United States: Courts Continue To Be Split On Class Certification In Unpaid Intern Cases

Last Updated: May 19 2014
Article by Angelo Spinola and Emily Blaiss

In the most recent development in the wave of wage and hour class and collective actions by unpaid interns, two different federal judges in the New York District Court for the Southern District of New York recently decided whether to conditionally certify putative collective actions filed by unpaid interns who claimed they did work customarily performed by paid employees but were not classified as employees and were not paid minimum wage and overtime as required by the FLSA.  The judges each reached a different conclusion.

In Fraticelli v. MSG Holdings, the unpaid interns brought suit against the parent of the Madison Square Garden Company claiming the company had misclassified them as "student associates" instead of employees.  The company opposed conditional certification, arguing that the interns failed to establish that they were (1) victims of a common and unlawful policy, and (2) similarly situated.  U.S. District Judge Jesse Furman agreed with the company finding that, "although there is no dispute that all MSG interns were not paid, that fact alone does not necessarily imply that MSG engaged in a 'common policy or plan that violated the law.'"  The court noted that although it would not delve into the merits of the plaintiffs' claims at the conditional certification stage, consideration of the legal standard governing the trainee exception to the FLSA minimum wage and overtime requirements was relevant to determine whether the company had a common policy or plan that violated the law.  The court held that whether individuals were properly classified as "trainees" under the FLSA could not be determined using common evidence because each intern's activities and experiences differed depending on the department in which they interned.  Specifically, the court found that "significant differences existed among the interns in terms of the activities they performed, the supervision, training and benefits they received, the burdens they imposed on MSG, and the manner in which the interns were selected for their position."  The court distinguished this case from other intern misclassification collective actions recently certified in which there was evidence of a more centralized program and inferences that the unpaid interns were acting as substitutes for paid employees.

In contrast, in Grant et al. v. Warner Music Group Corp., U.S. District Judge Paul Gardephe emphasized the lenient standard and "low burden" some courts have used to conditionally certify and authorize notice at the first stage of an FLSA collective action.  In this case, the judge relied on declarations from the named plaintiff and three other former interns who claimed they did the same type of work as paid employees in the departments in which they worked.  He noted that "[c]ourts regularly rely on plaintiffs' affidavits and hearsay statements in determining the propriety of sending notice" in FLSA collective actions.  The judge also accepted the plaintiffs' argument that the company had a common policy regarding interns, based mainly on the fact that there was a common application for internships, and all interns were required to meet the same criteria: "interns must be 18 years old, complete a successful background check, be enrolled at an accredited college, and make a 15 hour per week commitment."  In contrast to Judge Furman's point that a common policy that all internships are unpaid does not equate to a "common policy or plan that violates the law," in Grant, the court supported its finding of a common policy by pointing out that the Company's "centralized website also provides a general description of internships emphasizing that all internships are unpaid."

These issues are currently before the Second Circuit Court of Appeals, which recently heard oral argument in two other contrasting intern cases:  Wang v. The Hearst Corp., in which the U.S. District Court for the Southern District of New York denied conditional certification, and Glatt v. Fox Searchlight Pictures Inc., in which the same district court granted conditional certification. 

Intern misclassification cases have been filed against a number of other high profile companies and some of these cases have also settled.  On January 9, 2014, the U.S. District Court for the Southern District of New York preliminarily approved a $450,000 settlement in Davenport v. Elite Model Management Corp., in the U.S. District Court for the Southern District of New York], a lawsuit against Elite Model Management Corporation by unpaid interns who worked for Elite during Fashion Week.  A New York state court judge approved a settlement of $250,000, plus $50,000 in attorneys' fees, in Bickerton v. Charles Rose, a class action filed on behalf of 190 unpaid interns who worked on "The Charlie Rose Show" on PBS.  Very recently, the parties in Ballinger v. Advance Magazine Publishers Inc., a putative class and collective action by  former unpaid interns at W magazine and The New Yorker, announced they are working on finalizing a settlement agreement.

We will keep you posted on the Second Circuit's decision, which may signal the end of unpaid intern cases, or open up the floodgates to more of them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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