A federal court in New York recently ruled that Fox Entertainment Group, Inc. misclassified two workers as unpaid interns. The complaint alleged violations of the Federal Labor Standards Act (“FLSA”), New York Labor Law, and the California Unfair Competition Law. The “interns” worked on the movie “Black Swan,” produced by Fox Searchlight Pictures, and performed tasks such as making copies, ordering lunch, watermarking scripts, and making coffee. They argued that Fox should have classified them as paid employees.

District Judge William H. Pauley III agreed, relying upon a six-part test set forth in a 2010 Department of Labor Fact Sheet addressing unpaid internship programs. Under this test, the following criteria must be applied:

  • The internship is similar to training which 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 derives no immediate advantage from the activities of the intern, and occasionally operations may be impeded;
  • The intern is not necessarily entitled to a job after the internship concludes; and
  • The employer and the intern understand the intern is not entitled to wages.

The Court applied this test, despite the defendants’ urging for application of the “primary benefit test.” Under the primary benefit test, the Court would have assessed whether the benefits to the intern outweighed the benefits to the employer.

In ruling against Fox, the Court noted that the workers did not receive any formal training, performed routine tasks, and there was no evidence the workers were entitled to jobs at the end of their internships. Judge Pauley noted that the plaintiffs likely received some benefit from their internships, such as “resume listings, job references, and an understanding of how a production office works.” However, the Court found those benefits were incidental to the benefit received by the employer and were no different than the benefits any worker derives from a work relationship, whether paid or unpaid. The Court also gave little weight to the fact that the workers knew they were not going to be paid, stating that “the FLSA does not allow employees to waive their entitlement to wages.”

In his decision, the Judge also granted class certification to a group of other unpaid interns who worked for various other divisions of Fox Entertainment Group.

Recently, several cases have been filed alleging similar misclassifications. Employers should analyze the criteria listed above when deciding whether a worker can be classified as an unpaid intern. Companies who have unpaid internship programs should consult with counsel to avoid violating federal and state wage and hour laws.