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Glatt v. Fox Searchlight Pictures, Inc., No. 13-4478 (2d Cir. Jan. 25, 2016)

The Second Circuit yesterday filed an amended opinion in the Fox Searchlight Black Swan unpaid-intern case (a case filed by Outten & Golden). In response to a petition for rehearing, the panel upholds its original decision - vacating class certification and partial summary judgment for the class - yet made significant changes to its original reasoning that will enable unpaid-intern cases to proceed.

Glatt v. Fox Searchlight Pictures, Inc., No. 13-4478 (2d Cir. Jan. 25, 2016): The case was filed by former interns who worked as a production assistant and a bookkeeper on the Fox Searchlight film Black Swan. They allege that Fox Searchlight violated federal and New York labor laws by failing to pay them (and their fellow interns) minimum wage and overtime.

The district court held that Fox Searchlight's interns should be classified as "employees," who were covered by state and federal wage and hour laws and thus potentially owed back wages. It also held that plaintiffs met the requirements for class and collective certification of their wage claims.

In its first opinion, the Second Circuit vacated these orders. Applying Walling v. Portland Terminal Co., 330 U.S. 148 (1947) - the Supreme Court authority addressing unpaid trainees - and a U.S. Department of Labor guideline, the court held that "the proper question is whether the intern or the employer is the primary beneficiary of the relationship." It identified two "salient features" relevant to this primary-beneficiary inquiry:

"First, it focuses on what the intern receives in exchange for his work .... Second, it also accords courts the flexibility to examine the economic reality as it exists between the intern and the employer."

The panel then enunciated a seven-factor, "non‐exhaustive set of considerations" that should inform the primary-beneficiary examination. It also vacated and remanded class and collective certification on the ground that predominance was not demonstrated under Rule 23(b)(3).

In its amended opinion, the Second Circuit panel - while leaving its original decision intact - introduces some material alterations to its reasoning:

1. The panel identifies a third "salient feature" to the "primary beneficiary" examination: "it acknowledges that the intern‐employer relationship should not be analyzed in the same manner as the standard employer‐employee relationship because the intern enters into the relationship with the expectation of receiving educational or vocational benefits that are not necessarily expected with all forms of employment (though such benefits may be a product of experience on the job)."

2. It confirms that the intern inquiry is "context-specific," rather than "highly individualized." The language that the panel now uses focuses on the intern program as a whole, rather than the subjective experience of each intern.

3. It specifies that the court's reasoning is limited to bona-fide internship programs and "does not apply to training programs in other contexts."

4. Finally, it recognizes that unpaid-intern cases may be suitable for class or collective treatment. "[B]ecause the touchstone of this analysis the 'economic reality' of the relationship, ... a court may elect in certain cases, including cases that can proceed as collective actions, to consider evidence about an internship program as a whole rather than the experience of a specific intern." The panel likewise excises the holding from the original panel opinion that "courts must consider individual aspects of the intern's experience" in deciding whether a collective meets the primary-beneficiary test.

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