A New York judge recently ruled that Fox Searchlight Pictures must pay two of its former “interns” for work they did on the set of the 2011 film “Black Swan” back wages for work that the interns didn’t know that they were performing. Despite being told that they were interns, the two workers in question did all of the ordinary work that people are normally paid to do, and in fact they actually did so alongside other paid workers. The only difference between the “interns” and the paid staff was that the interns were told, and probably really thought, that they didn’t need to be paid.

This case, Eric Glatt et. al v. Fox Searchlight Pictures, has enormous implications for businesses and for the thousands of Americans either in school, or just leaving school, who are applying to or currently participating in unpaid internships. Not because the case signals some radical new change in the law – the law has been remarkably consistent on unpaid internships for years – but because now people might actually start to know the law on unpaid internships.

Fox Searchlight Pictures’ lawyers, just like the lawyers for the large companies that pull in thousands of unpaid interns every year, have to know the law on this one because the law is very plain: you must pay your workers. This is especially true in the private sector. The Fair Labor Standards Act, the flagship legislation in this field, only exempts very specific kinds of volunteer work for government, religious, and humanitarian agencies. The private sector has no such exemptions, and even those exemptions for charitable organizations are strictly defined. Otherwise, if somebody does work for you, you have to pay them.

So the question then becomes, what separates a “worker” from an “intern?” I’ll give you a hint: it is not just the difference between being called an “intern” instead of a “worker.” The rule that employers do not get to unilaterally make legal determinations about your status as a worker is consistent across several aspects of the worker: your employer does not get to unilaterally decide if you are entitled to overtime pay or not, your employer does not get to unilaterally decide that you are an at-will employee, and your employer does not get to unilaterally decide that you do not need to be compensated for your work.

The Department of Labor has issued some extremely clear guidance on this matter, and looking back over my own past, the unpaid “internships” I’ve done, it becomes pretty clear that very few so-called private sector “internships” are anything but evasions of the obligation to pay workers for their time, intentional or otherwise. According to the Department of Labor, In order to actually qualify as an internship that doesn’t need compensation, for the purposes of the Fair Labor Standards Act:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

This means that the internship where you primarily get or make coffee, make photocopies, or do work like the paid office temp is doing, will likely not meet this criterion. Nobody takes classes in college on the Starbucks order.

2. The internship experience is for the benefit of the intern;

This sounds fairly easy qualification for the employer to meet, since it’s rather broad. All that running to Starbucks is for the “benefit” of the employee, right? But this part of the test speaks to benefit in the sense that an education is for your benefit: you’re putting work into it, and getting a benefit from it, with a direct proportion between them. Fact Sheet #71 contemplates an apprenticeship model for the unpaid internship: it is supposed to be like a classroom on the job. The harder you work at it, the more you get out of it, not the more your employer gets out of it.

3. The intern does not displace regular employees, but works under close supervision of existing staff;

This speaks to the real policy agenda of Fact Sheet #71. You might have been jokingly referred to as “slave labor” when you worked your unpaid internship. That isn’t far from the truth. The policy agenda behind Fact Sheet #71 is to forbid employers from depressing wages, sabotaging the employment rate, and hurting skilled workers by replacing them with students. The Department of Labor doesn’t want your sincere desire to learn to take precedence over the life and livelihood of a skilled, experienced, paid worker, letting employers save on their labor costs at the expense of the entire rest of the economy.

4. 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;

This is the one your unpaid internship is most likely to trip. Did your employer ever actually lose anything from your being an unpaid intern? Did they set aside space for you, or the time of a staffer, that cut into their operations? And while they were doing that, did they gain nothing – nothing from you?

There is some ambiguity in this part of the guidelines, though. Does it mean that the employer gains no advantage whatsoever – not even so much as getting a cup of coffee that your boss might have had to set aside time to go get herself? Or does it mean that the employer gains no advantage in net – your boss might have gotten her coffee, saving her five billable hours over the course of the summer, but she also spent ten billable hours teaching you about your area of study, and so, in net, she gained no immediate advantage? I don’t know the answer to that question, but I think it likely that most unpaid internships are extremely lopsided one way or the other, either with the unpaid internship being little more than an employee in all but paycheck, or the internship being a genuinely student-like apprentice.

5. The intern is not necessarily entitled to a job at the conclusion of the internship;

This one is included to make the point that, if you have an on-the-job training period for wherever you end up working, you should get paid for that training period. Most of the time, what you call a learning period with a job guaranteed afterward is a “training period.” This is included in the fact sheet to prevent employers from getting to reduce their labor costs at the expense of trainees by calling them “interns,” consistent with the principle that employers do not have unilateral power to make legal determinations about their legal relations with and obligations to others. As an aside, there’s an interesting economic incentive lurking behind the necessity that employees must be paid for on-the-job training: it incentivizes companies to seek out employees who are already trained or skilled, thereby encouraging workers to incur the costs of training on themselves by going to school and discouraging employers from bringing unskilled workers into the skilled labor force. Interesting, I suppose, but only relevant to you if your internship is in economics.

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Your employer, of course, will always “understand” that the internship is not entitled to wages, but do you? Have you ever known someone who got hours or even days into an internship before asking when payday was, only to be “reminded” that the internship is unpaid? That person is illegally unpaid.

The main takeaway from the Fox Searchlight case is not a legal point, since the law is clear and consistent. Minimum wage and overtime laws make no allowance for unilateral determination by employers that their workers should be exempt from those laws. The proper unpaid internship follows is a hybrid apprenticeship/classroom model. The proper unpaid internship is not just training for an inevitable job. The internship should be fixed in duration, and done under the supervision of people who have something to teach you, not just staffers whose job and wages you undercut.

Rather, the takeaway is that interns have the same rights as any other workers, and the only thing between private sector wage violators and a torrent of lawsuits is knowledge. Knowledge you now have.

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Tags: Department of Labor, Fact Sheet #71, guidelines, illegal, minimum wage, overtime, unpaid internship