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Beware of Black Swans
10/07/2011

Europeans in the Middle Ages came up with the colloquialism “rare as a black swan” to describe impossibility, because they knew good and well that all swans are white.  Then Dutch explorer Willem de Vlamingh discovered black swans in Australia in 1697.  Oops.  After that the term “black swan” was used to describe a perceived impossibility that might later be proved possible.             

Philosopher Nassim Nicholas Taleb expanded on this idea and developed it into a theory, which he described in his 2007 bestselling book, The Black Swan: The Impact of the Highly Improbable.  A black swan, as described by Taleb, is an unexpected, high-impact event that comes as a surprise to the observer, but which the observer rationalizes afterwards as if it could have been expected.  World War I, the Internet, and the September 11 terrorist attacks are classic examples of black swan events, according to Taleb.
 
Taleb cautions that businesses need to be prepared for black swan events.  He wrote in 2007 that banks and trading firms had exposed themselves to massive losses beyond the predictions of their limited, and thus defective, models.  The events of 2008 seem to have proven him right.  
 
“Black Swan,” the movie, is a 2010 psychological thriller starring Natalie Portman as a ballet dancer in a production of “Swan Lake.”  The film received critical praise, including several Academy Award nominations, and Portman won the Best Actress Oscar for her performance.
 
Last week two unpaid interns who worked on the movie “Black Swan” sued Fox Searchlight Pictures, the company that produced the movie.  The class action lawsuit alleges that the production company violated minimum wage and overtime laws by hiring, but not paying, dozens of interns who worked on the film, as well as hundreds of others in other productions.
 
“Fox Searchlight’s unpaid interns are a crucial labor force on its production, functioning as production assistants and bookkeepers and performing secretarial and janitorial work,” according to the lawsuit.  “In misclassifying many of its workers as unpaid interns, Fox Searchlight has denied them the benefits that the law affords to employees.” 
 
From the production company’s perspective, the “Black Swan” lawsuit is a black swan event—it never saw it coming.  Movie companies routinely use unpaid interns in this capacity.  These internships are highly coveted, they say, and provide education and an opportunity to break into the industry.
 
But, like any black swan event, when viewed with the benefit of hindsight, the lawsuit seemed almost inevitable.  The Department of Labor has specific rules for unpaid internships and training programs.  To avoid wage and hour law obligations, the program must meet the following criteria: (1) the internship is similar to training given in an educational environment; (2) the experience is for the benefit of the intern; (3) the intern does not displace regular employees, but works under close supervision of existing staff; (4) the employer does not derive an immediate advantage from the intern’s activities; (5) the intern is not necessarily entitled to a job after finishing the internship; and (6) the employer and intern agree the intern is not entitled to wages.  Movie company internships, as described in the lawsuit, do not appear to meet these requirements.  But the industry practice of utilizing unpaid interns is nevertheless prevalent.  The lawyer for the “Black Swan” interns promises that this is only the first of several lawsuits targeting these internships.          
 
What potential black swan events might impact your workplace?  And what do you need to do to prepare for them?
 
Remember that a black swan event depends on the perspective of the observer.  Thus, according to Taleb, what may be a black swan surprise for a turkey is not a black swan to the butcher.  The point?  You may need to change your perspective, or seek guidance from someone else who has a different or more-complete perspective, to identify your areas of vulnerability, and thus avoid being the turkey.
 


Editors
Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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