Judge Rules That Movie Studio Should Have Been Paying Interns

A Federal District Court judge in Manhattan ruled on Tuesday that Fox Searchlight Pictures had violated federal and New York minimum wage laws by not paying production interns, a case that could upend the long-held practice of the film industry and other businesses that rely heavily on unpaid internships.

In the decision, Judge William H. Pauley III ruled that Fox Searchlight should have paid two interns on the movie “Black Swan,” because they were essentially regular employees.

The judge noted that these internships did not foster an educational environment and that the studio received the benefits of the work. The case could have broad implications. Young people have flocked to internships, especially against the backdrop of a weak job market.

Employment experts estimate that undergraduates work in more than one million internships a year, an estimated half of which are unpaid, according to Intern Bridge, a research firm.

“Employers have already started to take a hard look at their internship programs,” said Rachel Bien, a lawyer for the plaintiffs. “I think this decision will go far to discourage private companies from having unpaid internship programs.”

Chris Petrikin, a spokesman for 20th Century Fox, said: “We are very disappointed with the court’s rulings. We believe they are erroneous, and will seek to have them reversed.”

Eric Glatt and Alexander Footman, production interns on “Black Swan,” sued Fox Searchlight in September 2011. In the suit, Mr. Glatt and Mr. Footman said they did basic chores, usually undertaken by paid employees. Like their counterparts in other industries, the interns took lunch orders, answered phones, arranged other employees’ travel plans, tracked purchase orders, took out the trash and assembled office furniture.

“I’m absolutely thrilled,” said Mr. Glatt, who has an M.B.A. from Case Western Reserve University. “I hope that this sends a very loud and clear message to employers and to students doing these internships, and to the colleges that are cooperating in creating this large pool of free labor — for most for-profit employers, this is illegal. It shouldn’t be up to the least powerful person in the arrangement to have to bring a lawsuit to stop this.”

In the ruling, the judge said unpaid internships should be allowed only in very limited circumstances.

Judge Pauley rejected the argument made by many companies to adopt a “primary benefit test” to determine whether an intern should be paid, specifically whether “the internship’s benefits to the intern outweigh the benefits to the engaging entity.” Judge Pauley wrote that such a test would be too subjective and unpredictable.

Instead, the judge forcefully called for following criteria that the Department of Labor has laid out for unpaid internships. Those rules say unpaid internships should not be to the immediate advantage of the employer, the work must be similar to vocational training given in an educational environment, the experience must be for the benefit of the intern and the intern’s work must not displace that of regular employees.

Some employers have asserted that they have free rein not to pay interns as long as the interns are receiving college credit. But Judge Pauley said receiving academic credit was of little importance in determining whether interns should be paid.

“Undoubtedly Mr. Glatt and Mr. Footman received some benefits from their internships, such as résumé listings, job references and an understanding of how a production office works,” Judge Pauley wrote. “But those benefits were incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them.” Judge Pauley added that “Searchlight received the benefits of their unpaid work, which otherwise would have required paid employees.”

The “Black Swan” case was the first in a series of lawsuits filed by unpaid interns.

In February 2012, a former Harper’s Bazaar intern sued Hearst Magazines, asserting that she regularly worked 40 to 55 hours a week without being paid. Last July, a federal court ruled that the plaintiff could proceed with her lawsuit as a collective action, certifying a class of all unpaid interns who worked in the company’s magazines division since February 2009. This February, an unpaid intern sued Elite Model Management, seeking $50 million.

After a lawsuit brought by unpaid interns, Charlie Rose and his production company announced last December that they would pay back wages to as many as 189 interns. The settlement called for many of the interns to receive about $1,100 each — amounting to roughly $110 a week in back pay, for a maximum of 10 weeks, the approximate length of a school semester.

As part of his ruling on Tuesday, Judge Pauley also granted class certification to a group of unpaid interns in New York who worked in several divisions of the Fox Entertainment Group.