Appeals Court Deals Setback to Unpaid Interns in Compensation Case

A federal appeals court has dealt a setback to unpaid interns who had sued a movie studio over their compensation, The New York Times reported.

In 2013 a federal judge concluded that two former unpaid interns who had sued Fox Searchlight Pictures should have been classified as paid workers, and allowed the claims of another intern to move forward as a class action. Colleges have sometimes drawn criticism for their role in facilitating such unpaid internships, and have asked the courts to defer to them on determining the educational value of such work.

A unanimous three-judge panel of the U.S. Court of Appeals for the Second Circuit voided the lower court’s findings in a ruling issued last week. Judge John M. Walker Jr. suggested in the decision that guidance issued by the U.S. Department of Labor in 2010 to help determine when interns at for-profit companies can work without pay was outdated, and did not reflect the role that internships play in the modern economy.

He wrote that the proper question was “whether the intern or the employer is the primary beneficiary of the relationship,” and proposed a set of factors — such as the extent to which an internship is tied to one’s formal education — for courts to consider when weighing disputes over such work. The ruling sent the case back to the lower court for further proceedings.

A Fox spokesman said that the company was pleased with the decision. A lawyer for two of the plaintiffs told the newspaper it was a good sign that the court had focused on ensuring that internships provide “robust” training, but said she was concerned that factors cited by the court were disconnected from the Fair Labor Standard Act’s definition of an employee.