MANHATTAN (CN) – Fox Searchlight no longer must face class action claims that it violated labor laws by improperly classifying employees as unpaid interns, the Second Circuit ruled Thursday.
Eric Glatt and Alexander Footman initiated the case in 2011, alleging that they never received pay or college credit for their work on the film “Black Swan.”
The class action accused Searchlight and its parent company, Fox Entertainment Group, of violating the Fair Labor Standards Act (FLSA) and New York Labor Law.
Eden Antalik, another unpaid intern who worked for Searchlight’s corporate offices in New York, filed a separate class action.
U.S. District Judge William Pauley later granted Glatt and Footman partial summary judgment after finding that they were indeed misclassified as interns.
The judge also certified Antalik’s class action alleging violations of New York Labor Law and conditionally certified a nationwide class.
A three-judge panel of the Second Circuit unanimously vacated nearly every aspect of those rulings today.
“The specific issue we face – when is an unpaid intern entitled to compensation as an employee under the FLSA? – is a matter of first impression in this circuit,” Judge John Walker wrote for the panel.
The interns believed that the question should turn on the standard in Walling v. Portland Terminal for determining whether the employers received an “immediate advantage” from their work.
In that 1947 case, the Supreme Court let a railroad company put workers through roughly a week of unpaid “practical training” that did not benefit the company.
The U.S. Department of Labor later created a six-point test based on Walling, and the department supported the Fox interns in their case.
The Second Circuit found today, however, that the interns, the department and the lower court all asked the wrong question.
“Instead, we agree with defendants that the proper question is whether the intern or the employer is the primary beneficiary of the relationship,” the 23-page opinion states.
Focusing on this issue “reflects a central feature of the modern internship – the relationship between the internship and the intern’s formal education,” the panel found.
On remand, Pauley may consider new evidence regarding whether Fox or the interns primarily benefited.
The new test created by the Second Circuit also proved fatal to Antalik’s class action cases.
“In sum, even if Antalik established that Fox had a policy of replacing paid employees with unpaid interns, it would not necessarily mean that every Fox intern was likely to prevail on her claim that she was an FLSA employee under the primary beneficiary test, the most important issue in each case,” the opinion states.
Rachel Bien, an attorney for the interns with Outten & Golden, said she is reviewing the decision and weighing her clients’ options.
Though “disappointed” with the ruling, Bien argued the holding was “good for workers.”
“Under the decision, there is no justification for failing to pay interns who are not in school,” Bien said in an email. “Even if an intern is in school, employers must be able to show that they are providing training that is closely tied to the intern’s academic work. Many of the most abusive internships involving low-level tasks and grunt-type work are plainly illegal under this standard. Those are the internships that these cases targeted, and we believe that the decision will lead many employers to reevaluate their unpaid intern policies.”
A Fox spokesperson said the company was “very pleased” with the ruling, but “the real winners are the students.”
“Fox has always been very proud of its internship programs and continues to believe they offer tremendous benefits to those who participate in them,” the spokesperson said.
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