Glatt v. Fox Searchlight Pictures Inc.
20 Wage & Hour Cas.2d (BNA) 1436, 293 F.R.D. 516, 2013 U.S. Dist. LEXIS 82079 (2013)
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Rule of Law:
Under the Fair Labor Standards Act (FLSA), unpaid interns at for-profit businesses are considered employees entitled to wages unless the employer can prove the internship meets a narrow, six-factor test establishing it is for the intern's educational benefit and provides no immediate advantage to the employer. A financing and distribution company that exercises significant formal and functional control over a production is a joint employer of the production's workers.
Facts:
- Erie Glatt and Alexander Footman worked as unpaid interns on the production of the film 'Black Swan' in New York.
- Their duties consisted of routine administrative and production tasks such as making photocopies, running errands, taking lunch orders, tracking invoices, and answering phones.
- The work performed by Glatt and Footman was essential to the office's operations, and if they had not performed it, paid employees would have been required to do so.
- Fox Searchlight Pictures Inc. ('Searchlight') entered into a Production Agreement with Lake of Tears, Inc., the single-purpose entity created to produce 'Black Swan'.
- This agreement gave Searchlight the power to hire and fire key personnel, set the overall budget, approve all expenditures, and closely monitor day-to-day progress through mandatory reports.
- Glatt's supervisor stated he needed to get approval from a Fox production executive for Glatt to work as an unpaid intern without receiving college credit.
- The interns did not receive any formal training or education comparable to what would be provided in a vocational school or academic setting.
Procedural Posture:
- Erie Glatt and other former interns filed a putative class and collective action lawsuit in the U.S. District Court for the Southern District of New York against Fox Searchlight Pictures Inc. and Fox Entertainment Group, Inc.
- Plaintiffs alleged violations of the Fair Labor Standards Act (FLSA) and state labor laws for misclassifying them as unpaid interns.
- Plaintiffs Glatt and Footman moved for partial summary judgment, asking the court to rule that they were 'employees' and that Searchlight was their employer.
- Defendants filed a cross-motion for summary judgment arguing, among other things, that they were not the interns' employers.
- Plaintiff Antalik moved for class certification of her New York Labor Law claims and conditional certification of a collective action for her FLSA claims.
- The district court is now ruling on these competing motions for summary judgment and class certification.
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Issue:
Under the Fair Labor Standards Act (FLSA), are unpaid interns who perform routine work that provides an immediate advantage to a for-profit employer, and whose tasks would otherwise be performed by paid employees, considered 'employees' entitled to wages?
Opinions:
Majority - Pauley III
Yes. Unpaid interns are 'employees' under the FLSA unless they fall within the narrow 'trainee' exception. The court rejected the defendants' proposed 'primary benefit' test as subjective and unmanageable, instead applying the Department of Labor's six-factor test derived from Walling v. Portland Terminal Co. The court found that under the totality of the circumstances, the interns were employees because their internships were not similar to an educational environment, they displaced regular employees, and their employer derived an immediate advantage from their labor. The benefits the interns received were merely incidental to any employment relationship, not the result of a structured educational program. The court also held that Searchlight was a joint employer of the interns based on the 'economic reality' of the relationship. Applying both the formal control test (Carter) and the functional control test (Zheng), the court found Searchlight exercised pervasive control over the production, including the power to hire and fire, supervise work schedules, control the budget, and maintain employment records, making it liable as an employer.
Analysis:
This decision was a landmark ruling that significantly increased the legal risk for for-profit companies utilizing unpaid interns. By formally adopting the Department of Labor's strict six-factor test and rejecting a more lenient 'primary beneficiary' standard, the court narrowed the circumstances under which an intern could legally be unpaid. This prompted many companies, particularly in media and entertainment, to re-evaluate and often terminate their unpaid internship programs or convert them to paid positions. The ruling also serves as a warning to parent or financing companies that they cannot use shell production entities to shield themselves from labor law liability if they retain ultimate control over the work.
