Four years ago, a wave of cases involving unpaid internships looked to be the next “big thing.” As those cases sputtered, however, and employers reduced or eliminated internships, the flood of anticipated litigation never fully materialized. Many targets of these claims simply settled, but a small number of these cases continued to be litigated.
In 2012, a group of unpaid student interns for magazines including Esquire and Cosmopolitan brought suit for unpaid wages, claiming that they were actually “employees” as contemplated by the Fair Labor Standards Act. Wang v. The Hearst Corporation, Case No. 12 CV 793 (S.D.N.Y). The case was not insignificant, as it involved a high-profile industry and purported to involve 3,000 interns. As explained below, the facts in this particular case made it a questionable subject for litigation and the employer made the decision to fight the claims rather than settle. Indeed, Hearst’s own Deputy General Counsel, Jonathan Donnellan, himself acted as lead counsel.
On May 8, 2013, or about nine months after suit was brought, the district court denied summary judgment and class certification. Relying on the Department of Labor, Wage and Hour Division Fact Sheet No. 71, the court found that the question of whether the interns were simply students or employees turned on multiple factors that precluded both summary judgment and treatment of the group as a single class. We blogged that earlier opinion here. Three years later, on a more complete record and with the benefit of intervening authority, the district court granted summary judgment in favor of the magazine publisher. 203 F. Supp. 3d 344 (S.D.N.Y. 2016).
Now, not quite six years after the suit was initially brought, the Second Circuit has affirmed dismissal of the case. Wang v. The Hearst Corporation, Case No. 16-3302-cv (Dec. 8, 2017). The court of appeals noted that each of the plaintiffs was a college student hired as an intern without a promise of compensation or a position afterward. Applying an economic reality test to the relationship (which is significantly but not entirely different from the DOL Fact Sheet), the court found that it should look to (1) whether there was an expectation of compensation, (2) whether the working environment resembled clinical or other hands-on training offered by educational institutions, (3) the level of integration into the academic program, (4) coordination with the academic calendar, (5) whether the duration is relatively limited, (6) whether use of the intern displaced paid employees and (7) the job expectations at the end of the internship. We blogged these factors more fully here. At the end of the day, the focus is on whether the intern or the company is the primary beneficiary of the program.
The plaintiffs largely tried to reinterpret these factors by arguing, for example, that the internship should not include skills the individual might already have had, such as the ability to operate a camera. The court rejected such arguments as focusing too narrowly and simply missing the point of what it takes to have practical training. It ultimately affirmed the granting of summary judgment in the publisher’s favor.
There is little question that some employers have misused interns in the past, and we blogged examples here, and here. But as a consequence of litigation like the Wang case, internship opportunities have become less available as companies have simply reduced or eliminated them due to the high cost of protracted litigation. In this instance, further, the interns would have had the unparalleled opportunity to work in marketing and photography for iconic magazine titles, experience they could never have gained in the classroom. The net result of litigation such as this is fewer hands-on educational opportunities at a time when employers increasingly value practical experience. In any case, the law is becoming more settled and at least relatively more certain for those contemplating internships.
The bottom line: The law involving unpaid internships is gravitating toward an economic reality test that focuses on whether the primary purpose is to provide practical experience for the student or free labor for the employer.