Simon and Schuster, Tommy Hilfiger, and Fendi were all hit withlawsuits last week in New York state court over unpaid internships.

Publishing house Simon and Schuster and designer Fendi are accused of violating labor laws from at least January 2009 and clothing company Tommy Hilfiger is accused of the same from at least February 2009 for misclassifying their interns as exempt from earning a minimum wage.

The complaints allege that the companies would have had to hire paid employees or required existing staff to work longer hours in lieu of hiring unpaid interns. The attorneys for the unpaid interns—also representing unpaid interns from CBS Corp., Rolling Stone, Lacoste, and The House of Z in a lawsuit filed in January—are asking for backpay and attorney’s fees.

The company of note here for the book publishing industry is, of course, Simon and Schuster, being the first publishing house to be subject to an unpaid internship lawsuit.

Law 360 reports that Simon and Schuster intern “Diana Bruk claims she provided unpaid work to the company from September 2009 through May 2010, making photocopies, printing press releases, stapling and performing other administrative duties for about 20 hours per week.”

As a former legal intern at three book publishers and a literary agency, it pains me to say anything negative about the industry that has helped me acknowledge my career goal, but this is a long time coming.

Undoubtedly, many interns are given substantive tasks, such as editing manuscripts, assisting in creating publicity and marketing strategies, and designing cover art. However, there are also some interns, as Bruk alleges was the case with her experience, who are busy the majority of the time making copies and completing administrative duties.

Factor in not receiving a paycheck, and what happens?  Interns may become confused, dismayed, or worst of all start to rethink career paths. I would hate to see many talented future publishing industry employees change career paths before they even begin. Some interns, like Bruk, have no incentive to go to work because not only do they feel that they’re reduced to secretaries and aren’t learning anything, but they’re not getting paid.  Who would blame them?

The reason for paying interns is simple:  interns will feel more valued and can produce a better work product. Even if an intern is assigned to scan documents all week long, he or she will feel like he or she has contributed to the company when a paycheck is deposited into his or her account.  Without pay, some interns feel like they have no value.

Unpaid interns fighting for a chance, via the legal system, to feel valued seems to be becoming a trend. Given that last October and November, Conde Nast and NBCUniversal settled unpaid internship lawsuits for $5.85 million and $6.4 million respectively, I suspect that we will continue to hear about more settlements for unpaid interns in years to come. Perhaps until a standard is created regarding intern compensation, media companies will continue to face the challenge of providing interns with tasks to enhance their professional development or offering them monetary compensation for completing tasks that are more administrative in nature and don’t directly bolster their understanding of the field.

Joseph Perry

Joseph Perry is a graduate of St. John’s University School of Law whose goal is to become a publishing and media law attorney. He has interned at William Morris Endeavor, Rodale, Inc., Columbia University Press, and is currently interning at Hachette Book Group and volunteering at the Media Law Resource Center, which has given him insight into the legal aspects of the publishing and media industries. Contact Joe at staff@LawStreetMedia.com.

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Last week, Federal Judge Denise Cote approved a class action settlement agreement in which Apple may begin paying $400 million dollars to as many as 23 million consumers. The suit regarded antitrust law violations that it committed when it conspired to raise e-book prices with book publishers.

According to Publishers Weekly, the settlement terms are as follows:

Apple will pay $400 million to consumers only if the liability finding survives the appeal process; it will pay $50 million if the liability question is vacated or remanded for further proceedings. If the liability finding is reversed on appeal, Apple will pay nothing.

The actions that precipitated the lawsuit started a few years ago. Before 2010, the big-6 publishers (now the big-5 publishers since the Penguin-Random House merger) used the wholesale model to sell e-books. Under the wholesale model, publishers recommended a retail price to a wholesaler and sold the book to the wholesaler for a certain percentage off the publisher’s recommended retail price. The wholesaler then sold the book to the retailer, who set its own e-book prices. For example, a publisher could set a recommended retail price for a book of $15.99, sell the book to the wholesaler for a fifty percent discount of $7.99, and the retailer could then sell the book at $10.99.

Amazon then began selling e-books at $9.99, and publishers initially had trouble competing. In 2010, Apple convinced the big-6 publishers to change business models, and the publishers entered into the agency model. Under the agency model, publishers set the retail price  of an e-book and use retailers as agents to sell the e-book. The retailer then receives thirty percent of the sales price of the e-book, and the publisher receives the remaining seventy percent. For example, a publisher can set a retail e-book price at $15.99, and the retailer must sell the e-book at $15.99; however, the retailer receives thirty percent of the sales price, and the publisher receives the remaining seventy percent.

The Department of Justice soon accused five of the big-6 publishers and Apple of fixing e-book prices to thwart Amazon’s $9.99 e-book price, and the publishers and Apple were later found guilty of violating the Sherman Act. Penguin, Hachette Book Group, Macmillan, HarperCollins, and Simon and Schuster paid $75 million, $31 million, $25 million, $19 million, and $17 million in damages respectively to e-book consumers, for a grand total of roughly $167 million in damages.

The potential $400 million class action settlement with Apple is in addition to the $167 million paid in damages by the publishers, so all eyes in the publishing industry will be focused on the Second Circuit on when it hears Apple’s appeal on December 15..

This class action settlement comes at an interesting time in the book publishing industry.  As part of the original DOJ antitrust settlement, Hachette, HarperCollins, and Simon Schuster ended their contracts with e-book retailers like Amazon and allowed retailers to renegotiate the contracts. Moreover, the settlement allowed retailers to return to the wholesale model, and the three publishers also agreed to not interfere with price discounts for two years. Now, Hachette and Simon and Schuster have entered into separate agreements with Amazon concerning e-book prices.

Apple and the publishers are undoubtedly hoping for a reversal, but I don’t think that is likely.  We will just have to see what happens.

Joseph Perry

Joseph Perry is a graduate of St. John’s University School of Law whose goal is to become a publishing and media law attorney. He has interned at William Morris Endeavor, Rodale, Inc., Columbia University Press, and is currently interning at Hachette Book Group and volunteering at the Media Law Resource Center, which has given him insight into the legal aspects of the publishing and media industries. Contact Joe at staff@LawStreetMedia.com.

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