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Fortune—Claire Zillman

On Friday, a federal appeals court will review earlier court decisions that left unpaid internship in legal limbo.

Whether you noticed it or not, a big question has been hanging over the heads of companies and their prospective workers for several years now: Is an intern an employee?

The Second Circuit Court of Appeals in Manhattan will address that query on Friday when it reviews earlier decisions in two cases filed by unpaid interns whose opposite outcomes put the now-ubiquitous unpaid internship in legal limbo.

“This is the case that everyone’s been waiting for,” says David Yamada, a law professor and director of the New Workplace Institute at Suffolk University.

In June 2013, Manhattan district court judge William Pauley III sided with former Fox Searchlight Pictures interns, ruling that they deserved minimum wages in exchange for their work at the company. In that case, two interns on the 2010 film Black Swan claimed in a lawsuit that during their time at Fox, they received no compensation even though they completed tasks—like taking lunch orders, answering phones, and making travel arrangements—that were typically the responsibility of paid employees.

Another group of unpaid interns sued Hearst Corporation with similar claims; namely, that the publisher had violated labor law by not paying them for the work they did while interning at Harper’s Bazaar, Cosmopolitan, Marie Claire, and other magazines. They didn’t fare as well. In May 2013, another Manhattan district judge, Harold Baer, denied the interns’ motion for summary judgment and concluded that “a jury could return a verdict in Hearst’s favor.”

The two similar cases had conflicting outcomes because the judges deciding them relied on different approaches to determine if interns should be covered by employee protections. “There is no legal meaning for ‘internship,'” says Yamada, who signed an amicus brief in support of the Fox interns. “It’s just a designation that we’ve come to know by labeling summer positions as internships.”

In the absence of a formal definition, the judges in the Fox and Hearst cases relied on the next best thing: a Supreme Court ruling in a case about railroad trainees from 1947 that served as the basis for an internship fact sheet the Department of Labor compiled in 2010. The sheet lists six criteria that the Labor Department says must be met for an unpaid internship to be legal, such as, “the internship experience is for the benefit of the intern,” and “the intern does not displace regular employees, but works under close supervision of existing staff.”

While both judges relied on the Labor Department’s cheat sheet, they still managed to issue contradictory rulings. Why? Generally speaking, it’s because the ruling in the Fox case used the Department of Labor criteria as a rigid checklist and found that the movie studio failed to meet every requirement. In the Hearst case, Judge Baer used the rules as a “framework” for analyzing the employee-employer relationship and decided that Hearst met enough of the Department of Labor’s requirements to make its unpaid internships legal. It’s now up to the Second Circuit to decide which interpretation is correct.

The September 2011 lawsuit against Fox filed by former interns Eric Glatt and Alexander Footman was the first of its kind and prompted a flood of copycat suits against media and entertainment employers like The Charlie Rose Show and Elite Model Management, which were sued in 2012 and 2013 respectively. (Both cases have since settled.) In October, NBCUniversal settled a lawsuit brought by former unpaid interns of “Saturday Night Live” and other shows for $6.4 million. And just this week, former interns sued Rolling Stone magazine and CBS Corp. claiming labor violations.

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And even though it is an unsettled area of the law, unpaid internship litigation, and the fear of it, seems to have prompted some employers to alter their internship offerings. Even as it battled former interns Glatt and Footman in court, Fox Searchlight changed its policy and began to pay interns. The Nation magazine announced in August 2013 that it would pay its interns minimum wage for the first time ever after its interns wrote a letter to the editor protesting their $150 weekly stipend. Conde Nast, meanwhile, took an alternative approach. After former unpaid interns sued the publisher of The New Yorker, Vanity Fair, and Vogue in June 2013, the company shut down its internship altogether in October of that year.

Opponents of unpaid internships claim that such positions deflate the wages of all workers and inhibit class mobility, since they are only feasible for the wealthy. Meanwhile, advocates have defended the unpaid positions as opportunities for young adults to gain real-world experience. Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce, says the Second Circuit must strike a balance between both sides of that argument by eliminating the exploitation of interns while still giving students and recent graduates easy access to viable workplace experience. Internships, he says, “[are] something that needs to be encouraged. We’re in a world now where you need more education to get in the door, and work experience is hard to come by.”

Law360—Abigail Rubenstein

A New York federal judge gave the green light to former unpaid interns bringing a wage-and-hour suit against Hearst Corp. to appeal his ruling denying them class certification, saying the Second Circuit could also provide clarity for other pending intern suits.

U.S. District Judge Harold Baer granted a bid by former interns Xuedan Wang and Erin Spencer to certify for interlocutory appeal his May 7 ruling refusing to certify a class on their New York Labor Law and denying them partial summary judgment on the question of whether they qualified as “employees” under federal and state wage law.

In his order allowing the plaintiffs to seek immediate review by the Second Circuit, Judge Baer said that controlling questions of law were present — including whether the criteria were met for class certification and whether a totality of the circumstances test was the right one for evaluating the interns' employment status — and that answers from the Second Circuit on these questions would not only provide clarity for the present case but also for other cases brought by interns in the circuit.

“A decision on these questions will significantly affect the conduct of other lawsuits now pending in the district courts which have relied on other legal standards or the same legal standard, but have come out differently,” the judge said.

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In that case, U.S. District Judge William H. Pauley III ruled that two interns who had who worked on the Fox Searchlight-produced movie “Black Swan,” should have been classified as employees under the Fair Labor Standards Act and certified a class of interns who worked in five Fox Entertainment Group units in New York to bring related claims under state law.

“[A]s the questions raised by plaintiffs in this case and in Glatt are difficult and one of first impression, they clearly provide fodder for different opinions and have spawned them,” Judge Baer said.

If the Second Circuit provides clarification or a different legal standard, it will guide the resolution of outstanding issues pending throughout the circuit, he said.

“We're pleased that the judge agreed with our motion that these issues are ripe for review, and we are hopeful that the Second Circuit will see things our way,” Juno Turner of Outten & Golden LLP, who represents the plaintiffs, told Law360.

* * *

The Second Circuit will still have to decide whether or not to review the judge's ruling.

If the Second Circuit does agree to take the case at this stage, its ruling could have a significant impact in the wage-and-hour realm where suits by interns claiming they should have been treated as employees and paid minimum wage and overtime are becoming increasingly popular.

The suit against Hearst, which Wang, a former intern at Harper's Bazaar, originally filed in February 2012, marked part of a beginning of a wave of intern suits.

And even more interns have lodged suits in the wake of the ruling in favor of the interns in the Fox Searchlight case.

The Hearst interns are represented by Adam T. Klein, Rachel M. Bien and Juno Turner of Outten & Golden LLP.

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The case is Wang v. The Hearst Corp., case No. 1:12-cv-00793, in the U.S. District Court for the Southern District of New York.

thomsonreuters.com—Carlyn Kolker

The law governing unpaid interns has become so murky that even a victorious party in a current case is hoping an appeals court will weigh in to clarify it.

In the past two months, two judges in the Southern District of New York have issued opposing rulings on the topic of unpaid interns. On June 11, U.S. District Judge William Pauley ruled in a summary judgment motion that interns suing film company Fox Searchlight were employees.

A month earlier, U.S. District Judge Harold Baer declined to make a similar determination, ruling that the issue of whether interns suing publishing giant Hearst Corp were employees was appropriate for a trial. Baer also declined to certify as a class action the case against Hearst.

At issue in both cases is the central question of what constitutes an employee.

In the Fox case, the defense argued that the so-called "primary beneficiary" test - a test of whether the worker or the company is the primary beneficiary of the labor the intern provides - should be invoked to make the determination. Pauley rejected the defense's argument, calling the test "subjective and unpredictable."

In the Hearst case, Baer disagreed with the interns suing the publishing house, who said that a Labor Department checklist should be followed to determine if an intern is an employee. Instead, he looked to the "totality of circumstances" and let the issue proceed to trial. He noted the benefits test should be a part of this consideration.

The plaintiffs in the Hearst case have asked Baer to certify the case for an interlocutory appeal to the 2nd Circuit. Interlocutory appeals are unusual, as appeals courts rarely grant appeals midway through a case's proceedings in the district court.

And even though Hearst was essentially the victor in Baer's ruling, it has said it won't oppose the plaintiffs' request for interlocutory appeal, because it wants clarity on the law of interns.


"Hearst submits that an in-district split with respect to the legal standard in two cases proceeding concurrently justifies immediate review by the Second Circuit," Hearst wrote in a Friday motion, in which it also referred to the plaintiffs' criticism of Baer's ruling as "baseless" and having "utter lack of foundation.

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The issue of the legal standards governing interns is likely to arise in the courts again soon. On June 13 two former interns at the New Yorker and W Magazine sued Conde Nast Publications, alleging the publishing giant violated federal labor laws by paying interns a nominal wage.

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The case against Hearst is Xuedan Wang v. The Hearst Corporation, U.S. District Court for the Southern District of New York, No. 12cv00793.

For plaintiffs Xuedan Wang et al: Adam Klein, Rachel Bien, Deirdre Aaron, Juno Turner, Justin Swartz, Michael Scimone, Molly Brooks, Paul Mollica and Sally Abrahamson of Outten & Golden.

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February 27, 2013

By Bill Donahue, Law360

A former unpaid intern who claims Hearst Corp.'s intern policies violated federal labor law accused the magazine publisher on Tuesday of dragging its feet in turning over contact information for possible class members and actively impeding the notice process.

Xuedan Wang won conditional certification last year on her claim that Hearst ran afoul of the Fair Labor Standards Act by failing to pay magazine interns for entry-level work, entitling her to begin notifying other interns — potential opt-in plaintiffs — of her lawsuit, filed in New York federal court.

But on Tuesday, Wang's attorneys said Hearst had turned over only a fraction of the contact information it was ordered by the court to divulge, making available full information for only 328 of the estimated 3,000 potential class members.

"By failing to make a good-faith effort to search for and produce contact information for potential collective members, defendant prevented these individuals from receiving timely notice of their rights in this case, undermining the FLSA’s remedial purpose in the process," the motion said.

The company maintained that it didn't keep a list of former interns, but Wang's attorneys said the publisher seemingly had no problem finding unlisted former employees for another reason: to secure declarations against Wang's charges.

"Although defendant was able to find these individuals in order to obtain declarations from them, 19 of them were not on the class list at all," the motion said. "It will not be unduly burdensome for defendant to collect additional collective member contact information — indeed, when defendant needed to reach potential collective members to obtain declarations to support its defense, it apparently had little trouble locating them."

The plaintiffs want the court to extend the notification period and order Hearst to be more helpful during the process, including reaching out to intern supervisors at its magazines and departments and asking for all contact information that they may have.

On top of the alleged lack of effort, Wang also took exception to how Hearst's interns reportedly interacted with the former interns that it reached for declarations. The plaintiff says the defense attorneys mislead the former interns about her case, did not inform them that they could join it and even intimated that they represented the former interns' interests rather than Hearst's.

"The court should also authorize corrective notice to those collective members from whom defendant obtained declarations, claimed to represent and failed to provide adequate disclosures, informing them that they are still eligible to participate in the case," the motion said. "Courts routinely take similar measures to protect class members' rights following inappropriate communications from defendants."

An attorney for Hearst didn't immediately return a request for comment on Wednesday.

Wang first sued in February, claiming she worked full time at Hearst magazine Harper's Bazaar for five months — sometimes as much as 55 hours a week — for no pay, even though she did jobs that should have been handled by actual employees.

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Under federal law, interns can work without pay, but only if their work is for an educational purpose and does not provide the employer with a substantial benefit, according to the complaint.

Judge Harold Baer Jr. granted the interns class certification in July, ruling that they had met the fairly lenient early-stage standards for collective status under the FLSA. Several state law claims, however, have been trimmed from the case since it was lodged.

Wang is represented by Adam T. Klein, Rachel M. Bien and Elizabeth H. Wagoner of Outten & Golden LLP.

* * *
The case is Wang v. The Hearst Corp., case number 1:12-cv-00793, in the U.S. District Court for the Southern District of New York.

May 5, 2012

By Steven Greenhouse, The New York Times

Confronting the worst job market in decades, many college graduates who expected to land paid jobs are turning to unpaid internships to try to get a foot in an employer’s door.

While unpaid postcollege internships have long existed in the film and nonprofit worlds, they have recently spread to fashion houses, book and magazine publishers, marketing companies, public relations firms, art galleries, talent agencies — even to some law firms.

Melissa Reyes, who graduated from Marist College with a degree in fashion merchandising last May, applied for a dozen jobs to no avail. She was thrilled, however, to land an internship with the Diane von Furstenberg fashion house in Manhattan. “They talked about what an excellent, educational internship program this would be,” she said.

But Ms. Reyes soon soured on the experience. She often worked 9 a.m. to 9 p.m., five days a week. “They had me running out to buy them lunch,” she said. “They had me cleaning out the closets, emptying out the past season’s items.” Asked about her complaints, the fashion firm said, “We are very proud of our internship program, and we take all concerns of this kind very seriously.”

Although many internships provide valuable experience, some unpaid interns complain that they do menial work and learn little, raising questions about whether these positions violate federal rules governing such programs.

Yet interns say they often have no good alternatives. As Friday’s jobs report showed, job growth is weak, and the unemployment rate for 20- to 24-year-olds was 13.2 percent in April.

The Labor Department says that if employers do not want to pay their interns, the internships must resemble vocational education, the interns must work under close supervision, their work cannot be used as a substitute for regular employees and their work cannot be of immediate benefit to the employer.

But in practice, there is little to stop employers from exploiting interns. The Labor Department rarely cracks down on offenders, saying that it has limited resources and that unpaid interns are loath to file complaints for fear of jeopardizing any future job search.

No one keeps statistics on the number of college graduates taking unpaid internships, but there is widespread agreement that the number has significantly increased, not least because the jobless rate for college graduates age 24 and under has risen to 9.4 percent, the highest level since the government began keeping records in 1985. (Employment experts estimate that undergraduates work in more than one million internships a year, with Intern Bridge, a research firm, finding almost half unpaid.)

“A few years ago you hardly heard about college graduates taking unpaid internships,” said Ross Eisenbrey, a vice president at the Economic Policy Institute who has done several studies on interns. “But now I’ve even heard of people taking unpaid internships after graduating from Ivy League schools.”


Eric Glatt, who at age 40 interned for the movie “Black Swan,” is one of the few interns with the courage to sue for wages over the work he did.

With an M.B.A. and a master’s in international management, Mr. Glatt wanted to get into film after a previous job overseeing training programs at the American International Group, the big insurance and financial services company. For “Black Swan,” he prepared documents for purchase orders and petty cash, traveled to the set to obtain signatures on documents and tracked employees’ personnel data.

“I knew that this was going to be a normal job and I wasn’t going to be paid for it,” he said. “But it started kicking around in my mind how unjust this was. It’s just become part of this unregulated labor market.”

Mr. Glatt filed suit, accusing Fox Searchlight Pictures of minimum wage violations. The company says it fully complies with the law and provides interns with a valuable, real-world work experience.

“The purpose of filing this case was to help end this practice,” said Mr. Glatt, who now plans to go to law school. “That was more important than my working on the next blockbuster.”

Ross Perlin, author of the 2011 book “Intern Nation,” said postcollege internships used to be confined to a few fields like film but have become far more common. “The people in charge in many industries were once interns and they’ve come of age, and to them unpaid internships are completely normal and they think of having interns in every way, shape and form,” he said.

Some interns say their experiences were quite helpful. Emily Miethner, a fine arts major at Hofstra, took an unpaid position at Gawker after graduating in 2010, doing research and social media for the news and gossip site. After two months, she moved to an unpaid internship at Flavorpill, an online cultural guide.


Xuedan Wang, known as Diana, did not have such a positive experience. Ms. Wang, who graduated from Ohio State in 2010, interned at Harper’s Bazaar, working 9 a.m. to 8 p.m. overseeing eight other unpaid interns who ran around Manhattan picking up items from various fashion houses and showrooms.

She sued the fashion magazine in February, accusing it of minimum wage violations.

“Harper’s Bazaar was my favorite magazine growing up. I was dazzled that I was going to be working there,” she said. “But it was real grunt work, lugging things around.”

Hearst Magazines, which owns Harper’s Bazaar, said its internship programs enhanced students’ educational experience and fully complied with the law.

Some people end up on an internship treadmill. Joyce Lee, who received a film degree from Wesleyan in 2010, moved to Los Angeles and did six unpaid internships, including one for Scott Rudin, a top Hollywood and Broadway producer.

Her duties included reading scripts and picking up the mail. To pay her rent, she worked at a coffee shop and handed out fliers for a taxi company.

“Scott Rudin is made of money,” she said. “I don’t think it would be so hard for him to pay five interns the minimum wage.”

A spokesman for Mr. Rudin said he could not be reached for comment.

Ms. Lee, who is now in New York making her own film and supporting herself by again working at a coffee shop, said interns deserved better.

“If I ever become a famous filmmaker,” she said, “I promise I will pay my interns.”

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