The Current Landscape in FLSA Unpaid Intern Litigation - Law Firms Ready to Pounce

Every summer, unpaid interns arrive at various businesses throughout the country to learn a little bit about the real world before going back to school or diving into the job market.  But this summer, it is one federal court in New York that has made the biggest splash in the unpaid intern world.

On June 11, 2013, Judge William Pauley of the United States District Court for the Southern District of New York issued an opinion in Glatt v. Fox Searchlight Pictures, Inc. holding that two individuals working on the set of the film Black Swan had been improperly classified as unpaid interns.  As a result, both individuals were entitled to wages under the Fair Labor Standards Act (“FLSA”) and its New York equivalent.^[1]  Using the six criteria set out in an April 2010 U.S. Department of Labor fact sheet on internship programs under the FLSA as a guide,^[2] the court found that the interns worked “as paid employees work,” providing an immediate advantage to their employers and receiving nothing approximating the education available in an academic setting or vocational school.  Moreover, the benefits the interns did receive – such as knowledge of how a production or accounting office works or references for future jobs – were gained by “simply having worked as any other employee works.”  In this situation, the internships were not designed to benefit the interns or to be “uniquely educational,” but instead required the interns to perform “routine tasks that would otherwise have been performed by regular 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.

Judge Pauley also determined that an unpaid intern at Fox Entertainment Group’s (“FEG”) corporate office could represent a potentially large class of current and former unpaid interns as the litigation progressed.  The court emphasized 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 by different individuals was “of little moment.”  Rather, “potential liability arises from the operation of the program, not recruitment of the interns” and even though “disparate factual and employment settings” occurred, the common issue of 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 and state 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 have already 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 on behalf of unpaid interns against Condé Nast Publications, a worldwide magazine publisher.^[3]  Considering the potential import of Judge Pauley’s holding, employers should be aware of other unpaid intern class action cases currently making their way through the court system.

Other Recent FLSA Unpaid Intern Class Action Litigation

Bickerton v. Rose:^[4]  In March 2012, Lucy Bickerton filed a class action complaint in state court in Manhattan against the Charlie Rose Show, alleging that the show’s hiring of unpaid interns violated New York’s wage and hour laws.^[5]  On March 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 how many 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 in Manhattan 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 and refused to certify the proposed class because it found that no uniform policy existed among the various magazines concerning the contents of the internships at issue, the interns’ duties, their training, and their supervision.   Ms. Wang recently filed a motion with the court requesting the opportunity to immediately appeal the court’s ruling to the United 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 court in Syracuse, New York, alleging that interns in Hamilton College’s athletic department were working long hours at the same jobs as fully paid assistant coaches, all in the hopes of receiving a full time position.  Discovery is ongoing and trial is scheduled for February 2014.

Davenport v. Elite Model Management Corp.:^[8]  In February 2013, Dajia Davenport brought a class action complaint in federal 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 over July and August and discovery should be completed by the end of November 2013.  

What This Means For You

Considering the myriad types of employers who are currently defending lawsuits filed by all different kinds of unpaid interns, it is incumbent on employers who currently have or intend to create an unpaid intern program that such a program meets each of the six criteria identified by the Department of Labor, on which at least two New York federal courts have relied.  These requirements are:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which 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; and on 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 the internship.

Importantly, the Department of Labor only considers an internship to be proper under the FLSA if all of these requirements are met.  Considering these requirements and the message so recently trumpeted by the Fox Searchlight Pictures case – hiring unpaid interns to help with the regular functioning of the business puts the owner at serious risk of violating the FLSA.  Only if the internship is truly for the benefit of the intern and provides educational opportunities with only minimal benefit to the employer will the employer be safe from the FLSA’s reach.