Unpaid Internships Here to Stay?

It was called the court case that could end unpaid internships. Its initial ruling was hailed as a major win for unpaid interns, one that could concretely establish the illegality of many uncompensated internships.

But a new appellate court ruling in the case has paid intern advocates worried the pendulum could swing back in the other direction.

With the lawsuit headed back to the lower federal district court, legal and student careers experts say that the case will not result in any immediate widespread change until a final decision is made. Still, many agree, the appellate court’s decision now makes any sort of doomsday scenario for unpaid internships unlikely.

“Winning the innings doesn’t get you the game,” Anthony Carnevale, director of Georgetown University's Center on Education and the Workforce, said. “The process is not what determines the outcome. It’s where the case finally lands, the final stop that tells the story. But what is quite clear about all this is that, while we all know paid internships are the ones by far with the most powerful effects, unpaid internships do still benefit students as well. As long as they're benefiting students in some way, unpaid internships aren't going anywhere.”

In 2013, William H. Pauley III, a federal district court judge, ruled in a lawsuit brought by interns working on the Fox Searchlight film Black Swan that the plaintiffs should have been classified as employees, not interns, and therefore should have been paid.

In his decision, the judge cited a list of six criteria released by the U.S. Department of Labor in 2010. In order for an experience to qualify as a legal unpaid internship, the criteria state, the work, among other requirements, must be similar to training a student would be given in an educational environment; must be for the benefit of the intern; must not displace regular employees; and must result in no immediate advantage for the employer and should occasionally even impede its regular operations.

The duties of the Black Swan internships included copying and scanning documents, tracking purchase orders, and fetching various items, including a pillow for the director. These tasks, the judge decided, did not meet the criteria of a legal unpaid internship.

A number of other interns soon rushed to file suits of their own. For colleges, the legal cases point to dilemmas on internships. At a time that many new graduates struggle to find good jobs, many colleges encourage internships as a path forward and as a way to explore careers. But some question whether colleges are complicit in encouraging students to take unpaid positions in which they may not learn much or make truly valuable connections.

According to a survey by the National Association of Colleges and Employers, less than 40 percent of unpaid interns are offered a job by the time they graduate, compared to 63 percent of paid interns.

About one-third of internships in the United States are unpaid, according to Michigan State University’s College Employment Research Institute. Since the ruling, former interns have sued Atlantic Records, Gawker and its publisher Nick Denton, Condé Nast, and the production company that owns Nickelodeon. All major Hollywood studios now pay their interns, according to The Los Angeles Times, and several media companies either now pay their interns or have dropped their intern programs entirely. Others have turned their unpaid internships into paid fellowships.

Those companies aren’t likely to go back to their old ways in light of the new ruling, Carnevale said, as the impetus for many of them was bad publicity as much as any lawsuit or court decision. But the new ruling does seemingly create a new, less strict set of criteria for determining the legality of unpaid internships.

Fox Searchlight appealed the federal court ruling to the Second Circuit Court of Appeals, which ruled earlier this month that the test for unpaid internships should be if the intern is the “primary beneficiary” of the program. Judge John M. Walker Jr., writing the opinion of the three-judge panel, stated that the Labor Department’s criteria were out of date, and that the criteria should be more closely aligned with an intern’s formal education.

An employer can receive some benefit from the use of interns, the judges wrote, but the employer cannot be the primary beneficiary of the arrangement.

The ruling puts far more emphasis on the role of academic course work and college credit, and when the case is heard again in the lower court, it will have to follow the appellate court’s criteria. That worries critics of unpaid internships.

“The ruling seems to open the floodgates to internships that deliver school credit, a factor that was irrelevant before the ruling,” Susan Adams wrote in a Forbes op-ed criticizing the decision last week. “The ruling paves the way for employers to make deals with educational institutions for school credit, perpetuating a system that exploits student labor, takes jobs from would-be entry-level workers, favors the privileged who can afford to make no money and flouts the basic tenet of the Fair Labor Standards Act, that people who work deserve to get paid at least a minimum wage.”

In the original ruling, the judge said the overall educational experience of an internship, not simply academic credit, was a major factor in his decision. Maurice Pianko, director and lead attorney for Intern Justice, said the appellate court’s ruling does not make that distinction.

“In this case, lead plaintiff Eric Glatt was essentially a grad student at [New York University]," Pianko wrote in an analysis of the ruling. “But it is a stretch to say that his duties, which primarily consisted of copying, scanning and filing documents, tracking purchase orders, and transporting paperwork and items to and from the Black Swan set, had anything to do with his educational course work.”

While the discrepancy means the final outcome of Glatt’s case is difficult to guess, legal experts are warning companies that the ruling still makes clear that having unpaid interns go on coffee runs or copy documents is illegal. That’s especially true for interns who have already graduated from college, as there is no course work to tie the internship to or academic credit to offer in lieu of a paycheck.

Greg Weight, president and chief executive officer of the Washington Internship Institute, said there are companies that exploit interns for free labor, but he doesn’t see the appellate court’s ruling as allowing for more of that kind of exploitation.

“I think it could help with this shift to ensure internships are being educational,” Weight said. “The court is saying that an unpaid internship is only valid if it aligns with an intern’s academic career. This would require a responsibility on the part of institutions to ensure there’s an understanding as to how the experience would be educational.”