Fox Entertainment Group and Fox Searchlight Pictures Violate Federal and State, Wage and Hour Laws by Failing to Pay Interns
On June 11, 2013, the U.S. Federal Court (S.D.N.Y) held in Glatt v. Fox Searchlight Pictures that Fox Searchlight Pictures and Fox Entertainment Group violated Federal and State labor laws by failing to pay interns and that those unpaid interns may prosecute their claims as class actions on behalf of interns employed by specific Fox Entertainment Group subsidiaries. In so holding, the Federal Court has opened the door to future litigation against major film studios and other major corporations for failure to pay interns.
Glatt v. Fox Searchlight Pictures arose from claims brought by four former interns. Two of the plaintiffs, Eric Glatt and Alexander Footman, were unpaid interns who worked on the film Black Swan located in New York. Another plaintiff, Kanene Gratts was an unpaid intern who worked on production of the film 500 Days of Summer. The last plaintiff, Eden Antalik was an unpaid intern at Fox Searchlight Pictures corporate offices located in New York. In September 2011, the interns filed suit in U.S. Federal Court (S.D.N.Y.) on behalf of themselves, alleging that Fox Searchlight Pictures and Fox Entertainment Group had unlawfully violated federal and state labor laws by classifying them as unpaid interns instead of paid employees. More specifically, Glatt, Footman, and Gratts moved for summary judgment that (1) they were “employees” covered by the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL) and (2) Fox Searchlight Pictures was their employer; Antalik moved for class certification of her NYLL claims and conditional certification of a collective action for her FLSA claims. Defendants moved for summary judgment that (1) Gratt’s claims are time-barred; (2) Searchlight did not employ Glatt, Footman, or Gratts; (3) FEG did not employ Antalik; and (4) Searchlight did not employ any of the production interns on five films financed by Searchlight.
Fox Entertainment Group is the parent corporation of approximately 800 subsidiaries, including codefendant Fox Searchlight Pictures. Fox Searchlight Pictures produces and distributes feature films. However it does not produce the films itself but rather enters into production-distribution-finance agreements (“production agreements”) with corporations created for the sole purpose of producing particular films. Fox Searchlight Pictures entered into a production agreement with Lake of Tears, Inc. for the movie Black Swan and 500 DS Films, Inc. for the movie 500 Days of Summer. Fox Searchlight Pictures made a motion for summary judgment with the U.S. Federal Court that they did not employ Glatt, Footman or Gratts on account of this production agreement.
However Fox Searchlight Pictures had a substantial amount of power over the production process and the employment of interns despite Glatt and Footman working on production of Black Swan with Lake of Tears, Inc. and Gratts working on production of 500 Days of Summer with 500 DS Films, Inc. Both, Lake of Tears, Inc. and 500 DS Films, Inc. gave Fox Searchlight Pictures the power to hire and fire production personnel, set budgets, and monitor the progress of the films. Glatt Footman and Gratts argued that through its control of the budget and the hiring of unpaid interns not receiving college credit, Fox Searchlight Pictures “de facto” set wages for all production workers. Glatt, Footman and Gratts further argued that the crew working on Black Swan and 500 Days of Summer were tied to Fox Searchlight Pictures and the movies themselves, not their respective production companies, Lake of Tears, Inc. and 500 DS Films, Inc.
Lastly Glatt, Footman and Gratts motioned for summary judgment that they were employees covered by the FSLA and NYLL since they did not fall under the “trainee” exception established by Walling v. Portland Terminal Co., 330 U.S. 148 (1947). In Walling, a case involving a railroad that held a week-long training course for prospective brakemen, the Supreme Court determined that “trainees” were not covered employees under the FLSA. The trainees “[did] not displace any of the regular employees, who [did] most of the work themselves, and must stand immediately by to supervise whatever the trainees do… the [FLSA] was not intended to penalize [employers] for providing, free of charge, the same kind of instruction [as a vocational school] at a place and in a manner which would most greatly benefit the trainee.
“Fox Searchlight Pictures urged the Court to apply this type of “primary benefit test” by determining whether “the internship’s benefits to the intern outweigh the benefits to the engaging entity.” The U.S. Federal Court Judge William H. Pauley III declined to accept Fox Searchlight Pictures argument in this case that Walling applied a “primary benefit test.” In so holding, the Court emphasized that courts should be cautious in expanding the “trainee” exception established in Walling:
Walling created a narrow exception to an expansive definition. “A broader or more comprehensive coverage of employees … would be difficult to frame.” United States v. Rosenwasser, 323 U.S. 360,362 (1945).
The Court went on to explain that in Walling, the Supreme Court did not weigh the benefits to the trainees against those of the railroad, but relied on findings that the training program served only the trainees’ interests and that the employer received “no ‘immediate advantage’ from any work done by the trainees. In this case, the Plaintiffs performed routine tasks that would otherwise have been performed by regular employees such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking purchase orders and invoices, traveling to the set to get managers’ signatures, arranging travel plans, taking out trash, taking lunch orders, answering phones, watermarking scripts, and making deliveries. Searchlight received the benefits of their unpaid work, which otherwise would have required paid employees. Therefore, there was no basis for the Court to use the “trainee” exception for Glatt, Footman and Gratts.
Eden Antalik also moved for class certification of her NYLL claims and conditional certification of a collective action for her FLSA claims. Antalik claimed she was part of a “centralized unpaid internship program” in which unpaid interns at Fox Entertainment Group’s subsidiaries were subject to a single set of policies administered by a small team of intern recruiters. She maintained that two employees oversaw Fox Entertainment Group’s internship program during the relevant periods and their responsibilities included soliciting “intern request forms” from supervisors at subsidiaries interest in hiring interns, approving those requests, screening internship applicants, and processing interns’ paperwork. According to Antalik, she and the members of her proposed class and collective action were victims of a common policy of using unpaid interns to perform work that required them to be paid.
Defendants moved for summary judgment that they did not employ Antalik or that any “centralized” internship program existed given that the Fox Entertainment Group internships varied considerably among various subsidiaries and departments in experiences and supervision. The U.S. Federal Court declined to accept Fox Entertainment Groups motion for summary judgment that they employed Antalik or ran any centralized internship. In so holding, the Court emphasized that evidence existed that interns were recruited to help with busy periods and that they displaced paid employees:
“Those who oversaw the internships did not believe they complied with applicable law is evidence capable of generating common answers to questions of liability.”
The Court went on to explain that in this case, the relatively small recoveries available to individual plaintiffs made a class action a more efficient mechanism. For the foregoing reasons, the Court certified Antalik’s proposed class under Rule 23(b)(3) with Antalik as class representative.
In sum, because the Court decision approved summary judgment for Glatt and Footman’s motion that they are employees covered by the FLSA and NYLL and Antalik’s motion for class certification and condition certification were granted, the Court confirmed employers across the country cannot simply slap the term ‘intern’ on a job description and think that it relieves themselves of the legal and ethical obligation to pay wages for the labor that helps their organization succeed. As Judge Pauley stated, “résumé listings, job references and an understanding of how a production office works,” help interns, “but those benefits [are] incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them.” Judge Pauley ended up granting Fox Entertainment Group and Fox Searchlights motion for summary judgment against Gratts because her claims were time-barred.
For practitioners, the most important lesson is simple. If you are representing unpaid interns that are performing routine tasks that would otherwise have been performed by regular employees they may very well have a right to recover unpaid wages. Going forward, a claim that “unpaid internships are fine because they provide the intern with experience in a specific industry” will not be sufficient, as U.S. District Courts in New York will be able to differentiate between a trainee and an unpaid intern.
The subject of unpaid interns continues to be of significant interest to the Court. In February 2012, a former Harper’s Bazaar intern sued Hearst Magazines, asserting that she regularly worked 40 to 55 hours a week without being paid. Last July, a federal court ruled that the plaintiff could proceed with her lawsuit as a collective action, certifying a class of all unpaid interns who worked in the company’s magazines division since February 2009. This February, an unpaid intern sued Elite Model Management, seeking $50 million.
After a lawsuit brought by unpaid interns, Charlie Rose and his production company announced last December that they would pay back wages to as many as 189 interns. The settlement called for many of the interns to receive about $1,100 each, amounting to roughly $110 a week in back pay, for a maximum of 10 weeks, the approximate length of a school semester. Fitapelli & Schaffer is currently investigating unpaid intern cases. Feel free to call us for a free consultation.