Legal Alert: Hire Unpaid Interns at Your Peril

While Vince Vaughn and Owen Wilson have recently brought some attention to the internship position by comically portraying the life of Google interns in the movie The Internship, the U.S. District Court for the Southern District of New York has issued an important decision that provides guidance to employers on when their unpaid interns will be considered “employees” for purposes of federal and state labor laws. Glatt, et al. v. Fox Searchlight Pictures Inc., Case 11 Civ. 8784 (WHP) (S.D.N.Y. June 11, 2013). The Fox decision adopts a broad definition of an “employee” that is likely to include many unpaid interns and a narrow interpretation of the “trainee” exception that was previously recognized by the U.S. Supreme Court. The decision may well result in a significant increase of lawsuits against employers that use or have used unpaid interns and a sharp reduction in companies using unpaid interns.

Ironically, the unpaid interns in the Fox case were working in the movie industry. Two of the plaintiffs, Footman and Glatt, contended that the defendant violated federal and state laws by classifying them as unpaid interns instead of paid employees. Footman and Glatt each worked on production of the film, Black Swan, in New York. After production, Glatt took a second unpaid internship relating to Black Swan’s post-production. As discussed below, the Fox court held that they were improperly classified and should have been classified as employees. The Fox court also granted a motion for class certification of another plaintiff intern’s New York Labor Law (NYLL) claims against the defendant pursuant to Federal Rule of Civil Procedure 23 and conditional certification of her Fair Labor Standards Act (FLSA) claims. As this decision shows, employers need to be very careful in hiring persons as unpaid interns because this may put them at risk for FLSA and/or state labor law claims arising from misclassifications.