Hollywood intern case dealt setback by federal appeals court

Unpaid internships have long been a fixture of Hollywood, as much a part of show business as lavish Oscar parties, expense account lunches and prima donna actors.

In exchange for a foot in the industry's exceedingly narrow door, these uncompensated workers routinely perform a variety of menial tasks: fetching lattes, reading scripts and even topping off their bosses' gas tanks.

But in recent years, the legality of this practice has been under assault. Now, a lawsuit challenging unpaid internship programs — one that led to a wave of similar cases and may have pushed some companies to begin paying these minions — has been dealt a major blow.

On Thursday, the U.S. 2nd Circuit Court of Appeals in New York vacated a federal judge's 2013 ruling in favor of unpaid interns on a Fox Searchlight Pictures film. The decision could have a chilling effect on unpaid internship lawsuits, legal experts say.

Eric Glatt and Alex Footman, two interns who worked on Fox Searchlight's “Black Swan,” sued the company in 2011, alleging it violated minimum wage laws during the making of the Darren Aronofsky drama.

Their case drew national attention but was mocked by other Hollywood aspirants and some media pundits, including CNN's Anderson Cooper. Still, after Glatt and Footman filed their lawsuit, similar cases were brought against the likes of NBCUniversal, Viacom, Warner Music Group and Condé Nast. Each of those companies reached multimillion-dollar settlements with their former workers. Those companies now pay their interns, or have done away with their programs altogether.

Fox Searchlight, on the other hand, fought the lawsuit brought by Glatt and Footman.

The former interns alleged that Fox Searchlight violated the Fair Labor Standards Act by not paying them for their work. They sought back pay and damages for themselves and an unspecified number of other workers.

U.S. District Judge William Pauley sided with the interns in June 2013, concluding in a summary judgment that “Searchlight received the benefits of [the interns'] unpaid work, which otherwise would have required paid employees.”

Pauley's ruling cited the Department of Labor's six legal criteria for unpaid internships. 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.” The intern, furthermore, should not “displace regular employees.”

But on Thursday, 2nd Circuit Judge John Walker asserted the six criteria are “too rigid” to apply in this case. Instead, he said a different standard should apply. “The proper question is whether the intern or the employer is the primary beneficiary of the relationship,” he wrote.

The defendants — Fox Searchlight and Fox Entertainment Group — had argued that the court should adopt the so-called primary beneficiary test, and Walker agreed.

He enumerated a revised list of considerations for a legal unpaid internship, including a stipulation that the intern's work be tied to his or her “formal education program by integrated coursework or the receipt of academic credit.”

Walker also vacated a class certification that Pauley had granted in his 2013 ruling.

The case has been remanded to district court. Glatt said in an email that he and his attorneys are “considering our legal options.”

Loyola Law School professor Jay Dougherty said the ruling could dissuade some attorneys from bringing similar cases because “it might make it more difficult to prevail.”

“The 2nd Circuit decision is likely to be influential on other courts, but it is not binding on them,” said Dougherty, director of Loyola's Entertainment & Media Law Institute.

A spokesman for 20th Century Fox, a sister company of Fox Searchlight, praised the court's ruling in a statement, saying that “the real winners are students.”

Nonetheless, Glatt said that in his interpretation of Walker's decision, “Fox Searchlight remains responsible for the wages we are owed.”

“Among other things, the decision suggests a presumption that interns are enrolled in an integrated educational program,” he said. “My work on ‘Black Swan' was nothing of the sort, nor was it for my co-plaintiff, Alex Footman.”

Glatt, 45, had signed on as an intern for the New York-based production of “Black Swan” after giving up a desk job at an insurance company to pursue his dream of becoming a film editor. Glatt told The Times last year that his “Black Swan” responsibilities including running errands for director Aronofsky, and in one instance he walked nearly a mile through Brooklyn to a Macy's, where he bought a hypoallergenic pillow requested by the filmmaker.

Despite the legal setback, Glatt, a recent graduate of Georgetown University Law Center, believes his lawsuit led to positive changes in the industry. Many large Hollywood companies, including Fox Searchlight and 20th Century Fox, now pay their interns. Last fall, Lionsgate, which long operated an unpaid internship program, switched to a paid program. With that change, each of the seven major film studios now pays its interns.

It is not clear how many Hollywood companies still forgo paying their interns — the Department of Labor does not track internships — but anecdotal evidence suggests that many small firms continue to operate unpaid programs. Aspiring movie producer and writer Ryan Stayton, who had four unpaid internships from 2013 to 2014, said that the practice of not paying interns remains in place.

“It is very much alive at smaller production companies,” he said. “I feel strongly that internships should be paid.”

However, Stayton, 37, noted that one of those four internships he recently held led to his current job at Sean Daniel Co., a production company behind the recent movie “Best Man Holiday,” among others.

“It was a hell of a patience game,” said Stayton, who now works as an executive assistant. “I am very pleased with how it worked out. The timing and the effort I would speak less positively about. But without question, the internship is what directly got me this job.”

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Copyright © 2016, Los Angeles Times

UPDATE

5:46 p.m.: This article is updated with changes throughout.

This article was first published at 12:18 p.m.

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