Ruling Casts Doubt On Unpaid Internships

Fox Searchlight Pictures Found In Violation Of Minimum Wage Laws

Ruling Casts Doubt On Unpaid InternshipsA ruling by a federal judge could have significant impact on the ability of American businesses to rely on unpaid internships, analysts say. Federal District Judge William H. Pauley III's decision in a Manhattan courtroom found that Fox Searchlight Pictures violated federal and New York minimum wage laws by using unpaid interns.

In his ruling on Tuesday, Pauley determined that Fox Searchlight should have paid two interns on the movie Black Swan, saying that Eric Glatt and Alexander Footman were essentially acting as regular employees. Pauley said unpaid internships should only occur in limited circumstances as outlined by the U.S. Department of Labor. Those rules state that unpaid internships must be similar to vocational training in an educational environment and that they must not be to the immediate advantage of an employer. Furthermore, the experience must be for the benefit of the intern, whose work must not displace that of regular employees.

Pauley rejected notions that businesses have the right not to pay interns as long as the interns receive academic credit. "Undoubtedly Mr. Glatt and Mr. Footman received some benefits from their internships, such as résumé listings, job references and an understanding of how a production office works," Judge Pauley wrote. "But those benefits were incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them."

For Kotis Design (asi/244898), the judge's decision won't have much of an impact. The practice of using unpaid interns is one that company President Jeff Becker has avoided. "For one thing there are rules against it and for another it's just not fair," says Becker of his reasons for eschewing unpaid internships. Kotis occasionally brings college students on board part-time, but they're always paid. "It's an accountability issue too," says Becker. "How can I hold someone accountable if I'm not paying them? I have a hard time giving someone a task to do if I'm not compensating them in some way. It's not right."