As I wrote last week, a federal appeals court ruling in Glatt v. Fox Searchlight Pictures, Inc., reversing a lower federal court decision holding that two unpaid interns hired by Fox Searchlight Pictures were entitled to back pay under minimum wage laws and certifying a class action on behalf of other interns hired by the company, was a setback for a growing intern rights movement.
In practical terms, the decision by the U.S. Court of Appeals for the Second Circuit invites private employers and universities to collaborate on schemes that (1) create unpaid internships; and (2) charge students tuition for the “privilege” of doing unpaid work. The ruling also makes it harder for unpaid interns to band together to challenge unpaid internships via class action lawsuits.
Basically, the “intern economy” that has been growing by leaps and bounds during the past three decades got a big judicial stamp of approval last week. It may be only temporary, but the Second Circuit’s ruling sends a bigger message that the label of “intern” is now being accorded its own legal meaning, one with a lesser status than that of a regular old “employee.” By slapping the intern label on what otherwise would be deemed an entry-level job, employers can potentially be exempt from paying even the minimum wage.
“Primary beneficiary” test
The Second Circuit adopted a “primary beneficiary” test to determine whether interns should be exempt from minimum wage laws. In other words, if someone is labeled an intern by an employer, we will now engage in a balancing test to determine who gets the better of the deal, the intern or the employer, taking into account a laundry list of “intangibles” such as training, networking opportunities, and so forth. It’s noteworthy that the Court said a lot less about the intangible benefits of interns to employers, such as training, mentoring, and evaluating the next generation of new people into a profession, in addition to the tangible work contributions that many interns provide.
Furthermore, it’s clear that these hedgerows to a paycheck are being created only for those trying to get their careers off the ground. Although many new high-level managers and professionals also go through training periods and enjoy networking opportunities, they will not be subject to this legal test.
Why this matters to all of us
This litigation, and the many other pending and settled lawsuits concerning unpaid internships, obviously are of direct importance to students and recent graduates. However, we all should be paying attention to this, because these cases are raising the fundamental question of whether people have a legal right to be paid for their work.
We are going down that slippery slope. Whereas internships were once largely confined to graduate-level professional programs, they now have become staples for undergraduates as well. Even more alarming is the expansion of unpaid internships into the post-graduate stage, sometimes dressed up under the label of “non-stipendiary fellowships.”
The work-for-free creep has already entered certain vocations with a vengeance. Last year I wrote about how so many writers, journalists, and other creative folks are struggling to find gigs that pay them for their labor. I quoted an extended editorial essay titled “The Free and the Antifree: On payment for writers,” in which the editors of N+1 magazine examined the challenges of economic and technological systems conspiring to make it difficult for capable writers, journalists, editors, and other wordsmiths to get paid for their work and to earn a living. (The N+1 piece favorably cited Ross Perlin’s Intern Nation (2011) — touted on several occasions in this blog — as one of the first books to come out of the “antifree movement.”)
So…for anyone who thinks this unpaid intern stuff is someone else’s problem, please think again. This is all about the dignity of being paid for one’s labor, and the resolution of these lawsuits will help to determine if the door has been opened or closed to more and more unpaid work.
I was quoted in this Forbes.com piece by Susan Adams on the Court of Appeals ruling:
Agrees Suffolk University law professor David Yamada, who wrote the first law review article on unpaid internships back in 2002, “All the factors they drew up were really without legal authority.” In fact the judges cite no case law for their checklist. “They apparently decided to invent something new here, which is surprising at the appellate level,” says Yamada.
I appeared on June Grasso’s radio program for a 20-minute segment, along with entertainment law professor Jay Dougherty. It was a lively, collegial exchange that allowed for some substantive give-and-take about internships and compensation. You may access the link here.