image: 20th Century Fox

image: 20th Century Fox

One of the more striking clashes over the past several years has centered on the unpaid fashion internship. Established industry figures – whether it be Louis Vuitton’s Nicolas Ghesquiere, Haider Ackermann or Alice + Olivia founder Stacey Bendet, just a few – have spoken out about the merit of such opportunities. WWD’s Bridget Foley took one of the strongest stances in a 2014 article, entitled, Condé Interns — Extinction by Entitlement?, in which she wrote: “All [interns] came and stayed of their own free will. Working from that free-will premise, these lawsuits were ridiculous and disingenuous.” And “at the risk of sounding 110 years old,” she continued, the recent unpaid internship lawsuits “strike me as episodes in Millennial self-absorption and entitlement. 

The flip side of the debate – which many of the individuals who filed class action lawsuits against brands cited – is the argument that unpaid internships serve to further limit job opportunities within the fashion industry to the more well-to-do individuals. In accordance with this argument, it is only these fortunate few that can really afford to work in an uncompensated capacity in order to gain experience, connections, and an addition line on their resumes.

Two recent developments present an unfavorable outcome for the individuals in this latter camp. First up: The decision from the U.S. Circuit Court of Appeals for the Second Circuit, which held that Hearst Communications’ unpaid internship program is perfectly legal. The court’s ruling comes six years after former Harper’s Bazaar intern Xuedan “Diana” Wang filed suit, alleging that Hearst “systemically” exploited eager young students by getting them do entry-level work for free by labeling them as “interns.”

Wang v. Hearst

According to Wang’s complaint, which was filed in December 2011 in federal court in New York and spawned at least a dozen other similar lawsuits, she and up to 3,000 other former interns for Hearst’s various publications, which include, Elle, Marie Claire, Cosmo, and Seventeen, were actually entry-level employees, but were classified as interns, and thus, were denied both minimum wage and overtime payment in violation of the Fair Labor Standards Act, as well as New York state law.

The Second Circuit – in considering whether Wang and co. were interns or entry-level employees – looked to the test that was established in Glatt v. Fox Searchlight Pictures Inc., another unpaid internship case, which centers on whether the intern or the employer was the “primary beneficiary” of the so-called internship relationship. 

In holding that the plaintiffs were, in fact, interns and not entry-level employees, the Second Circuit’s panel of judges specifically noted that it was made clear in advance that Hearst’s internships did not entail monetary compensation, that the internships provided training similar to what would be given in an educational environment, that such internships were tied to a formal education program, and that each of the plaintiffs “had an academic or aspiring professional connection to fashion,” which was at the core of their internships. 

The Department of Labor Standard

This decision was swiftly followed up by action taken behalf of the U.S. Department of Labor (“DOL”), which serves to further reiterate that unpaid internships may be perfectly legal, regardless of whether the interns like it or not. This month, the DOL introduced new guidelines by way of “Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.”

The new guidelines largely coincide with the ruling in the Hearst case, as they set forth the same “primary beneficiary” test, under which an individual will be deemed an intern (as opposed to an entry-level employee that must be paid minimum wage and overtime pay, when applicable), if his/her internship meets at least some of the seven factors. These factors include:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL’s fact sheet states that “courts have described the ‘primary beneficiary test’ as a flexible test, and so, no single factor is determinative.” With that in mind, “whether an intern or student is an employee under the [Fair Labor Standards Act] necessarily depends on the unique circumstances of each case.”

As noted by Bloomberg, at least “some labor advocates worry that under the new guidelines a company can justify any [internship] program, no matter how basic, as benefiting the intern.” For instance, Patricia Smith, senior council at the National Employment Law Project, told the publication: “You could say working in the industry, even if you’re doing relatively mundane tasks, gives you some knowledge of how the industry works.”

While no shortage of brands and publications have started paying their interns, especially in light of the widespread filing of internship-related laws, when taken together, these developments likely do not bode well for a revamp of fashion’s pattern of offering unpaid internships for any brands/publications that may be holding out.