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Fox: Interns who benefit from internship don’t deserve pay

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No longer?Peter Dazeley—Getty Images

Who’s getting the most out of this relationship? It’s not just an awkward question between significant others anymore.

Late last week, Fox Searchlight Pictures and Fox Entertainment Group proposed that the nature of the employer-intern relationship should be used to decide whether or not an an intern needs to be paid. If the employer is the so-called “primary beneficiary” of the arrangement, the intern merits compensation. If the intern takes that title, there’s no money exchanged.

It was Fox’s latest argument in its ongoing appeal before the Second Circuit of a June 2013 decision by a district court, which found that Fox had violated federal and New York minimum wage laws by not paying production interns who’d worked on the Black Swan film.

The June 2013 ruling—the first in what turned into a rash of lawsuits over the legality of unpaid internships—called into question the longstanding practice in which companies recruited college students and graduates to work for free. Hearst Magazines, Elite Model Management, Charlie Rose and his production company, and Conde Nast, among others, faced similar litigation.

When the district judge released the initial decision in the Fox case last year, he found that the interns were basically functioning like regular employees. In his ruling, he’d applied the Department of Labor’s six-point test that an internship must pass to be lawfully unpaid. The test says that the internship must be similar to training giving in an educational setting, it must be for the benefit of the intern, and it must not replace paid-positions or provide an immediate benefit to the employer. Also, the internship cannot necessarily guarantee employment afterwards and the employer and the intern should understand that the intern is not entitled to wages during the internship.

In a brief, the interns asked the Second Circuit to uphold the earlier ruling since they performed productive work for Black Swan that provided Fox with an immediate advantage; it allowed Fox to hire fewer paid employees and expedited the film’s operations. All the while, the interns did not receive any academic training or other educational benefits and they weren’t part of an internship program designed to benefit them. Oral arguments in the appeal are expected in a few months.

In its brief seeking to overturn the district court’s earlier ruling, Fox took particular issue with the Department of Labor’s requirement that an employer must not derive any immediate benefit from an unpaid internship. If that were the case, “the benefits provided by an internship would be substantially diminished, perhaps even limited to pure shadowing experiences devoid of the type of hands-on, experiential learning that is valuable and important to the student’s educational and professional development. Companies would have no incentive to provide educational opportunities,” Fox wrote. “While the [six] Department of Labor factors may be useful to this inquiry,” it said, “they should not be treated as exclusive.”

Instead of following those six strict, all-or-nothing rules, Fox has asked the Second Circuit to follow what it calls the “primary beneficiary test” that takes into account the totality of an internship’s circumstances, which is an appropriate approach for the intern context, Fox says, “because it allows a court to evaluate additional objective factors, including those related to the educational value of the experience.”

From that perspective, Fox argues, the Second Circuit would see that during their internship, the Black Swan interns gained substantial benefits like resume listings, job references, and an understanding of how a production office works. The lower court had dismissed those benefits as insubstantial. Fox argues that those benefits, along with hands-on experience, are “not only relevant but weighty”—enough to make the interns the primary beneficiary of the internship, which—from Fox’s perspective—means they could legally work without pay.