New guidelines defining the conditions for unpaid internships may prove unsettling to any company that has become accustomed to getting free work from eager young people.
The guidelines, actually established in 2010 but until recently largely overlooked, were cited in a federal lawsuit involving Fox Searchlight Pictures Inc.
"In a decision that is sure to shake up how many employers handle their internship programs, a federal district court has ruled that unpaid interns working in the offices of motion picture production companies were not 'trainees' under the federal Fair Labor Standards Act or New York law, but employees who had to be paid," wrote attorneys Diane L. Kimberlin and Joseph Lazazzero of Littler Mendelson LLP.
Recommended For You
In a case before Judge William H. Pauley III of the U.S. District Court for the Southern District of New York, interns had argued that they should be paid for the work they did for a company working with Searchlight on the films "Black Swan" and "500 Days of Summer."
After reviewing FLSA standards, which themselves were based on a 1947 court ruling, Pauley found that the interns in fact should have been paid. He cited the following factors used to determine whether unpaid interns or "trainees" had been properly used by the defendant:
- 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;
- 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 that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- the intern is not necessarily entitled to a job at the conclusion of the internship; and
- the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
In the case of Searchlight's unpaid interns, Pauley found that most of the conditions argued that the workers should have been paid. If his decision stands the test of potential appeals, many employers who now use unpaid interns may have to rethink either the payment part of the deal or be very clear about following the FLSA guidelines, the authors said.
"The Fox Searchlight case is just the first of a growing trend of comparable lawsuits. Interns for Hearst Magazine have filed a class action alleging similar claims, and in February a class of unpaid interns filed suit against Elite Model Management seeking $50 Million in unpaid wages. Exposure in such cases can be quite substantial, especially because of the availability of attorneys' fees, interest, treble damages and/or penalties in many jurisdictions," they wrote.
"Employers with unpaid interns should review their programs with legal counsel to be sure they meet the applicable employee classification test in their jurisdiction. The use of unpaid interns eager to break into an industry or gain workplace experience when jobs are scarce, is increasing. The use of interns is also the subject of increasing scrutiny in the courts, and can have serious financial consequences for a company if not done correctly."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more information visit Asset & Logo Licensing.
Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
