Two unpaid interns at the movie studio Fox Searchlight Pictures were actually employees owed the minimum wage under the Fair Labor Standards Act (FLSA), a federal court has ruled. Glatt v. Fox Searchlight Pictures Inc., +2013 U.S. Dist. LEXIS 82079 (S.D.N.Y. June 11, 2013). An employer currently implementing unpaid internship programs may wish to reconsider the practice in light of this ruling.
The ruling has generated a great deal of coverage as the Black Swan case in the mainstream press. Due to the intense media scrutiny, employers that take on unpaid interns should prepare for the possibility of copycat lawsuits. Already, just one day after the Glatt ruling was filed, former interns filed a lawsuit against the publishing company Condé Nast, the New York Times reported.
In its ruling, the US District Court for the Southern District of New York applied criteria used by the US Department of Labor that make it difficult for employers to avoid paying interns.
Under these criteria, all interns or trainees will be considered employees who must be paid the minimum wage unless all of the following factors are met:
Fox Searchlight Pictures had urged the court to reject the DOL's strict six-factor test, as two federal appeals courts have done, in favor of a "primary beneficiary test" that is more lenient on employers. But the court rejected the looser test, calling it "subjective and unpredictable."
"Under this test, an employer could never know in advance whether it would be required to pay its interns," the ruling states. "Such a standard is unmanageable."
How to Structure an Unpaid Internship or Training Program
Managing Employees in Special Situations > Volunteers, Interns and University Externs
The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
The training is for the benefit of the trainees or students;
The trainees or students do not displace regular employees, but work under close supervision;
The employer that provides the training receives no immediate advantage from the activities of the trainees or students and, on occasion, his operations may even be impeded;
The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.