Media Companies: Who's Vulnerable As Intern Lawsuits Snowball?

Thousands of the Emboldened and Disgruntled are Potentially Eligible to Sue

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Media companies alarmed by the spate of lawsuits by former interns can expect more of the same soon, according to experts in labor law.

Hearst is just one media company facing a lawsuit.
Hearst is just one media company facing a lawsuit. Credit: OptimumPx/Wikipedia

A judge's ruling on June 11 that Fox Searchlight violated minimum wage laws by not paying interns is likely to embolden other potential plaintiffs. They had been gathering anyway, filing new lawsuits against Conde Nast on June 14 and Gawker Media on June 21, alleging that each company had violated laws by failing to pay minimum wage.

The statute of limitations in New York for cases involving wage and labor issues is six years, legal experts said, meaning thousands of former interns could potentially bring suits or join class actions against their former employers.

"Kids are now opening their eyes," said Ellen Kearns, a partner at Constangy, Brooks and Smith and editor-in-chief of Bloomberg BNA's guide to The Fair Labor Standards Act. Ms. Kearns represents employers but said she is not involved in any of the current cases. "It's going to cause a chilling effect on employers to have unpaid interns. Any media company that has taken on unpaid interns in the last six years could face a lawsuit."

Fox Searchlight has already appealed. "We are very disappointed with the Court's rulings," a spokeswoman for parent company Twentieth Century Fox said. "We believe they are erroneous, and will seek to have them reversed by the 2nd Circuit as quickly as possible."

Fox is arguing in part that the plaintiffs should not have been granted class action status. A judge recently sided with Hearst Corp. on that question in its own internship battle, which began last year, refusing to certify the case for class action.

Beyond media companies
The battle over unpaid internships isn't limited to media companies, of course. Fields including sports, entertainment and even the law itself are all seeing growing suits from plaintiffs, who are coming armed with a 2010 fact sheet from the Department of Labor that spells out six criteria for a legal unpaid internship. It requires, among other things, that interns don't displace regular employees, that the experience is for the benefit of the intern and that the employer gets no immediate advantage from the intern.

The media business, however, has long been a high-profile source of unpaid internships -- which often seem like the only way to break into a somewhat glamorous field. Now it is a focus for litigation. One of the former interns who sued Conde Nast compared her plight to Anne Hathaway's character in "The Devil Wears Prada."

Conde Nast declined to comment for this story.

Many of the internship programs at print and digital-media companies do pay. Time Inc., the publisher of magazines such as People and Sports Illustrated, pays "well above minimum wage," a spokeswoman said. Business publications such as Forbes and Bloomberg Businessweek offer some of the highest wages for interns.

Gawker Media now pays its interns at least minimum wage, CEO Nick Denton said in an online chat. He did not answer a question about how long that has been the case.

"I'm proud of all the interns who have gone on to do great things, from Mary Pilon of The New York Times to Scott Kidder, now head of Gawker Media operations," Mr. Denton said. "We've always recognized talent over seniority -- and will continue to do so in any way the law allows."

Companies that failed to pay their interns at least minimum wage in the last six years, even many of the ones that offered college credit, now look vulnerable, attorneys say. Charlie Rose's production company agreed last December to pay back wages to former interns rather than continue fighting their suit. The judge in the Fox Searchlight case said that college credit should not be a determining factor as to the legality of an unpaid internship, pointing instead to the six criteria from the Department of Labor.

Very few unpaid internships hold up against these standards, said Tim Van Dyck, co-chair of the labor and employment group at Edwards Wildman. Paying a stipend below minimum wage or cutting a check afterward is not likely to hold up, according to Mr. Van Dyck, who represents employers. Calling an unpaid internship a fellowship program won't work either, he added.

"I counsel most of my clients not to have unpaid internships," Mr. Van Dyck said.

In many ways, unpaid internship programs have become a rite of passage in the media world, and a step on the way to many successful careers. Mary Pilon, the success story cited by Mr. Denton, actually held several internships while studying journalism at New York University, including a completely unpaid internship at a daily newspaper. "I loved it," she said. "I made it work with the understanding that it was temporary."

That led to Ms. Pilon's Gawker internship, which paid her per post from 2006 to 2008. But she does not support unpaid internships on the whole. "I'm an advocate for getting paid for the work you're doing," she said. "When you're not paying interns you're excluding people and that hurts newsrooms in the long run."

A $2-billion-a-year savings?
Opponents of unpaid internships say they've replaced entry-level positions at media companies. At Hearst, unpaid interns and paid assistants perform many of the same tasks, court documents allege. Neither Hearst nor its law firm Proskauer and Rose responded to requests for comment.

They also restrict entry-level opportunities to people who can afford to work for free, attorneys for the plaintiffs say. "It's not fair that a good portion of the population can't afford to have an unpaid internship," said Sally Abrahamson, associate at Outten and Golden, the firm representing plaintiffs in the Hearst, Conde Nast and Fox Searchlight Pictures cases.

Unpaid internships save companies at least $2 billion a year, said Ross Perlin, author of the book "Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy." Their use has helped to produce a cottage industry of firms that place young people in internships for a steep fee, as well as led to a glut of unemployed or underemployed college graduates whose resumes are studded with internships.

A report out Thursday from the New York Federal Reserve showed that underemployment rates among recent college graduates is reaching 45%. The same report said that student loan debt nearly tripled between 2004 and 2012.

"My strong suspicious is that there is a much larger pool of unpaid interns now than was the case 10 or 15 years ago," Mr. Van Dyck said. "I credit that to the economy."

A larger crop of unpaid interns and diminished prospects for real employment may be combining to encourage the new wave of suits. Only a few years ago, an intern suing a former employer was nearly unthinkable, tantamount to career suicide.

Steven Kotok, CEO at The Week and Mental Floss magazines, hopes the unpaid internship model ends. "When I see this kind of system that gives access to the publishing world to people with other means of support, it has me rooting that the system would end and everyone would have a fair shot, whether or not they have other financial support," he said.