Experts Fear “Black Swan” Lawsuit Might Lead to Big Changes in the Internship World

July 2, 2013 | Charles Bowen

Black_Swan_PosterLate last month, New York Federal District Court Judge William H. Pauley III issued what could end up being a landmark ruling impacting the future of a common feature of college life: unpaid internships. Judge Pauley’s decision in the case brought by two unpaid interns against Fox Searchlight Pictures has led some industry experts to wonder whether the employment law floodgates have been opened for future suits by disgruntled interns against across a wide array of industries.

The case in question was brought by two interns with Fox, Eric Glatt and Alexander Footman, who worked as production interns on the Academy Award-winning movie “Black Swan.” The interns claimed in their suit that Fox’s practices violated federal labor law because they functioned primarily as employees yet received no pay for their work. Judge Pauley agreed, saying that it was clear Glatt and Footman performed a variety of tasks that were typically done by paid employees. Rather than create an educational environment for the interns, Judge Pauley held that Fox mainly used the men as free labor, extracting the bulk of the benefits from the arrangement.

Rather than adopt a more lenient test weighing the benefits received by the intern against the benefits received by the company, Pauley wrote that companies must strictly follow rules laid out by the Department of Labor. Those rules state that unpaid internships should not be designed to benefit the employer and must be function as either an educational environment or as vocational training. Moreover, it’s essential that the intern’s work not displace that of regular, paid employees. Judge Pauley said the same rules apply in cases where interns receive academic credit for their work, meaning no free pass in instances where college credit is awarded.

Employment law experts say there is a concern among corporations, especially those in the “glamour” industries such as publishing, movies, television and music, that the Fox case represents the first in a long line of cases that could lead to enormous changes in the way their businesses function. As the economy lost steam, more and more students were willing to work for free, hoping to get their feet in the door of a competitive career. That system may now change as companies say they are being advised to significantly alter or entirely do away with internship programs given the legal liability they present.

The Fox case may have been the first, but it will not be the last. Already, an intern with Harper’s Bazaar has filed suit against Heart Magazines, claiming she was required to work between 40 and 55 hours per week without pay, all the while performing tasks usually done by paid employees. Two interns for the New Yorker magazine have sued their parent company, Condé Nast, arguing that they should be allowed to file a class action against the publisher on behalf of other, similarly overworked and underpaid interns. Just this week, new intern lawsuits were announced against Atlantic Records, online magazine Gawker, Fox Soccer Channel and a production company that creates programming for Nickelodeon.

As these suits were announced, other cases settled out of court, including one regarding claims made by a group of unpaid interns on Charlie Rose’s PBS talk show. Rose’s production company agreed to pay the interns $110,000 to settle claims that the show violated labor law by allowing them to work six hours a day, several days a week over the course of a semester without pay. Fashion designer Norma Kamali also announced this past week that she had agreed to settlement terms with a former unpaid intern.

Though the lawsuits are currently confined to creative industries that have long relied on intern talent, many say it’s a matter of time before the claims spread to other industries. When that happens, real changes might occur that result in the end of the college internship as we know it. Unfortunately, it is probably best to be apprised of the risks now before incurring potential future liability.