Do as I Say, Not as I Do: Differences in Duties Means No Commonality, No Class Certification for Unpaid Interns

As employers welcome a new group of eager interns to their offices this summer, employers may be thinking about the recent wave of class action lawsuits alleging that unpaid internships violate minimum wage and overtime laws. Should these claims be litigated on a classwide basis?

One federal district court judge recently said no. Earlier this month, Southern District of New York Judge Harold Baer, Jr. denied class certification of a group of former unpaid interns who accused the Hearst Corporation of violating minimum wage and overtime laws by improperly classifying them as interns instead of employees. See Wang v. The Hearst Corp., No. 1:12-cv-00793 (S.D.N.Y. May 8, 2013). Relying on the landmark decision in Wal-Mart v. Dukes, Judge Baer agreed with the “cornerstone” of Hearst’s argument: although the interns shared the common thread of being unpaid, there was no uniform companywide policy pertaining to the work the interns actually did. Accordingly, the proposed class lacked common answers necessary to satisfy commonality under Rule 23. Judge Baer also denied Plaintiffs’ partial summary judgment on the question of whether the unpaid interns should have been classified as “employees” as set forth in the U.S. Supreme Court’s decision in Walling v. Portland Terminal Co., 330 U.S. 148 (1947). The fact that the parties disagreed on the appropriate standard for defining an “employee” under Walling was enough to deny summary judgment. Moreover, the court concluded that a genuine dispute and material issues of fact existed with respect to the extent Plaintiffs’ motion was based on the Department of Labor’s six-factor test.

Although Judge Baer’s decision signifies a win for employers, there is no sign that the unpaid intern lawsuits are going away anytime soon. Indeed, last July, Judge Baer granted conditional certification to the former Hearst interns as a collective action under the Fair Labor Standards Act (FLSA). Two other recent cases in the Southern District of New York—Meyer v. U.S. Tennis Ass’n and Jacob v. Duane Reade, Inc.—found that the proposed classes of unpaid interns satisfied commonality under the Wal-Mart v. Dukes standard. In these cases, the plaintiffs were able to show that companywide policies existed with regard to the actual duties performed.

Should employers be worried that all unpaid internships are under attack? Not necessarily. According to the Department of Labor guidance, whether an internship program is exempt from federal minimum wage and overtime laws under the FLSA should be considered in light of six factors. If all six criteria are satisfied, no employment relationship exists, and the intern does not need to be paid according to federal minimum wage and overtime laws. Employers should also be cognizant of state labor laws and regulations that differ from federal laws to ensure that their internship programs comply with all applicable wage and hour laws. In California, for example, the Division of Labor Standards Enforcement (DLSE) has historically applied an 11-factor test, but has also applied a six-factor “economic realities” test (discussed in this 2010 DLSE Opinion Letter). Employers should therefore carefully consider the structure of unpaid internship programs to ensure compliance with state and federal wage-and-hour laws.