Intern-al Affairs: Unhappy Interns Up In Arms About Unpaid Internships

Spate of litigation, with more to come, raises questions about possible realignment of traditional relationship with interns

The unpaid internship. It’s a rite of passage in the media industry. Every year, communications/journalism majors dust off their résumés and apply for the few highly coveted positions at newspapers, television stations, radio stations and movie studios.

So highly coveted are these positions that, more often than not, the intern doesn’t get paid. Oh sure, you might get some school credit, a chance to network, and an extra line on your résumé – but no cash. (In my book, the most valuable benefit is the opportunity to discover over a couple of months what you may never want to do again for the rest of your life.)

I was one of those interns. For two summers during college I worked two nights a week and Sundays at the Washington, D.C. Fox affiliate, doing mainly sports.

It was a sweet gig: watch some games, tag some highlights, write some copy, go to the occasional sporting event location shoot. My stuff got on the air. One summer I was the World Cup guy. My job was to watch all the Cup games. I’m a soccer fan (if you didn’t already know). This wasn’t work; it was a dream.

So I didn’t get paid. Big deal. I got school credit. That was enough justification (as if I needed any justification to do what I got to do). Back in my day, that’s how it was. Nobody complained. (Now get off my lawn, you kids – it’s my ball now!!!)

Not anymore.

Recently, interns have challenged the no-pay condition of their servitude in a number of cases percolating through the U.S. District Courts in New York. And while the legal issues have yet to be finally resolved, there’s reason to believe that the “credit in lieu of payment” system may be at risk.

So now’s a good time to take a look at the questions being raised about unpaid internships, how the courts have addressed those questions so far, and what might be on the horizon.

The case that initially got everyone’s attention was Glatt v. Searchlight Pictures, a lawsuit filed by some unpaid interns who worked on the movie Black Swan.  But we all might have seen Glatt coming had we looked more closely at a 1947 Supreme Court case and a 2010 U.S. Department of Labor “Fact Sheet”, not to mention another decision issued in an unrelated case just a month or so before Glatt.

Walling v. Portland Terminal

Let’s start with the grand-daddy of intern cases, Walling v. Portland Terminal Co., issued by the U.S. Supreme Court in 1947. Technically it involved “trainees” rather than “interns”, but it comes down to the same thing. The question is Walling was whether prospective railroad brakemen participating in a week-long training course were “trainees” under the Fair Labor Standards Act (FLSA), rather than “employees”. As “employees”, they were entitled to be paid under the FLSA; as “trainees”, not so much.

The Court concluded the workers were “trainees”. The Court found that regular employees didn’t get bumped in order to make room for the “trainees” and still did most of the work, while also supervising whatever the “trainees” did. And for their part, the “trainees” didn’t really “expedite” the railroad’s business; in some cases they actually “impede[d] and retard[ed]” it. The Court concluded that the FLSA wasn’t meant to penalize an employer for providing vocational school-like instruction “at a place and in a manner that would most greatly benefit the trainee”, particularly if the employer “receive[d] no immediate advantage” from the trainees’ efforts. Bottom line: under these circumstances, the FLSA does not require employers to pay trainees.

Fact Sheet #71

Fast forward to April 2010, when the United States Department of Labor (DOL) released its “Fact Sheet #71: Internship Programs Under the [FLSA]” designed to help for-profit businesses determine whether interns have to be paid minimum wage (and given overtime) under the FLSA.

According to the Fact Sheet, the Supremes (presumably in Walling, although the Fact Sheet doesn’t specifically name the case) held that, under the FLSA, a worker who is “provide[d] aid or instruction” is not an “employee” if her/his work “serves only his or her own interest”. The Fact Sheet then described a “test for unpaid interns” consisting of six criteria:

  • The internship must provide training “similar” to that which would be given “in an educational environment;
  • The internship must be for the benefit of the intern;
  • The intern does not displace regular employees; instead, the intern should work “under close supervision of existing staff”;
  • The company running the internship should derive “no immediate advantage” from the intern’s work and, on occasion, may find its operations “impeded” by that work;
  • No promise of a job at the end of the internship is given; and
  • It’s clear up front that the intern is not going to be paid for her/his work.

No problem so far. But the Fact Sheet creates confusion by providing two seemingly inconsistent instructions for how to apply those criteria. At one point it says that whether or not an internship program qualifies for “unpaid” status “depends upon all the facts and circumstances”. But at another point, it says that it’s a legitimate unpaid internship only “[i]f all of the facts . . . are met”. And further complicating matters is the Fact Sheet’s admonition that the unpaid intern exclusion from the FLSA’s employment requirements is “necessarily quite narrow”. 

Which brings us to 2013, and the case of Xuedan Wang v. The Hearst Corporation.

From August to December 2011, Wang worked as an intern for five days a week in the accessories department of Harper’s Bazaar magazine, a Hearst publication. She served as contact between editors and public relations reps, did online research, catalogued samples, maintained the accessories closet and created story boards. She was not paid at all for the work she performed. 

In early 2012 Wang sued, along with several other plaintiffs – all unpaid – who had interned for other Hearst publications (Cosmopolitan, Seventeen, Marie Claire, etc.). All the plaintiffs had performed essentially similar duties ranging from gopher work to organizing important files and up to some actual writing and journalism work. It was apparently undisputed that some of the work they did was the type performed by full-time paid employees.

Analysis of the six Fact Sheet criteria seemed inconclusive. At least two of the factors (no promise of a paid job at the end of the internship, no expectation of pay during the internship) clearly supported Hearst’s claim that these were legitimate unpaid positions. But while some of the plaintiffs had been given some form of training sessions, others had not. And the work performed by the interns at times overlapped work performed by actual employees and was not always supervised by employees (according to the plaintiffs). In other words, the remaining four criteria were not obviously conclusive for one side or the other.

Wang and her fellow plaintiffs moved for summary judgment, arguing (among other things) that they were all “employees” under the FLSA. They claimed that their work had provided Hearst an “immediate advantage” and that, under Walling, they were thus “employees” entitled to pay. Alternatively, they argued that, under the DOL Fact Sheet, Hearst would have to satisfy all six criteria and that it had not done so.

Hearst, of course, disagreed. In its view, the six DOL Fact Sheet factors were not a “rigid checklist”. Rather, according to Hearst, the court should use a “balancing of the benefits” test looking to the “the totality of circumstances to evaluate the ‘economic reality’ of the relationship”.

Siding with Hearst, Judge Harold Baer, Jr., of the U.S. District Court for the Southern District of New York, denied Wang’s motion for summary judgment. He determined that Walling requires the court to consider not merely the existence of an “immediate advantage” to the employer (as argued by the plaintiffs), but rather the “totality of the circumstances”. He ascribed particular importance to determining “who is the primary recipient of benefits from the relationship”. The Fact Sheet criteria could provide a “framework” for performing this analysis but, since four of the six factors were not obviously conclusive one way or the other, summary resolution of the case was not appropriate. Accordingly, the plaintiffs’ motion was denied, and the case will proceed to trial.

This was good news for employers, since Baer’s “totality of the circumstances/primary recipient of the benefits” test would seem to afford them considerable leeway in the design of unpaid internships.

But then, hot on the heels of Wang, came Eric Glatt v. Fox Searchlight Pictures.

In a decision released less than a month after Wang, Judge William Pauley (also sitting in the Southern District of New York) granted plaintiffs’ motion for summary judgment, holding that interns working on certain movie productions (including Black Swan and 500 Days of Summer) had indeed been employees entitled to payment under the FLSA.

As in Wang, the unpaid intern plaintiffs had been assigned various chores running the gamut from the menial (e.g., janitorial) to the quasi-professional (e.g., bookkeeping). There had been no promise of payment and no promise of a job once the internships wrapped up. And, as in Wang, the other four criteria from the DOL Fact Sheet were less than conclusive for either side.

As did Judge Baer in Wang, Judge Pauley read Walling to require consideration of the “totality of the circumstances”. But Pauley parted ways with Baer on how to do that. In particular, Pauley expressly rejected the “primary beneficiary” approach taken by Baer, i.e., the approach which assigned considerable importance to determining “who is the primary recipient of benefits from the relationship”. (He did, however, opine in passing that, in his view, Fox Searchlight was the “primary beneficiary” here, since any benefits the interns received were supposedly “incidental” at best.)

Judge Pauley then analyzed the internships against the six DOL Fact Sheet criteria, concluding that, while no payment or future employment had been promised, the other four factors favored the interns. The employer received a benefit even though the interns’ work was “menial”. Even though the interns gained “resume listings, job references, and an understanding of how a production office works”, those benefits were merely “incidental”.  The interns performed work that would have had to be performed by actual employees

Even where the underlying facts were a bit cloudy – and, thus, ordinarily not appropriate for summary decision – he came down firmly on the interns’ side. (Example: One of the interns did not claim that he hadn’t received any training; all he said was that he “didn’t learn much” – a very different thing. Pauley nevertheless resolved this factor for the intern.)

Here’s Pauley’s wrap-up analysis of the “totality of the circumstances”:

They worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training. The benefits they may have received – such as knowledge of how a production or accounting office functions or references for future jobs – are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would have received in an academic setting or vocational school. This is a far cry from Walling where the trainees impeded the regular business of the employer, worked only in their own interest, and provided no advantage of the employer. 

Obviously, Judges Baer and Pauley have taken two markedly different approaches to analyzing intern programs for FLSA purposes.

What does this all mean for you?

For openers, it’s important to recognize that neither Wang nor Glatt has much precedential effect, yet. Both decisions involve summary judgment motions and are interlocutory; the underlying cases must still be tried. Moreover, the losing side in each of the summary judgment decisions (plaintiffs in Wang, defendants in Glatt) has asked the Second Circuit to review their respective cases now, rather than wait until the final trial disposition. Interestingly, while the intern-plaintiffs in Glatt have (as might be expected) opposed Fox Searchlight’s immediate appellate efforts, in Wang Hearst has supported Circuit resolution of the key issue sooner rather than later – presumably reflecting Hearst’s confidence in the soundness of Judge Baer’s reasoning.

We can expect the Second Circuit to be asked to announce precisely how the FLSA (as seen through the lenses of Walling and the DOL Fact Sheet) is to be applied to unpaid internships. Ms. Wang and her fellow intern-plaintiffs will doubtless press for an analysis akin to Judge Pauley’s, requiring an employer to “make more than some showing that each of the six [Fact Sheet] factors is met”. According to Ms. Wang, an internship must involve shadowing opportunities under “close and constant contact supervision where the intern performs no or minimal work” in order to qualify as an educational experience. Such a standard would likely increase substantially the burden on many employers, especially if other judges adopt Judge Pauley’s intern-friendly inclination. 

Employer-defendants, of course, will argue that Judge Baer got it right, and that the facts underlying each of the Fact Sheet criteria should be carefully assayed in the crucible of a trial before any conclusions can be drawn.

Whichever side prevails in the Second Circuit (or beyond), we can expect the impact to be substantial. 

That’s because there has been an explosion of FLSA-based intern lawsuits in the Second Circuit. That is not a coincidence, because the same law firm that represents Ms. Wang (and her co-plaintiffs) and Mr. Glatt (and his co-plaintiffs) also represents plaintiffs in ten other FLSA/intern cases filed since the beginning of 2012. Prominent media companies on the wrong side of those cases include NBCUniversal, Warner Music Group, News Corp, Gawker Media, Elite Model Management Group. Seven of these cases were filed after Judge Pauley’s Glatt ruling.

Oh, and by the way, that law firm is actively courting even more potential plaintiffs through an aptly-named website (http://www.unpaidinternslawsuit.com/). We can probably count on that firm – and others like it – to continue to press the arguments we have already seen in Wang and Glatt. We should also assume that, as word of the possibility of collecting money for past intern work circulates (having a handy recruitment website certainly doesn’t hurt), a large universe of past interns is likely to provide that law firm plenty of opportunities to press those arguments. And, while the litigation to date has arisen in the Southern District of New York, none of us should be surprised if kindred cases start popping up in other jurisdictions.

Note also that, in both Wang and Glatt, the plaintiffs asked for class certification, meaning that they were hoping to litigate their respective cases as class actions on behalf of all similarly-situated interns. Judge Baer denied certification, while Judge Pauley granted it. The prospect of class actions in this context is likely to incentivize the plaintiffs’ bar.

In other words, there is a concerted movement to push for pay for previously unpaid internships, and that movement is not likely to dry up and blow away unless and until the courts reject the legal premises underlying that movement.

What are the chances of that happening? It’s impossible to say just now. But it is clear that the standards broadly laid out in Walling and DOL Fact Sheet have some newfound teeth. How sharp those teeth turn out to be, and how precisely they may be used to bite employers, remains to be seen. Which party – intern or employer – will bear the burden of establishing whether any particular internship does or does not constitute “employment”? And how strict is the “totality of the circumstances” test – are we talking Judge Baer or Judge Pauley here?

Regardless of the ultimate resolution, the overall nature of internships is being scrutinized, and the conventional wisdom – that, by giving an intern academic credit, an employer can avoid paying him or him – is out the window.

So what should an employer do? 

In view of the still-developing precedent, it’s impossible to say for sure precisely how the treatment of internships under the FLSA will be finally resolved. But from the decisions described above, some potentially helpful steps may be identified.

Focusing on the first four Fact Sheet criteria would be a good place to start. In particular, it’s probably a good idea to make sure that all internships include a truly training-focused, educationally-based component. Interns can still be given scut work – like fact-checking, tape-logging, game-watching, even story writing. But it appears that the program should include ongoing oversight of interns’ day-to-day activities and a few education-focused sessions every week beyond the work-related tasks that dominate. Some work alongside full-time employees could also help to show that the interns aren’t there just to work for free. And, yes, extra points if having interns around makes your life more difficult.   But remember, none of this has been written in stone yet – so nobody can guarantee at this point that any particular steps will necessarily lead to any particular result.

And remember, too, that no matter how difficult it might be to train these kids now, it’s likely to be easier (or at least less painful) than paying out a lump sum judgment later on.

[Blogmeister’s Note: We here at CommLawBlog are primarily communications lawyers, NOT employment lawyers, and we are NOT trying to provide advice in the employment area. The recent spate of intern-related cases involving media companies suggested to us that our readers – many of them media companies – should be given a heads up about what’s been brewing. While we will continue to provide occasional coverage of these and other employment issues when we think it’s a good idea, readers looking for a steadier, and more diverse, diet of employment law should be aware that there are other sources of useful information out there. For example, a blog edited by our friend, Bill Schreiner, recently posted an interesting piece on the enforcement of noncompetition agreements in a broadcast context.]

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