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Court Finds that Unpaid Internships Are Legal Where Educational Benefit is Clear

Published by on August 3, 2015

A federal appeals court ruled in July 2015 that Fox Searchlight Pictures did not violate minimum wage laws by employing unpaid interns on the set of the film “Black Swan”. The ruling sets aside a lower court’s decision and sends the case back to the lower court. The plaintiffs had performed duties such as making […]

A federal appeals court ruled in July 2015 that Fox Searchlight Pictures did not violate minimum wage laws by employing unpaid interns on the set of the film “Black Swan”. The ruling sets aside a lower court’s decision and sends the case back to the lower court.

The plaintiffs had performed duties such as making copies, assembling furniture, taking out trash, and otherwise providing general assistance to the studio and to individual members of the cast and crew.

The 2015 decision reverses the prior ruling by Federal District Court, which concluded that Fox Searchlight Pictures should have classified the interns as employees, based upon six criteria set forth by the U.S. Department of Labor. The DOL criteria specify that in order for work to qualify as an unpaid internship, the work itself must:

  • be similar to training offered in a school setting
  • be performed for the benefit of the intern rather than the employer
  • be work that does not replace or replicate that of existing employees

The appeals court determined, however, that the DOL criteria were out-of-date and not actually binding on federal courts. In lieu of the DOL criteria, the Court accepted a proposal presented Fox, the defendant in the case, called the “primary beneficiary test”. In this test, the standard boils down to who benefits more from the internship – the intern gaining the experience, or the company gaining the unpaid labor from the intern.

While the lower court will be required to rule again on the case, it will now be required to use the new standard selected by the higher court.

In a separate decision, the court also upheld a judge’s ruling that The Hearst Corp did not have to pay interns who served in roles associated with publications.

Interestingly, the actual Fox case itself may still be decided in the plaintiff’s favor, as Fox Searchlight’s internship program was not closely tied to that of an educational institution and therefore lacked some of the features that would clearly indicate that the intern benefitted more than the employer.

Still, the case gives employers a wide berth – assuming they can clearly demonstrate that the internship is indeed educational in orientation and overall value – when establishing internship programs and positions.

Laconic Lookout:

Employers should use caution when creating and managing student internship programs, but with the new standard in play, employers in the Second Circuit (which encompasses New York, Connecticut and Vermont) can now focus on creating and implementing internships that have attributes offering clear value to interns.

Furthermore, employers would be particularly well served by aligning their internship programs with recognized academic curricula or institutional sponsors/partners, and emphasizing the learning and educational benefits of the work interns will perform when designing unpaid internship programs.

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