In a decision likely to affect long-held practices in the entertainment industry and beyond, a federal judge in New York ruled that Fox Searchlight Pictures violated federal and state minimum wage laws by not paying two production interns who worked on the film “Black Swan.”

The interns alleged their work on the film—which included tasks such as taking lunch orders, answering phones, assembling office furniture, and tracking purchase orders—would normally have been performed by paid employees and did not exempt them from New York or federal minimum wage laws.

In its defense, Searchlight argued that unpaid interns are not “employees” for the purposes of determining their entitlement to the minimum wage, and their entitlement to any wages should turn on who was the “primary beneficiary” of their labor. In Searchlight’s view, there should be no obligation to pay interns where an internship’s benefits to the intern outweigh those to the “engaging entity.” While Searchlight conceded the interns provided some benefit to the production, it argued that the interns themselves received the greater benefit from their labor, in the form of resume listings, job references, and an understanding of how a production office works.

Judge William H. Pauley III of the U.S. District Court for the Southern District of New York rejected Fox Searchlight’s argument. He granted summary judgment in the interns’ favor, holding that the test for whether an intern at a for-profit business must be paid is derived from six criteria set forth by the U.S. Department of Labor:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees, but works under close supervision of existing staff.
  • The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.
  • The intern is not necessarily entitled to a job at the conclusion of the internship, and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The court focused on the second, third, and fourth factors. It found that any benefits the interns received, such as “[r]esume listings and job references[,] result from any work relationship, paid or unpaid,” and that Searchlight received the real benefit from the internship in the form of the unpaid labor, which otherwise would have required paid employees.

If you have questions on the court’s decision or your organization’s use of interns, please contact the member of the Labor and Employment Group with whom you work.

Copyright © 2013 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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