Interns Win One, Lose One, In Having Misclassification Cases Conditionally Certified In New York

by BakerHostetler

There has been a great deal of coverage involving litigation by interns against various media and entertainment companies in New York. We won’t recount the many articles, blogs, and discussions about this issue. If you need a quick summary of the law, the U.S. Department of Labor, in its Fact Sheet # 71, sets forth the relevant factors, which 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.

Are these factors amenable to class or collective action treatment? According to a recent pair of cases, in some instances “yes” or at least “we don’t need to think about them at the early stages,” and others “no.”

Keep in mind that the cases in this pair are both conditional certification cases (meaning that the court applied a particularly lenient standard), but let’s start with the “no.” In Fraticelli v. MSG Holdings LP, Case No. 1:13-cv-06518 (S.D.N.Y. May 7, 2014), the plaintiffs contended that Madison Square Garden misclassified hundreds of interns and failed to pay them minimum wage and overtime. They moved for conditional certification under the FLSA, contending that the interns were all subject to a common illegal policy. Their evidence consisted of their own affidavits about the work they performed and how it compared to that of paid employees, a code of conduct that applied to interns as well as employees, a standardized time sheet for interns, and a script given to interns about the handling of telephone calls. The court found that this evidence was insufficient to demonstrate centralized control, particularly since the putative class members worked in over 100 different departments and under different managers. The court distinguished other cases in which intern classes had been conditionally certified under greater evidence or where it believed the courts may have used a standard that was too lenient.

A week later, the same court (but a different judge) addressed similar claims against a different employer in the entertainment industry. Grant v. Warner Music Group Corp., Case No. 1:13-cv-4449 (S.D.N.Y. May 13, 2014). The plaintiffs in Grant relied on the declarations of the plaintiff and three opt-ins and that of a former intern whose claims would have been time-barred under the FLSA. The court refused to consider the time-barred declaration, but still found that the allegations of the remaining four were sufficient under the low standard for conditional certification. The declarations contained conclusory allegations of the type rejected in Fraticelli, but were given credence in this case. Most of the court’s opinion is spent on describing how low the standard is rather than addressing the merits. The court relied on evidence “suggesting” a nationwide policy, but did not state what that policy was.  It found that the same intern job description was used in 6 cities and extrapolated them across the country.  It also relied on the fact that internships were unpaid (which seems circular since there would be no case if they were paid) and fairly bland uniform requirements such as that the interns be over 18 years old and actually be students. The court refused to analyze the impact of the six factors listed above, finding that it could not do so on such a limited record. The court thus authorized the issuance of notice to the class.

The court in Grant cited and distinguished the decision in Fraticelli, but there really isn’t that much to distinguish the two factually. The judge in Grant was willing to determine if the plaintiffs had met even the lower standard for conditional certification. In Fraticelli, the court acknowledge the standard, but then interpreted it in such a way as to be virtually meaningless.

This pair of cases reflects several practical realities. First, there is nothing that requires that the two-step procedure now in vogue be used, as it is a discretionary tool, but some judges are treating it as if it is and are watering down even the most basic, common-sense requirements. Many of these cases will, of course, settle, but apart from a cynical, rough-justice approach, it defies logic to conditionally certify a class or authorize notice and opt-ins for a class that ultimately should not survive decertification.  Even the most superficial review would suggest that the work of interns across the country in hundreds of departments and under different supervisors will differ, particularly as to a 6-factor test that itself contains numerous individual inquiries. Similarly, courts conditionally certifying classes often indicate that they cannot weigh the merits, but as reflected in Wal-Mart Stores, Inc. v Dukes, 131 S. Ct. 254 (2011), they should consider the merits to determine whether, in fact, the case can be decided as a class. This is particularly true in the Second Circuit, which requires that the class members be subject to a common policy “that violates the law,” not simply a common policy. See Myers v. Hertz Corp., 624 F.3d 537, 555 (2d Cir. 2010).

Second, certification often turns on the view of the individual judge.  Like the competing majority and dissenting opinions in Dukes, the outcome may very well turn on whether the judge views certification as a right, or simply as a procedural device whose requirements must be observed.

Third, although courts across the spectrum state that they will refuse to look at the merits at the conditional certification/notice stage, one can’t help but wonder if some of these decisions are borne of a concern that employers are abusing interns as unpaid workers. The court in Grant, for example, distinguished two cases in which conditional certification had been granted – in one a company memorandum noted that the unpaid intern program had doubled after the reduction of overtime, temporary employees, and paid internships; in the second a company memorandum directed staff to use interns as messengers to reduce messenger costs.

Fourth, of course, this all means that the outcome in this area is not predictable. The court in Grant cited other internship cases with different results. We’ve previously written about cases in which classes were certified and where they were not. The difference may also turn on the applicable standard, whether conditional certification under the FLSA, a motion to decertify under the same statute, or under Rule 23. Unfortunately, much of this will result in many employers eliminating internship programs entirely, when a compliant program would benefit those seeking to experience a particular industry under “real life” circumstances.

The Bottom Line: New York District Courts continue to grapple with whether and when to certify (or authorize notice) in FLSA cases involving interns.


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