Still a Hot Topic: Unpaid Internships in the Entertainment Industry
Please check out Part 1 of this series, where I cover the basic issues with unpaid internships in the entertainment industry.
Unpaid internships are a hot topic nationwide. As the country waits for the Second Circuit’s decisions in Glatt and Hearst, legal minds are brushing up on the history behind unpaid vocational training. Since the Glatt and Hearst appeals, new internship cases have been filed, some of them in the Second Circuit, therefore awaiting the Glatt and Hearst decisions. Those decisions are binding only in the Second Circuit, but the appeals will affect internship practices across the country. Further, if the cases end up in the Supreme Court, the entire nation will likely have a new way to assess unpaid internships.
Vocational or educational training without pay is a part of almost every industry across the country and the practice is not exclusive to the Entertainment Industry.  However, the first unpaid internship case to reach the U.S. court of appeal involved the Entertainment and Media. Most of the unpaid internship cases are in the Entertainment Industry. We may just have to face it – the Hollywood mail rooms might be to blame for the notoriety of unpaid internships across all industry sectors.
This second installment will discuss the history of FLSA, the impact the Glatt and Hearst decisions will have of the future of unpaid internships, and will conclude by discussing why the issue is important.
History of Unpaid Vocational Training and The FLSA
On June 25, 1938, President Franklin D. Roosevelt signed the Fair Labor Standards Act; what he considered the most important piece of the New Deal Legislation. The FLSA banned oppressive child labor and set the minimum hourly wage and maximum workweek in interstate commerce (of course).  This was the first law in the country that addressed these crucial labor issues, but the legislation did not touch upon “internships,” and did not discuss whether payment was required for legal vocational training.
In 1947, the Supreme Court decided on the issue of unpaid “vocational” or “educational” training in Walling v. Portland Terminal Co. The Court concluded that the FLSA was not meant to penalize an employer for providing vocational school-like instruction without pay. The Court stated that vocational training without pay in a particular industry is legal “at a place and in a manner that would most greatly benefit the trainee,” particularly if the employer “received no immediate advantage from the trainees’ efforts.” The standard became- as long as the training benefited the intern mostly, and the employer received no immediate advantage, no pay would be okay.
The economic downturn of 2008 saw an upsurge in unpaid internships and a markedly high rate of unemployment. The rise of unpaid internships across all industries was due to workers’ low expectations for the future, the increased importance of internships as a means of retraining, taking advantage of unemployment time, building skills and the like, and schools’ complicity in questionable unpaid internship practices. And in 2014, we are still recovering from the 2008 collapse.
New FLSA and Recent Cases
In 2010, the Obama Administration wanted to address the problem, and the United States Department of Labor released its “Fact Sheet #71: Internship Programs Under the [FLSA]” designed to help for-profit businesses determine whether interns have to be paid minimum wage (and given overtime). The Fact Sheet described a “test for unpaid interns” consisting of six criteria. But the Fact Sheet creates confusion by providing two seemingly inconsistent instructions for how to apply the six criteria – at one point it says that whether or not an internship program qualifies for unpaid” status “depends upon all the facts and circumstances” – but at another point, it says that it’s a legitimate unpaid internship “only if all of the facts . . . are met.”
The 1947 Walling decision has been the only Supreme Court case addressing unpaid training. Glatt and Hearst are not the first unpaid internship suits since Walling, but they are the first in the recent series of unpaid internship lawsuits, and the first opportunity for a consistent standard to be set in at least one circuit. Because there have been no Supreme Court decisions regarding unpaid vocational or educational training since Walling, Walling is the only standard for courts to decide whether an unpaid internship is legal. The Fact Sheet is an official statement, not law, and courts do not have to use it. Therefore the eleven circuits currently apply several different tests in determining whether interns in unpaid internship lawsuits are owed back wages, in the many unpaid “training” cases. The Fourth, Sixth, and Eighth Circuits are still applying the primary beneficiary test used in Walling and the Eleventh Circuit applies an “economic realities” test which compares the economic value conferred by the intern on the company to that received by the intern himself. This confusion makes especially difficult for courts to assess unpaid internships. No two tests could reach the same liability.
Both Glatt and Hearst were filed in the same New York Federal District Court, and used the Fact Sheet, so at least it appears the Second Circuit is using the DOL test, but the Hearst and Glatt district courts still applied the DOL test in two very distinct ways. Glatt applied the test in an absolute way, where in order to be fulfilled every element had to be met, whereas Hearst applied the test in a totality of the circumstances way. Glatt found for the interns, whereas Hearst found for the Hearst Corporation. Because both cases applied the tests differently, both decisions cannot logically both be affirmed. One approach allows for companies to have a lot of fluidity in creating the unpaid internship programs, while one is more rigid.
The courts will decide the cases, and will likely also decide upon the usage of the DOL, whether it is to be a rule or a suggestion in the Second Circuit, and whether it should be applied in a Hearst way or the Glatt approach in the Second Circuit. As previously mentioned, if in the rare chance Hearst and Glatt do get to the Supreme Court, the Justices will likely create a standard for assessing the internships across industries, DOL six-factor test included or not. Even though these decisions will only be binding on the Second Circuit, the impact will be substantial on unpaid internship cases nationwide and will affect internships in the Entertainment Industry here in Los Angeles. Glatt is an important case for production internships, and Hearst for all media (Hearst Magazine publishes Harper’s Bazaar, Cosmopolitan, Seventeen, and Good Housekeeping). It is not clear when the decisions will come out.
Since the 2013 Fox decision, employers have definitely started to take hard looks at their internship programs. More entertainment companies have been changing their methods – even hiring experts to help assess their internship programs. Some changes can definitely be seen here in Los Angeles. NBC and Viacom, among other studios, and Entertainment Law firms, now pay their interns minimum wage or higher. More often than not however, law firms are suggesting that production companies, and entertainment companies simply just not offer internship programs to avoid any liability. Not good news for interns. Some have chosen the alternate route and have restructured their programs, so that the internship is purely educational. However, other studios, still have unpaid internship programs, so unless these internships are purely educational, these studios could one day be liable for paying interns back wages. Even though there is no workable standard, there is precedent in CA courts to decide whether employers should pay back wages.
The Weinstein Company has recently taken a new approach. It auctioned off a 3-month educational internship at either its New York or Los Angeles office. The winning bidder got an unpaid internship at the Weinstein Company, and the Company donated all proceeds to supporting the American Repertory Theater. This is a novel approach, as any bidder who elects to pay so much for the gig clearly wants to work at the Weinstein Company, pay or no pay. This does not necessarily mean the internship has muster against the DOL six-factor test or other standards.
Why is the Issue Important?
Some ask, “if a student wants to work for free and a company has limited resources to pay- what is the problem?” The problem is that the benefits of an unpaid internship for some, comes with several broad societal problems. My last article touched upon how the change is so important in socio-economically diversifying competitive industries, as low-income individuals are the ones who cannot afford to take unpaid internships. Unpaid internships encourage a class-divide. And because most internships are sought after in the most concentrated and competitive fields- like law, entertainment, fashion, and politics, low-income individuals are further marginalized from these industries. The change is important because it will also benefit employment rates. When employers decide to hire unpaid interns, typically students who do not work full-time, one paid working opportunity is lost.
It is also important that each circuit has a workable and consistent standard to assess the legality of an unpaid internship program. The DOL does not create important employment rights for student workers in any industry, like Title VII rights. Students have no way of addressing sexual harassment in the workplace, denial of social security contributions, right to receive unemployment insurance, and worker’s compensation, so what happens if these interns get hurt on the job?
Stay tuned for the courts’ decisions.
The following is a chart addressing some of the cases starting from Glatt and Hearst until today:
|9/28/2011||Glatt v. Fox Searchlight Pictures, Inc.||
|2/1/2012||Xuedan Wang v. Hearst Corporation||
|3/14/2012||Lucy Bickerton v. Charles Rose and Charlie Rose, Inc.||
|6/17/2013||Justin Henry v. Warner Music Group Corp. and Atlantic Recording Corp.||
|6/25/2013||Christopher Mackown v. News Corp. and Fox Entertainment Group, Inc.||
|6/27/2013||Kyle Grant v. Warner Music Group Corp. and Atlantic Recording Corp.||
|6/27/2013||Kevin Hicks v. Crook Brothers Productions, Inc. and Larry Schwarz Media Group, Inc.||
|7/3/2013||Jesse Moore and Monet Eliastam v. NBC Universal, Inc.||
|7/22/2013||Claudia Becerra and Montserrat Perez v. Tomas Cookman Nacional Records, LLC and Cookman International, LLC||
|8/13/2013||Casey O’ Jeda v. Viacom Inc., MTV Networks Music Production Inc. and MTV Networks Enterprises, Inc.||
|8/15/2013||Katherine Moreno and Aaron Dumas v. Sony Music Entertainment||
|8/20/2013||Rashida Salaam v. Universal Music Group Inc. and Bad Boy Entertainment, Inc.||
|9/16/2013||Britt’ni Fields vs. Sony Corporation of America, Sony Music Holdings Inc., and Columbia Recording Corp.||
 Law review articles on various legal search engines demonstrate the nation’s growing interest.
 Mackown v. News Corporation et al, No. 1:2013cv04406 (S.D.N.Y. 2013).
 The New York Times, June 27, 28, 1938; Harry S. Kantor, “Two Decades of the Fair Labor Standards Act,” Monthly Labor Review, October 1958, pp. 1097-98.
 330 U.S. 148, 151-52 (1947).
 Id. at 153.
 As of March 2010, unemployment in the United States was 9.7%. See News Release, U.S. Dep’t of Labor, Bureau of Labor Statistics, The Employment Situation–March 2010 (Apr. 2, 2010), available at http:// www.bls.gov/news.release/pdf/empsit.pdf.
 14 Nev. L.J. 184, 184-85.
 See, e.g., Jessica Curiale, America’s New Glass Ceiling: Unpaid Internships, the Fair Labor Standards Act, and the Urgent Need for Change, 61 Hastings L.J. 1531, 1534 (2010); David L. Gregory, The Problematic Employment Dynamics of Student Internships, 12 Notre Dame J.L. Ethics & Pub. Pol’y 227, 240 (1998).
 http://peltonlaw.com/news/2014/hot-topic unpaidinternships/NY%20Times:%20The%20Unpaid%20Intern,%20Legal%20or%20Not/
 Glatt v. Fox Searchlight Pictures Inc., 293 F.R.D. 516, 532 (S.D.N.Y. 2013); Wang v. Hearst Corp., No. 12 Civ. 793, 2013 WL 1903787 (S.D.N.Y., May 8, 2013).
 Wang v. Hearst Corp., No. 12 Civ. 793, 2013 WL 1903787 (S.D.N.Y. 2013).
 Lauren Fredericksen, Falling Through the Cracks of Title VII: The Plight of the Unpaid Intern, 21 Geo. Mason L. Rev. 245 (2013) National Association of Colleges And Employers, The Class of 2013 Student Survey Report 38 (2013).