U.S. News

06.13.13

Unpaid Internships on ‘Black Swan’ Violated the Law. So Are They Dead?

A judge for the southern district of New York ruled Wednesday that Fox Searchlight violated the law by not paying interns on ‘Black Swan.’ David Freedlander on whether unpaid internships are on their way out.

Is the unpaid internship dead?

That’s what corporate CEOs and employment law attorneys were trying to figure out Wednesday after a U.S. district court judge ruled that Fox Searchlight Pictures had violated the law by not paying interns who worked on the film Black Swan.

In a lacerating ruling, Judge William H. Pauley III found that had the interns not been hired to do the mostly remedial tasks they were assigned, paid employees would have been. Citing guidelines from the U.S. Department of Labor, Pauley wrote that the benefits the plaintiffs received from the internship “were incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them.”

“I thought it was great,” said Ross Eisenbrey of the Economic Policy Institute. “I thought the judge got right to the heart of the matter, that this was for the benefit of the corporation and wasn’t created to provide an educational experience for the intern. It is huge that this came from an important court, and the southern district court of New York is an important court.”

Most encouraging to Eisenbray and others is that Pauley cited the Department of Labor guidelines for determining whether an internship must be paid, which include stipulations that the internship be similar to what one would receive in an educational environment; that the internship be closely supervised; and that the intern not displace a paid worker. The guidelines also state that the internship must be primarily for the benefit of the intern and that “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.”

But Camille Olson, a Chicago lawyer and expert in how companies use interns, said she was less certain that the ruling will represent a sea change in the way many young people today start their careers. She noted that the decision contradicted an earlier ruling that denied Hearst Magazines interns from forming a class.

“It is a ruling by one judge in the southern district of New York, and it is completely contrary to the ruling of another judge in the southern district of New York,” Olson said. “It is one judge who decided to apply the Labor Department’s fact sheet very rigidly and not look at the overall context.”

But Olson conceded that internships like the one at Fox Searchlight, which did seem to be little more than manual labor and grunt work—interns took out the trash, built office furniture, and fetched lunch—may now need to restructure. And companies, she added, cannot be expected to pay their interns if their internship programs are set up properly, “because they are already investing significant resources in their internship programs in terms of supervising and mentoring time done by senior managers.”

There are no hard numbers on how many unpaid interns are working in U.S. movie studios, fashion houses, and newsrooms. A 2008 study by the National Association of Colleges and Employers found that 50 percent of graduating seniors had an internship; it is estimated that as many as one half of them are unpaid. New York, Chicago, and Los Angeles are besieged by young interns at the start of the summer, especially in creative industries such as film, media, and fashion. “It’s places that have a certain appeal, a certain glamour, and so students and young people are willing to go through hardship to get their foot in the door,” said EPI’s Eisenbrey.

Company presidents “are on the lookout. We are right at the start of the summer internship season. Who is the next Edward Snowden? Who is the next intern that is going to sue?”

It may take more than Judge Pauley’s ruling to bring down that system, Eisenbray said.

“I wish the Department of Labor would really crack down, but so far they really haven’t,” he added. “Word would go out if the Department of Labor brought a high-profile suit against a television network. I talk to people in a lot of these media corporations, and they say it is typical, it is widespread, and they are trying to get away with it as long as they can.”

Laura O’Donnell, a San Antonio lawyer who has written extensively about interns and employment law, said that going forward companies will likely try to hire interns in consultation with colleges and universities to ensure their compliance with the law.

“Big employers are going to look at their internship programs a lot more closely, and a lot of them will go by the wayside,” she said. “Ones that are really tied to a university, where there is a syllabus and it is closely supervised, I think those will continue and they should. There is a genuine value to students to be able to do that. But so often employers can become complacent about these types of abuses. Everybody does it, and because everybody does it, everything is OK.”

That culture however may be changing. With tuition costs increasing alongside student debt, would-be interns may start to decide that their services must be compensated. And the ruling this week comes on the heels of a number of cases about unpaid internships, including the Hearst case and another against talk-show host Charlie Rose’s production company. (The case against Rose’s company was settled.)

“Giving young people a shot to learn the ropes has gone off the rails,” said Ross Perlin, the author of Intern Nation, a critical look at the practice. “There are record levels of youth unemployment, people are saddled with debt, and there is a general sense of malaise and downward mobility among young people. These internships are just the straw that breaks the camel’s back.”

If there is one thing to ensure that the days of the unpaid intern are limited, Perlin suggested, it is that plaintiff attorneys now know that they can get a favorable judgment from a judge. So they are likely to be on the lookout for disgruntled unpaid summer employees, he said. And just as higher-ups at the National Security Agency are looking around for the next leaker, company presidents, he said, “are on the lookout. We are right at the start of the summer internship season. Who is the next Edward Snowden? Who is the next intern that is going to sue?”