'Cosmopolitan' Publisher Preserves Legal Victory Over Unpaid Internships

2012-38 BIZ Interns Illustration P IPAD

A few years ago, the future of unpaid internships in the entertainment and media industry looked to be endangered thanks to one ruling that Fox Searchlight had violated labor laws by not paying two interns on the 2010 smash Black Swan. But then, the 2nd Circuit Court of Appeals vacated that decision and came up with a new test that directed judges to examine whether the intern or the employer was the "primary beneficiary" of the relationship. On Friday, in a dispute over magazine interns at Hearst Corporation, the 2nd Circuit went even further by affirming that the application of the test could be handled without the necessity of a trial.

Like Eric Glatt and Alex Footman, who brought the case against Fox (before accepting a settlement), Xuedan Wang, Matthew Wagster, Erin Spencer, Alexandra Rappaport and Sarah Wheels challenged whether they were really employees during their internships and were entitled to minimum wage. They each had spent a few months at Hearst publications including Cosmopolitan and Harper's Bazaar. Later, they became the lead plaintiffs in a putative class action. The case has been running for more than five years.

In the Glatt case, the appeals court outlined various considerations when applying the new "primary beneficiary" test, including the extent to which the intern and the employer understood there was no expectation of compensation, the extent to which the internship provided training similar to what would be given in an educational environment, the extent to which the internship was tied to a formal education program and so forth.

After the Glatt decision, the district judge went about applying the test to the magazine interns and came to the conclusion they weren't really employees. On appeal, the ex-interns challenged the ruling. The appellants may have testified they had gained valuable knowledge and skills, particularly early during their internships, but they also described tasks that were menial and repetitive without supervision and guidance.

Second Circuit Judge Dennis Jacobs writes today's opinion (read here in full).

"The second factor (training) is at the heart of the dispute on appeal," he writes, noting that the interns want to "limit the discussion of beneficial training under the second factor to education that resembles university pedagogy to the exclusion of tasks that apply specific skills to the professional environment."

"Appellants’ interpretation ignores our instruction in Glatt that a key element of the intern relationship is 'the expectation of receiving educational or vocational benefits,'" Jacobs continues. "Glatt clearly contemplates that training opportunities offered to the intern include 'product[s] of experiences on the job.' ..The appellants’ tacit assumption is that professions, trades, and arts are or should be just like school; but many useful internships are designed to correct that impression."

Perhaps as important as the 2nd Circuit's revisit of its "primary beneficiary" test is the holding today that a judge can render a decision in these kinds of cases on summary judgment rather than having a jury decide such issues at trial. It's acknowledged in the decision that internship disputes involve a "fact specific" and case-by-case analysis, but nevertheless, matters of law like status as an "employee" can be resolved by the judge if there are no triable issues of fact.

"There are contested issues that bear on the quality of each intern’s experience," states the opinion. "The crucial point is that a district court may rule on summary judgment if it can weigh the Glatt factors on the basis of facts that are not in dispute. As the district court recognized, the internships 'involved varying amounts of rote work and could have been more ideally structured to maximize their educational potential,' but concluded that these critiques did not give rise to a material factual dispute."