A federal district court in New York ruled last week that unpaid interns who worked on the production of films for Fox Searchlight Pictures Inc. and Fox Entertainment Group, Inc. were actually employees who should have been paid in accordance with the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”).  Glatt v. Fox Searchlight Pictures Inc., Case No. 11-CV-06784 (S.D.N.Y. 2013).  This decision comes just weeks after another Southern District of New York judge issued a favorable defense ruling by denying class certification for unpaid interns at various Hearst-owned magazines. See Wang v. The Hearst Corporation, Case No. 12-CV-00793 (S.D.N.Y. 2013).

In Glatt, the court applied the six-factor test set used by the Department of Labor (“DOL”)  and determined that two unpaid interns who worked on production of Black Swan were improperly classified  and did not come within the “trainee” exception to the FLSA’s coverage.  Instead, the interns should have been classified as employees subject to the FLSA and NYLL.  Specifically, in applying the DOL test, the court found that:

1.  The internship was not similar to training in an educational environment because the interns did not receive any formal training or education, or acquire any new skills aside from those specific to the Black Swan back office during the internship;

2. The internship had only incidental benefit to the interns – resume value and references– which were not the result of the structure of the internship, and that Fox also benefitted from the unpaid work;

3. The interns displaced regular employees and performed tasks that would have otherwise been performed by regular employees, such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking and reconciling purchase orders, making copies, and running errands, among other low-level tasks;

4. Fox received immediate advantages from the activities of the interns, and there is no evidence that the interns impeded work;

5. The interns were not entitled to a job at the conclusion of the internship; and

6. The parties understood that the interns were not entitled to wages for time spent in the internship, although the court noted that this factor was not determinative.

While the plaintiffs to whom the court’s ruling applied did not seek class certification, the court granted another plaintiff’s motion for class certification of her NYLL claims and conditional certification of the FLSA claims.  In doing so, the court found that:  (1) the class was sufficiently numerous because it included at least 40 plaintiffs whose information was not easily identifiable by plaintiffs; (2) there are common questions or law and fact relating to the DOL’s six-factor test; (3) the plaintiff’s claims are typical of the class because she participated in the same internship program administered by the same set of recruiters as all class members and was classified as an unpaid intern like all class members; (4) plaintiff’s interest are not antagonistic to those of the class; (5) common issues of liability predominate over any individual damages claims; and (6) class action is a more efficient mechanism than individual claims because of the relatively small recoveries available.

The court’s reference to the evidence presented in the case provides a good lesson for employers.  The court noted an internal memo in which Fox stated that, in light of the DOL test, Fox would only provide paid internships unless a manager could comply with the six criteria provided by the DOL.  The outcome in Glatt demonstrates employers must remain vigilant not only in maintaining proper policies on internships, but also in training and oversight of managers, to ensure compliance with the DOL’s six-factor test and the FLSA.