The End of the Unpaid Internship

The law, lawyers, and the court.
June 18 2013 10:54 AM

The End of the Unpaid Internship

The judge who said interns should be paid is right.

Natalie Portman as Nina in Black Swan.
Natalie Portman in Black Swan. Judge William H. Pauley III ruled that interns on two film production crews,including one from the Academy Award winning Black Swan, were employees entitled to payment with actual money.

Photo by Niko Tavernise

Summer brings an annual invasion, in nearly every line of work, of shiny new interns. They're eager to fill out résumés and make contacts. That’s what they get instead of money—and so they save their employers about $600 million every year, according to Ross Perlin in his book Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy. That’s why the free intern bonanza continues despite plenty of complaints that it frequently means breaking the law.

Last week, in Glatt v. Fox Searchlight Pictures, a federal judge in New York broke up the party. Judge William H. Pauley III ruled that interns on two film production crews, including one from the Academy Award winning Black Swan, were employees entitled to payment with actual money. By not paying the interns, their employers violated the Fair Labor Standards Act.

Judge Pauley got it right. Much too often interns do work that people ought to earn money doing. The benefits of the intern economy don’t outweigh the pernicious costs: distorted wages, exploitation of interns, a race to the bottom of the wage scale, and an erosion of the law's protections for workers.

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The Glatt case exposed how many interns don't meet the "trainee" exception to the general rule that all workers must be paid for their work. Judge Pauley made clear that to qualify as a trainee, an intern has to receive training similar to what would’ve been provided in an educational facility and must do work primarily for his or her own benefit, not the employer's. Also, the intern's work shouldn't be the sort of thing the business would have otherwise had to hire someone to do. The work the Black Swan intern did (getting lunch, filing, running errands, making deliveries) didn’t cut it. About résumé fodder and networking, the judge said: meh. Those are benefits that paid workers get, too.

But wait a minute, you might say: These interns weren’t tricked. They knew the deal when they signed on and agreed—and perhaps competed—to work for free. But as Judge Pauley pointed out, the Fair Labor Standards Act “does not allow employees to waive their entitlement to wages." That’s how the law prevents unpaid interns from exerting "a general downward pressure on wages in competing businesses."

This sort of intrusion in the marketplace is precisely what government should do to regulate commerce.  Markets are enormously efficient allocators of resources. But an unregulated market that permits employers to take work for free, and workers to give it, has a dramatic, and unfair, effect.

There are three actors in this drama: employers (who want low labor costs), interns (who will work for free), and workers who need money. Traditionally, employers and interns have joined forces, effectively, to the economic disadvantage of workers. Because of interns, paid entry-level work is scarcer, and some workers lose out. The ones who can't afford to work for free lose out on the training and networking that unpaid interns enjoy. Judge Pauley said that isn't fair and it isn't legal.

This is just one ruling by one U.S. District Court judge, which means it doesn’t apply outside of the Southern District of New York. But the Southern District is one of the nation's most prominent courts and Judge Pauley's reasoning is pretty compelling.  The Fair Labor Standards Act can require double damages, and it permits winning plaintiffs to recover their attorney fees. Smart employers with internship programs should look long and hard to make sure they’re really treating their interns as trainees. Already lawsuits against Hearst and Condé Nast allege they haven’t paid their interns the wages they are due. Even where interns got a modest payment, as claimed in the Condé Nast case—in which interns at The New Yorker and W Magazine say they were paid less than $1 an hour— they can say they’re owed because they were paid less than the minimum wage.

It's no small irony that the case that could stem the tide of free interns arose from a movie that takes its inspiration from Swan Lake, which centers on a trick and betrayal. Too many internships are tricks played on workers and markets, pretending to be about learning but actually being about running the Xerox and fetching coffee.  One hallmark of real work is getting paid for it. Employers and interns everywhere should take the lessons of the Black Swan case to heart.

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