Unpaid “Black Swan” Interns Win Lawsuit

Posted by Jeanine Gagliardi on Mon, 06/24/2013 - 04:00

There was a big win for unpaid interns in litigation at the front of a developing legal story with national consequences. The Fair Labor Standards Act (“Act”) requires, among other things, that employees be paid a minimum wage. The U.S. Supreme Court created a narrow exception to the wage requirements for “trainees.” Subsequently, the Department of Labor created guidelines for businesses to use to determine whether their interns fit within this exception and, therefore, can be unpaid.

Notwithstanding the well-publicized, and narrow, standard established by the guidelines, many businesses and whole industries have simply done their own thing. Taking advantage of eager labor, they have called all manner of workers "interns" and employed them without pay. Now, the chickens are coming home to roost.

Lawsuits filed by unpaid interns claiming that they are entitled to pay under the Act are popping up across the country. We previously reported about two such cases. In one, individuals who worked as unpaid interns for Fox Searchlight Pictures (“Searchlight”) on the set of “Black Swan” sued Searchlight. A federal court in New York recently ruled in the interns' favor.

The interns moved for summary judgment, claiming that they were employees entitled to pay under the Act. Searchlight also moved for summary judgment, claiming that the interns were “trainees” that need not be paid. Rejecting Searchlight’s claim, the court held that the failure to pay the interns violated the Act.

In reaching its decision, the court deferred to the Department of Labor’s guidelines and used them as the standard for determining whether a worker fits within the “trainee” exception. At the same time, the court recognized that courts in other jurisdictions have used a different standard. For example, rather than applying the guidelines, some courts just ask whether the internship benefits the intern more than it benefits the business.

Under both standards, whether an intern fits within the narrow exception for “trainees” is a complex, factually specific inquiry. It is not sufficient to declare the worker an "intern" and fail to pay them on that basis. This, combined with the fact that different courts apply different tests, makes it difficult for businesses to determine whether their use of unpaid interns is legal. For this reason, businesses must be exceedingly careful in hiring and retaining workers for no pay.

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