships are worth the bother. Fox Searchlight now pays its interns, and in October NBC Universal agreed to pay $6.4 million to settle unpaid internship claims and started paying all its interns. The following month, Conde Nast paid $5.8 million to settle a class action lawsuit brought by thousands of former interns. The publisher had already shut down its internship program the year before, after the lawsuit was filed.
A ruling for the interns would surely accelerate this process. “Is this the end of exploiting young people?” asks Turner. “Will this be the start of internships becoming more meaningful or becoming sources of meaningful employment?”
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