United States: In Final Exam, Court Rejects Hearst Interns' Pay Claims

Last Updated: September 5 2016
Article by Robert S. Whitman

Seyfarth Synopsis: Unpaid interns for Hearst magazines have been rebuffed again in their effort to be declared eligible to receive wages under the FLSA and the New York Labor Law.

In an August 24, 2016 ruling, Judge J. Paul Oetken of the Southern District of New York held that six interns, who worked for Marie Claire, Seventeen, Cosmopolitan, Esquire, and Harper's Bazaar, were not employees as a matter of law and granted summary judgment to Hearst. After reviewing each of their circumstances individually, the court held:

These interns worked at Hearst magazines for academic credit, around academic schedules if they had them, with the understanding that they would be unpaid and were not guaranteed an offer of paid employment at the end of the internships. They learned practical skills and gained the benefit of job references, hands-on training, and exposure to the inner workings of industries in which they had each expressed an interest.

The six named plaintiffs were the only ones remaining after the Second Circuit, in July 2015, denied their bid for class and collective certification. The court in that decision also articulated a new set of factors for determining whether unpaid interns at for-profit companies are "trainees" (who are not entitled to compensation) or "employees" (who must receive minimum wage and overtime premiums).

The Second Circuit's decision adopted the "primary beneficiary" test to determine internship status—i.e., whether the "tangible and intangible benefits provided to the intern are greater than the intern's contribution to the employer's operation." Applying that test to the Hearst interns, Judge Oetken concluded, "[w]hile [the six plaintiffs'] internships involved varying amounts of rote work and could have been more ideally structured to maximize their educational potential, each Plaintiff benefited in tangible and intangible ways from his or her internship, and some continue to do so today as they seek jobs in fashion and publishing."

Among the factors he relied on: the relatively brief duration of the internships, typically limited to college semesters or summer breaks; the interns' opportunities for observation and learning, such as "Cosmo U," a program in which senior editors spoke about their career paths; and the receipt of or opportunity for academic credit.

Aside from its detailed discussion of the facts of the plaintiffs' internships, the court's decision, Wang v. The Hearst Corporation, is notable for two reasons:

  1. It shows the practical impact of a denial of class and collective certification. Although the court addressed the six named plaintiffs' claims in a single opinion, it was effectively a series of rulings on each intern's individualized circumstances. As the court noted, some of the factors—such as the receipt of college credit for the internships—weighed differently for the different plaintiffs. But in the end, the result for each of them, given the "totality of the circumstances" in their particular cases, was the same.
  2. The court's decision applied equally to the plaintiffs' claims under the FLSA and the NY Labor Law. This issue was left somewhat unsettled after the Second Circuit's 2015 decision, which noted the similarities in the definitions of "employee" under the two statutes but did not explicitly say that the ruling pertained to both. Judge Oetken, following the earlier lead of a Southern District colleague, held that his ruling decided the claims under federal and NY law.

The Hearst decision is not the first to grant summary judgment under the Second Circuit's factors. In March 2016, a Southern District Judge found that an intern for the now-late Gawker website was properly treated as such and was not entitled to wages. Despite the positive trend, these cases are highly fact-driven and do not foreclose the possibility that interns will be deemed to be employees, nor should they make for-profit employers complacent about not paying interns. But they signal that, where interns have a bona fide learning experience in coordination with their academic pursuits, they need not be paid as a matter of law.

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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