The High Cost of Hiring Unpaid Interns

by Orrick - Global Employment Law Group
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Given the difficulty of finding a job in today’s economy, unpaid internships are becoming increasingly popular, particularly for students looking to gain resume-boosting experience. Yet just because someone is willing to work for free and will derive some benefit from an unpaid internship, it does not make it legal under state and federal law. Class litigation regarding unpaid interns is on the rise, and likely will increase even more given the recent ruling in Glatt v. Fox Searchlight Pictures

On June 11, 2013, the United States District Court for the Southern District of New York dealt a huge blow to Fox Searchlight Pictures by holding that two of its unpaid interns should have been classified as employees, and by certifying classes of unpaid interns. The District Court granted summary judgment for Plaintiffs Glatt and Footman and found that Fox misclassified them as unpaid interns when they should have been classified as employees under the Fair Labor Standards Act (FLSA). Applying the U.S. Department of Labor’s six criteria test for determining whether interns fall within the FLSA’s trainee exception, it found that five out of the six criteria were not met. Specifically, the District Court found that Glatt and Footman:

worked as paid employees work, providing immediate advantage to their employer and performing low-level tasks not requiring specialized training. The benefits they may have received—such as knowledge of how a production or accounting office functions or references for future jobs—are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would receive in an academic setting or vocational school.

Accordingly, considering the totality of the circumstances, the District Court concluded that Glatt and Footman were “employees” covered by the FLSA and New York state wage-and-hour laws.

Importantly, the Glatt court also certified under state law a class of unpaid interns who worked for Fox Entertainment Group (FEG) in New York, and conditionally certified a national class of unpaid interns under the FLSA. It held that class certification was appropriate because Plaintiff Antalik identified evidence that was capable of answering common questions on a classwide basis, even though there were disparate factual and employment settings among the class.

Shortly after the Glatt ruling, a former unpaid intern at Warner Music Group’s Atlantic Records filed a class action suit in New York state court alleging various wage-and-hour claims on the grounds that he should have been classified as an employee. According to the complaint, the class includes more than 100 individuals, whose job duties included things such as answering telephones, making photocopies and deliveries, preparing coffee, and getting lunch for paid employees. Similarly, on June 21, 2013, three unpaid interns sued their former employer Gawker Media LLC (an internet publisher) on a class and collective action basis in the Southern District of New York. They allege that Gawker improperly classified them as interns rather than employees to avoid paying wages in violation of the FLSA and New York state law.

Interestingly, on May 8, 2013, the District Court for the Southern District of New York denied class certification of a class of unpaid interns at Hearst Magazines in New York in Wang v. The Hearst Corporation. The Wang court found that commonality, predominance and superiority were not met because there was no common proof of the nature of the interns’ work, and liability would require an individualized inquiry into the interns’ duties, training and supervision. Even though Wang did not go forward on a class-wide basis, it nevertheless underscores that litigation by unpaid interns is on the rise, particularly in today’s economy.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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