The Current Landscape in FLSA Unpaid Intern Litigation - Law Firms Ready to Pounce
PattonBoggs.com Employment Law Client Alert 1JUNE 19, 2013This Alert provides only generalinformation and should not berelied upon as legal advice. ThisAlert may be considered attorneyadvertising under court and barrules in certain jurisdictions.For more information, contact yourPatton Boggs LLP attorney or theauthors listed below.NIGEL WILKINSONnwilkinson@pattonboggs.comJOSHUA DRIANjdrian@pattonboggs.comABU DHABIANCHORAGEDALLASDENVERDOHADUBAINEW JERSEYNEW YORKRIYADHWASHINGTON DCEMPLOYMENT LAW CLIENT ALERTTHE CURRENT LANDSCAPE IN FLSAUNPAID INTERN LITIGATION – LAWFIRMS READY TO POUNCEEvery summer, unpaid interns arrive at various businesses throughout the countryto learn a little bit about the real world before going back to school or diving intothe job market. But this summer, it is one federal court in New York that hasmade the biggest splash in the unpaid intern world.On June 11, 2013, Judge William Pauley of the United States District Court forthe Southern District of New York issued an opinion in Glatt v. Fox SearchlightPictures, Inc. holding that two individuals working on the set of the film Black Swanhad been improperly classified as unpaid interns. As a result, both individualswere entitled to wages under the Fair Labor Standards Act (“FLSA”) and its NewYork equivalent.1 Using the six criteria set out in an April 2010 U.S. Departmentof Labor fact sheet on internship programs under the FLSA as a guide,2 the courtfound that the interns worked “as paid employees work,” providing an immediateadvantage to their employers and receiving nothing approximating the educationavailable in an academic setting or vocational school. Moreover, the benefits theinterns did receive – such as knowledge of how a production or accounting officeworks or references for future jobs – were gained by “simply having worked asany other employee works.” In this situation, the internships were not designed tobenefit the interns or to be “uniquely educational,” but instead required theinterns to perform “routine tasks that would otherwise have been performed byregular employees.” Therefore, the interns’ positions did not fall within the“narrow ‘trainee’ exception to the FLSA’s broad coverage,” and these“employees” were entitled to wages just like any other staff.1 Civil Action No. 11 Civ. 6784 (WHP) (AJP)2 U.S. Department of Labor Fact Sheet #71, available at http://www.dol.gov/whd/regs/compliance/whdfs71.pdf. This test is described inmore detail below.
PattonBoggs.com Employment Law Client Alert 2Judge Pauley also determined that an unpaid intern at Fox Entertainment Group’s (“FEG”) corporate office couldrepresent a potentially large class of current and former unpaid interns as the litigation progressed. The courtemphasized that FEG and its divisions recruited all of the interns for the same reason – to help with busy periods –and that they had displaced paid employees. That some plaintiffs did not receive college credit and were recruited bydifferent individuals was “of little moment.” Rather, “potential liability arises from the operation of the program, notrecruitment of the interns” and even though “disparate factual and employment settings” occurred, the common issueof liability won out over any individual issues and defenses. In essence, the court provided a powerful warning –“Using unpaid interns to fill the interstices created by eliminating paid positions is a clear violation” of federal andstate labor laws and employees will be able to bring their claims as a single class.This decision is one of the first to certify a class of unpaid interns for wage and hour violations, and law firms havealready begun to recognize the opportunity that its holding represents. Indeed, just days after Judge Pauley’s decision,the same law firm representing unpaid interns in the Fox Searchlight Pictures case filed another class action lawsuit onbehalf of unpaid interns against Condé Nast Publications, a worldwide magazine publisher.3 Considering thepotential import of Judge Pauley’s holding, employers should be aware of other unpaid intern class action casescurrently making their way through the court system.OTHER RECENT FLSA UNPAID INTERN CLASS ACTION LITIGATIONBickerton v. Rose:4 In March 2012, Lucy Bickerton filed a class action complaint in state court in Manhattan against theCharlie Rose Show, alleging that the show’s hiring of unpaid interns violated New York’s wage and hour laws.5 OnMarch 21, 2013, the court preliminarily approved a settlement between the Charlie Rose Show and the proposed class(approximately 190 members) that could, if fully approved, cost the show more than $250,000, depending on howmany weeks each of the interns worked.Wang v. The Hearst Corporation:6 In February 2012, Xuedan Wang brought a class action complaint in federal court inManhattan against the Hearst Corporation, one of the world’s largest publishers of monthly magazines. On May 8,2013, the court in that case, using the DOL’s six-factor test, denied the plaintiffs’ summary judgment motion andrefused to certify the proposed class because it found that no uniform policy existed among the various magazinesconcerning the contents of the internships at issue, the interns’ duties, their training, and their supervision. Ms. Wang3 Civil Action No. 13 Civ. 40364 Civil Index No. 650780/20125 The New York State Department of Labor’s test for determining whether an unpaid internship is lawful primarily uses the six criteriaestablished by the U.S. Department of Labor and violations of this law mirror those under the FLSA. N.Y. State Dep’t of Labor, OpinionLetter No. 09-0189 (Dec. 21, 2010), available at http://www.labor.ny.gov/legal/counsel/pdf/Other/RO-09-0189.pdf6 Civil Action No. 12 CV 793 (HB)
PattonBoggs.com Employment Law Client Alert 3recently filed a motion with the court requesting the opportunity to immediately appeal the court’s ruling to theUnited States Court of Appeals for the Second Circuit. The court has yet to rule on this motion.Kozik v. Hamilton College:7 In December 2012, Benjamin Kozik brought a class action FLSA complaint in federal courtin Syracuse, New York, alleging that interns in Hamilton College’s athletic department were working long hours at thesame jobs as fully paid assistant coaches, all in the hopes of receiving a full time position. Discovery is ongoing andtrial is scheduled for February 2014.Davenport v. Elite Model Management Corp.:8 In February 2013, Dajia Davenport brought a class action complaint infederal court in Manhattan against Elite Model Management Corporation, arguing that “hundreds, if not thousands”of unpaid interns had been intentionally misclassified under the FLSA. Class certification motions will take place overJuly and August and discovery should be completed by the end of November 2013.WHAT THIS MEANS FOR YOUConsidering the myriad types of employers who are currently defending lawsuits filed by all different kinds of unpaidinterns, it is incumbent on employers who currently have or intend to create an unpaid intern program that such aprogram meets each of the six criteria identified by the Department of Labor, on which at least two New York federalcourts have relied. These requirements are:(1) The internship, even though it includes actual operation of the facilities of the employer, is similar to trainingwhich would be given in an educational environment;(2) The internship 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 that provides the training derives no immediate advantage from the activities of the intern; andon occasion its operations may actually be impeded;(5) The intern is not necessarily entitled to a job at the conclusion of the internship; and(6) The employer and the intern understand that the intern is not entitled to wages for the time spent in theinternship.7 Civil Action No. 6:12-cv-1870 (LEK/TWD)8 Civil Action No. 13 CV 1061 (AJN)
PattonBoggs.com Employment Law Client Alert 4Importantly, the Department of Labor only considers an internship to be proper under the FLSA if all of theserequirements are met. Considering these requirements and the message so recently trumpeted by the Fox SearchlightPictures case – hiring unpaid interns to help with the regular functioning of the business puts the owner at serious riskof violating the FLSA. Only if the internship is truly for the benefit of the intern and provides educationalopportunities with only minimal benefit to the employer will the employer be safe from the FLSA’s reach.