Unpaid internships have long been a path of opportunity for students and recent grads looking to get a foot in the door in the entertainment, publishing and other industries, even if it takes a generous subsidy from Mom and Dad.
But those days of working for free could be numbered after a federal judge in Manhattan ruled this week that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns who worked on production of the 2010 movie "Black Swan."
The decision by U.S. District Judge William H. Pauley III may lead some companies to rethink whether it's worth the legal risk to hire interns to work without pay. For many young people struggling to find jobs in a tough economy, unpaid internships have become a rite of passage essential for peddling resumes and gaining practical experience.
"I'm sure this is causing a lot of discussions to be held in human resource offices and internship programs across the country," said David Yamada, professor of law at Suffolk University in Boston.
There are up to 1 million unpaid internships offered in the United States every year, said Ross Eisenbrey, vice president of the Economic Policy Institute, a liberal-leaning think tank. He said the number of internships has grown, and he blamed them for exploiting young workers and driving down wages.
"The return on a college investment has fallen, students are facing higher and higher debt burdens, and the reaction of employers is to make matters worse for them by hiring more and more people without paying them," Eisenbrey said.
In the ruling, Pauley said Fox should have paid the two interns because they did the same work as regular employees, provided value to the company and performed low-level tasks needing no specialized training.
The judge followed a six-part test outlined by the Labor Department for determining whether an internship can be unpaid. Under the test, the internship must be similar to an educational environment, run primarily for the benefit of the intern as opposed to the employer, and the intern's work should not replace that of regular employees.
The interns, Eric Glatt and Alexander Footman, performed basic administrative work such as organizing filing cabinets, tracking purchase orders, making copies, drafting cover letters and running errands.
"Undoubtedly Mr. Glatt and Mr. Footman received some benefits from their internships, such as resume listings, job references and an understanding of how a production office works," 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."
Chris Petrikin, a spokesman for 20th Century Fox, said the company believes the ruling was erroneous and plans to appeal. Fox had argued that the interns received a greater benefit than the company in the form of job references, resume listings and experience working at a production office.
Juno Turner, an attorney for the plaintiffs, said it was the first time a court had given employee status to young people doing duties commonly associated with interns. The case is one of several that have been filed in recent years demanding that all interns deserve a salary.
In another lawsuit filed Thursday, two former interns who worked at W Magazine and The New Yorker sued parent company Condé Nast Publications for allegedly failing to pay them the minimum wage. Condé Nast spokesman Joe Libonati said the company's policy was not to comment on pending litigation.