A wave of lawsuits has led some of the biggest Hollywood companies to end their long-standing practice of not paying interns. But there's a high-profile holdout in this labor controversy: the popular horror and comedy studio Lionsgate.
The company, known for squeezing maximum profit out of smaller genre movies such as "Saw" and "Kick-Ass," is the only major film and television studio with an unpaid internship program.
It's a practice, legal experts say, that could expose Lionsgate to a potential lawsuit.
Former unpaid interns on the film "Black Swan" fired the first major salvo at Hollywood in a 2011 lawsuit against Fox Searchlight Pictures. The class action contends that the company violated the Fair Labor Standards Act by not paying the interns.
"All it takes is one big lawsuit, and if they don't have insurance for it, Lionsgate would use up more money on the legal case than they would paying college kids minimum wage," said Loyola Law School professor Jay Dougherty.
Lionsgate, founded in 1997, is the largest of the so-called mini-major film studios. With recent hits "Divergent" and the "Hunger Games" franchise, the Santa Monica company has moved beyond its role as a scrappy upstart and is now outperforming some of its old-line competitors.
In 2012, the studio finished fifth in box-office market share, ahead of storied competitors Paramount Pictures and 20th Century Fox; last year it was sixth, again ahead of Paramount, according to entertainment data firm Rentrak Corp.
The company also produces television shows including "Mad Men" and "Orange Is the New Black."
In a statement to The Times, Lionsgate said it was "very proud" of its internship program, which has not been the subject of any litigation.
"We believe that the current program is a valuable learning experience and a win/win for Lionsgate and our interns," a Lionsgate spokesman said. "We also believe that the current structure enables us to create more opportunities than we could otherwise offer."
Lionsgate maintains spring, summer and fall internship cycles that last eight to 10 weeks and are aligned with college semesters. There are roughly 75 participants in the spring and fall cycles, and the program expands to accommodate up to 120 in the summer. Interns attend an orientation, participate in mock job interviews and submit their resumes for feedback. They typically work two or three days per week and must receive academic credit to participate.
The company spokesman indicated that Lionsgate would have to offer fewer internships if it shifted to a paid program. The studio could have to spend between $300,000 and $400,000 a year to compensate interns, based on extrapolations that consider the program's size and minimum wage.
Lionsgate in May reported a profit of $152 million on revenue of $2.63 billion for its most recent fiscal year. The company's stock, which trades on the New York Stock Exchange, closed at $26.96, down 29 cents, on Thursday.
The lawsuit against Fox Searchlight sent reverberations through the entertainment and media world.
After it was filed, rival studio Universal Pictures began paying its interns. Its corporate parent, NBCUniversal, is subject to a similar unpaid intern lawsuit. Fox Entertainment Group, the parent company of Fox Searchlight, also now pays its interns.
The Fox case was also followed by lawsuits from unpaid interns at Warner Music Group and Atlantic Records, and at publishing houses Conde Nast and Hearst Corp. (Conde Nast, publisher of Vogue and GQ, canceled its unpaid internship program in October.)
The lawsuits center on whether the companies' programs violated the six legal criteria for unpaid internships issued by the Department of Labor in April 2010. The guidelines say that an unpaid internship should be "similar to training which would be given in an educational environment" and offer the employer "no immediate advantage from the activities of the intern." Additionally, the intern should not "displace regular employees."
The Times interviewed a handful of people who recently interned at Lionsgate. All gave the unpaid program a positive review, saying it was beneficial to their professional development. They described assignments such as script coverage — which entails reading scripts and writing summaries of them — and occasional office work including photocopying, answering telephones and burning DVDs.
"You learn so much about people in this business — what they like and don't like," said former Lionsgate intern Sarah Galos, 23. "It was invaluable."
But at least some of the work described by Galos and others could be interpreted as a violation of the six legal criteria, according to legal experts.
Dougherty said that office tasks such as burning DVDs and photocopying seem "marginal."
"It's hard for me to see how that would be for the benefit of the intern and not displacing a regular employee," said Dougherty, the director of Loyola's Entertainment & Media Law Institute. "Are they close to the line with the more menial aspect to the work? Yes, probably."
But he also said that script coverage could be considered akin to training given in an educational environment, and thus compliant with federal guidelines.
According to several film and television executives at major studios, coverage typically is the responsibility of development executives or other full-time paid employees. Therefore, an intern doing such work could be displacing an employee.
Still, Dougherty believes that Lionsgate considered this and "decided they fall on the side of being lawful."
Former Lionsgate intern J.P. Alanis dismissed the question of whether the work he did at the company in 2011 and 2012 while a student at USC was in violation of the Labor Department guidelines.
"For me, I would rather stay busy and do coverage than sit around and adhere" to the guidelines, said Alanis, who in addition to coverage completed occasional administrative tasks. He enjoyed it all — even getting the occasional lunch for an executive.
"I loved doing that, because then they would know my name," said Alanis, 24.
A ruling in the Fox case from New York's 2nd Circuit Court of Appeals is expected by early next year and could shake things up in Hollywood. The plaintiffs are seeking back pay, damages and an order barring use of unpaid interns at Fox Searchlight and other units of Fox Entertainment Group.
Last year, U.S. District Judge William Pauley in New York ruled that "Searchlight received the benefits of [the interns'] unpaid work, which otherwise would have required paid employees." Fox appealed Pauley's ruling, arguing that interns aren't employees subject to wage protection if they — not the employer — are the "primary beneficiaries" of the internships.
UCLA is among the universities that have guided students to Lionsgate. The school's Career Center, a resource for students seeking internships, said the company's program conforms to UCLA's standards. The Career Center staff reviews internship opportunities to make sure they comply with the federal guidelines.
For now, Lionsgate remains unscathed by Hollywood's internship quagmire. And the unpaid work is still viewed by some interns as the best way to get a foot in the door of a notoriously cutthroat business.
Indeed, the company said there are more than 25 former Lionsgate interns who later got full-time jobs there. Among those is Alanis, who was hired by Lionsgate as an executive assistant after graduating from college in 2012. Last year, he parlayed the job into a position at Whalerock Industries, a Santa Monica production company.
Galos, who interned at Lionsgate in 2011 while a student at Boston University, sees the benefits of the work. She recalled the internship in the company's TV department fondly — particularly the script coverage. She said that an executive once emailed her to say "how happy he was with the coverage."
Now an executive assistant at HBO, she says it's a message she returns to when the rigors of Hollywood prove daunting.
"I kept that email and I look at it sometimes when it isn't such a good day," she said.
Follow Daniel Miller @DanielNMillerCopyright © 2015, Los Angeles Times