Southern District Of New York Rules That Movie Studio Was Required To Pay Its Interns; Numerous Lawsuits By Unpaid Interns In Manhattan Follow

On June 11, 2013, in Glatt v. Searchlight Pictures Inc., No. 11 Civ. 6784, 2013 WL 2495140 (S.D.N.Y. June 11, 2013) (Pauley, J.), vacated and remanded, 811 F.3d 528 (2d Cir. 2016), the U.S. District Court for the Southern District of New York held that defendants Fox Searchlight Pictures Inc. (“Fox Searchlight”), a producer and distributor of feature films, and Fox Entertainment Group, Inc. (“Fox Entertainment”), the parent company of Fox Searchlight, violated the federal Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (the “FLSA”) and the New York Labor Law (the “NYLL”) by not paying two interns who had worked on production of the film Black Swan in the borough of Manhattan.

Rather, the U.S. District Court for the Southern District of New York held in Glatt that the plaintiff production interns “are ’employees’ covered by the FLSA and [the] NYLL.” As a result, held the Glatt Court, both federal and New York wage and hour laws required Fox Searchlight and Fox Entertainment (together, “Fox”) to pay the production interns not less than the minimum wage of $7.25 per hour.

The Southern District of New York’s Glatt decision broke no new ground. Rather, in Glatt, the Southern District of New York merely applied the U.S. Department of Labor (the “U.S. DOL”)’s criteria for whether an employer must pay its interns the minimum wage and overtime compensation.

As my April 14, 2010 blog post explained, under the regulations and Wage and Hour letter rulings of the U.S. DOL, interns or trainees are not employees within the meaning of the FLSA, and thus need not be compensated by an employer, if all of the following criteria apply:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in an educational environment;
2. The training is for the benefit of the intern;
3. The intern does not displaces regular employees, but works under close supervision of existing staff;
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;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The U.S. DOL’s above criteria (for whether an employer must pay its interns the minimum wage and overtime compensation) closely track the U.S. Supreme Court’s 1947 decision in Walling v. Portland Terminal Co., 330 U.S. 148 (1947).

The Glatt Court summarized the reasons that Fox Searchlight’s and Fox Entertainment’s classification of the two production interns as unpaid interns was improper, and the reasons that the production interns were ’employees’ covered by the FLSA and the NYLL, as follows:

[The production interns] worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training. The benefits they may have received — such as knowledge of how a production or accounting office functions or references for future jobs—are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would receive in an academic setting or vocational school.

In addition to holding that Fox was required to pay the two production interns at least the minimum wage, the Glatt Court granted the motions of a third unpaid intern, who’d worked in Fox Searchlight’s corporate offices in New York, for class certification of her NYLL claims and conditional certification of an FLSA collective action.

The Second Circuit Modifies The Southern District Of New York’s Test For Determining Whether Interns Are Employees

Two-and-a-half years later, in Glatt v. Searchlight Pictures Inc., 811 F.3d 528 (2d Cir. 2016), the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”), vacating the Southern District of New York’s order and remanding for further proceedings, held that in determining whether interns or trainees are employees within the meaning of the FLSA, and thus must be paid by an employer, the following, non-exhaustive set of considerations applies:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
6. 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; and
7. 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.

Even though the Southern District of New York’s Glatt decision merely applied existing law, Fox’s prominence and the heavy publicity which the Fox interns’ legal victory received unleashed what one newsroom termed “a rising tide of lawsuits brought by unpaid interns,” primarily in the borough of Manhattan.

In the seven weeks since the Southern District of New York issued the Glatt decision, workers in the entertainment, public relations/marketing, and media/publishing industries filed at least nine lawsuits alleging that their employers improperly categorized them as unpaid trainees and failed to pay them the minimum wage or overtime pay. Eight of these nine lawsuits were venued either in the U.S. District Court for the Southern District of New York (the Court which decided Glatt) or in New York state court in Manhattan. 

The defendant employers in these unpaid intern lawsuits included such prominent companies as NBC, Warner Music, Gawker Media, and Condé Nast. Further, the plaintiffs in most of these lawsuits sought class certification of NYLL claims brought by them and/or certification of FLSA collective actions.

Take-Aways For Employers

The Southern District of New York’s and the Second Circuit’s Glatt decisions illustrate that, in general, businesses must compensate their interns or trainees in New York City (including the borough of Manhattan) and throughout the remainder of New York State. As my April 14, 2010 blog post observed:

A rule of thumb is that for-profit companies in Manhattan must pay their interns or trainees unless, among other requirements, the interns or trainees are obtaining vocational experience and educational credit by working; are working for their own benefit rather than the company’s; and, by working, are conferring no immediate benefit on the company.

Businesses should consult with an experienced labor and employment attorney before allowing students or other interns to work without compensation.

This article was initially posted in 2013, and was updated on February 14, 2024.

Call Manhattan Unpaid Wages Attorney David S. Rich at (347) 835-5688 to speak with a knowledgeable labor and employment lawyer about ensuring that your company complies with overtime pay and other wage and hour laws, or to retain a skilled overtime attorney to defend your company in unpaid overtime lawsuits or other wage and hour litigation.