“Black Swan” Interns May Not Be Employees

“Black Swan” Interns May Not Be Employees

July 9, 2015
by Jerry Glover

The U.S. Court of Appeals for the Second Circuit (with federal jurisdiction over New York and various other states) recently reversed a decision of a New York federal district court which had held that unpaid interns working on the Fox Searchlight motion picture, “Black Swan”, were actually employees of the company. Glatt v. Fox Searchlight Pictures, Inc., 2015 WL 4033018 (2d Circ. July 2, 2015). A spate of lawsuits by interns against various media companies had followed the district court’s decisions. Most of those cases were settled out of court as a result, at least in part, of the district court decision. Had the appeals court decision come down sooner, those settlements may not have occurred so quickly if at all. To determine whether the plaintiffs in this case were employees or interns the appeals court used a test that differed from the one used by the district court as well as many other courts around the country.

We wrote about the district court decision when it was announced in 2013 which you can find by clicking here. One of the plaintiffs, Glatt, was enrolled in a non-degree graduate program at NYU’s School of Education. He worked as an unpaid intern in the Black Swan accounting department five days a week from 9 a.m. until 7 p.m. He copied, scanned and filed documents, tracked purchase orders, transported paperwork and items to and from the movie set; maintained employee personnel files and answered questions about the accounting department. Glatt later interned in a second position in the film’s post-production department for six months. There he drafted cover letters for mailings, organized filing cabinets, filed paperwork, made photocopies, kept the take-out menus up-to-date, brought documents to the payroll company and ran errands (including an errand to purchase the film’s director a non-allergenic pillow).

Two other plaintiff in this case performed duties similar to Glatt one plaintiff working in the film’s producing office and the other working in the publicity office.

The plaintiffs sued under the Federal Labor Standards Act (FLSA), 28 U.S.C. Sec. 206, and a similar New York state labor law. The trial court determined that the plaintiffs had been improperly classified as unpaid interns rather than employees. But the appeals court reversed noting that the issue of whether an intern should be classified as an employee under the FLSA was one of first impression in the Second Circuit.

The appeals court first noted that the district court had relied on the Department of Labor’s 2010 informal guidance on unpaid interns working in the for-profit private sector to determine whether the “Black Swan” interns were actually employees. The appeals court, however, decided that these factors were merely an interpretation of a 1947 U.S. Supreme Court case involving train brakemen serving in a vocational program. Although federal agencies are often deferred to when interpreting the statutes that govern their existence, the appeals court noted that those same agencies have no special competence in interpreting a court decision. Since the appellate court believed that the Department’s factors were too rigid, they were not persuasive.

The court held that the “proper question” is “whether the intern or the employer is the primary beneficiary of the relationship.” The court noted that there were two features to this question:

  1. If focuses on what the intern received in exchange for his/her work; and
  2. It accords courts the flexibility to examine the economic reality as it exists between the intern and employer

Despite rejecting the Department of Labors list of factors to determine whether an intern is an employee, the court came up with its own “non-exhaustive” set of considerations:

(a) The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any express or implied promise of compensation suggests that the intern in an employee and vice versa

(b) The extent to which the internship provides training that would be similar to that given in an educational environment including the clinical and other hands-on training provided by educational institutions.

(c) The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

(d) The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

(e) The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning

(f) The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

(g) The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The court noted that no one of these factors controls and every factor does not have to point in the same direction (in favor of the intern or vice versa) for a court to conclude that an intern is not an employee. The court added that other factors may be considered on a case by case basis.

The court vacated the trail court decision and remanded the case for further hearings based on this list of factors. Whether a different decision will be reached by the district court remains to be seen, but the factors listed above would seem to lead to the same decision the trial court had initially released based on the lack of educational training involved in the internships presented in this case.

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