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Fox Searchlight’s unpaid interns post big win, boost burgeoning area of wage-hour litigation

June 14th, 2013  |  Lisa Milam

A few weeks ago, I wrote about a ruling that seemed as though it might stem the rising tide of class action wage suits by unpaid interns. In Wang v Hearst Corp, a federal judge in New York refused to certify a Rule 23 class of magazine interns who alleged they should have been deemed “employees” and compensated accordingly. But a major victory on Tuesday in a suit brought by interns at Fox Searchlight represented a sharp course correction: A federal court held the movie company’s unpaid production assistants were statutory employees under the FLSA. Of equal significance: as to interns at the company’s corporate offices, the court certified both an FLSA collective action and a Rule 23 class.

The named plaintiff alleged that he was misclassified and improperly denied pay during the nine months he spent on the filming and post-production of the movie Black Swan. He sought to bring FLSA and New York Labor Law claims on behalf of all other similarly situated Searchlight interns. Giving deference to the Department of Labor’s criteria for determining whether interns must be paid minimum wage and overtime, Judge William Pauley of the Southern District of New York ruled the Fox interns didn’t fit the “trainee” bill, so this FLSA exception did not apply. As the court saw it, any benefits that the production assistants derived from their efforts came from “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.”

The decision offered several important takeaways:

• The court sanctioned the DOL’s six-factor test for determining interns’ status under the FLSA and soundly rejected the “primary benefit” test advocated by the employer as subjective, unpredictable, and unmanageable. Under the latter approach, because one intern might derive great benefit from the unpaid position while another could receive little value from the same experience, one intern would be compensated while the other would not. “An employer could never know in advance whether it would be required to pay its interns,” Pauley wrote. (He noted, though, that even under the primary benefit test, Fox Searchlight would have lost.)

• If an internship provides nothing beyond what a paid employee would receive, it won’t pass muster. Employment references, job-specific new skills, and professional connections alone won’t justify not paying the minimum wage. As the court wrote, “those benefits were incidental to working in the office like any other employee and were not the result of internships intentionally structured to benefit them.” Formal educational training must be provided. (The kind of training your typical new hire wouldn’t receive—and that likely comes at considerable cost and effort, and little tangible advantage, to the employer.)

• If a paid employee would have to perform the intern’s duties if the intern weren’t around, it’s not an internship. The Fox Searchlight “interns” performed routine menial tasks such as obtaining documents, picking up paychecks, tracking purchase orders and invoices, organizing filing cabinets, making photocopies, arranging travel plans, taking out trash, taking lunch orders, answering phones, watermarking scripts, and making deliveries. Their supervisor attested that if the interns hadn’t performed these tasks, “another member of my staff would have been required to work longer hours to perform it, or we would have needed a paid production assistant … to do it.” More red flags: The company’s internship placements coincided with the employer’s busy periods. And, after corporate belt-tightening led to job cuts, the company’s unpaid internship program “more than doubled.” As the court pointed out, using unpaid interns “to fill the interstices created by eliminating paid positions” clearly violates New York wage law.

On the heels of its victory in Fox Searchlight, New York law firm Outten & Golden LLP announced it had launched a proposed class action wage suit on behalf of former Conde Nast interns who had worked at W magazine and The New Yorker. The plaintiff’s firm, which has largely driven this growing area of class wage litigation, has set its sites on large media companies. (Outten & Golden also represents the plaintiffs in the Hearst suit.)

“This case is about the fundamental principle that if you work, you must be paid,” said Outten & Golden’s Juno Turner, one of the attorneys representing the Conde Nast interns. “Our clients seek to end the wage theft endemic in the media industry.”