The Court Ruling That Could End Unpaid Internships for Good

Having young adults work for free is now officially a legal liability.

The unpaid intern, that lowly, coffee-scalded creature of the modern office, might be about to become a thing of the past.

For the last two years, media companies have been combating a series of lawsuits brought by interns claiming the right to a paycheck under state and federal law. Things began looking good for team management this past May, after a federal court scuttled the class action filed by a former Harper's Bazaar intern against Hearst Magazines. 

But yesterday, corporate's luck took a turn for the worse. A federal district judge in Manhattan, William H. Pauley III, ruled that Fox Searchlight studios had indeed broken New York and federal minimum wage laws by failing to pay two interns who had worked on the set of its Oscar-winning flick "Black Swan." A few pages later in his opinion, Judge Pauly proceeded to greenlight a class action sought by an intern who had worked in Fox Entertainment Group's offices.

As Becca Greenfield at The Atlantic Wire reported earlier today, this appears to be the first time a judge has banged a gavel and declared definitively that, no, employers can't ask young adults to work in return for the privilege of earning a bit of on-the-job experience. In doing so, Judge Pauley adopted a stringent, six-point test advocated by the Department of Labor to determine whether or not an intern can legally go unpaid. 

How stringent are we talking? Well, take a look a the department's language yourself:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern; 
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship;
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship

Upshot: Nobody loses their job to the intern; the company doesn't benefit from their presence; and the program needs a serious training component along the lines of a vocational school or academic setting. A summer full of filing, data entry, and occasional lunch runs would appear to be utterly insufficient to meet this standard. Presumably, a magazine intern wouldn't even be allowed to publish an article, since they'd be helping the publication turn a profit.

To be sure, Judge Pauley is just a single trial court judge, and there's no guarantee that his ruling would survive on appeal. One federal circuit court has vehemently rejected the Department of Labor's test as too rigid. And even if his opinion did by some chance become law of the land, it might not spell doom for every unpaid internship program. Allan Bloom, co-chair of the employment law practice at international firm Paul Hastings, said there "would be plenty of wiggle room for companies to keep offering them," if they were absolutely determined to. Marcia McCormick, a professor at Saint Louis University School of Law, told me that because governments and non-profits have special leeway under U.S. employment law, they would probably be able to keep running the programs as well. (In other words, don't expect Capitol Hill interns to go extinct any time soon, for better or worse.)  

But Judge Pauley's ruling might still symbolize the tipping point in the battle over unpaid internships. Unless a higher court steps in, some judges might choose to follow his lead in the future. Plaintiffs' lawyers, meanwhile, have seized on the issue. Among the legal experts I talked to, the consensus seemed to be that the risk of getting sued is great enough that companies may start to view unpaid interns as a reckless liability. "We've got lots of legal uncertainty," New York University School of Law Professor Samuel Estreicher told me. "I think most potential employers are going to be very wary of getting involved in unpaid internships."

We've reached a point where employers may choose to retreat, rather than fight it out. Whether you love unpaid internships, hate them, or just kind ambivalently tolerate them, there's a good chance they're about to become a whole lot more rare.