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August 26, 2016

Hearst Interns Misclassification Claim Rejected

In July 2015 and in January 2016, we reported on cases, including the Second Circuit's seminal decision in Glatt v. Fox Searchlight Pictures, Inc., 13-4478-cv (2d Cir. July 2, 2015), concerning the issue of whether unpaid interns should be classified as employees and receive pay under the Fair Labor Standards Act and New York Labor Law. The court in Glatt held that courts must apply a "primary beneficiary test," which involves a balancing of factors to determine whether the intern or the employer is the "primary beneficiary" of the relationship. Glatt provided a "non-exhaustive" list of factors to be considered in assessing the relationship, with the overarching instruction being that courts (and parties) must focus on the "central feature of the modern internship - the relationship between the internship and the intern's formal education," and that "[t]he purpose of a bona-fide internship is to integrate classroom learning with practical skill development in a real-world setting." If the relationship is a "bona fide internship" then the intern would not be considered an employee and the wage requirements under the Fair Labor Standards Act and New York Labor Law would not apply.

On Wednesday, August 24, 2016, a New York federal judge applied the Glatt test to find that a group of individuals were interns and not employees. In Wang v. The Hearst Corp., case number 1:12-cv-00793 (Southern District of New York), six students sued the Hearst Corp. alleging that they should receive employment benefits (including wages and overtime) because their purported internships consisted of performing routine, low-level tasks such as running errands, sending packages or copying documents, rather than any beneficial job training. The students claimed that they performed the work of entry-level employees at no cost to the company, which allowed Hearst to not have to hire couriers, freelancers, or other paid employees.

In the decision on Wednesday, the judge dismissed the case (which had been pending since 2012) finding that the students did learn some practical skills that could be used in achieving employment in the future, that the internships centered in some way around academic studies, and that all of the plaintiffs knew in advance they would not be paid. The decision stated that "[w]hile their 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." The judge further found that the plaintiffs, for the most part, all received some sort of academic credit for their work and performed their tasks in connection with some sort of academic schedule, and they did receive exposure to practical day-to-day assignments and realities of employment in their respective fields.

Even though there was also some evidence that the plaintiffs performed what the judge labeled as "scut work," meaning unpleasant assignments that paid employees would not want to perform, the judge found that the plaintiffs were the "primary beneficiaries" of the internship and, thus, under Glatt, were properly identified as interns rather than employees.

The decision is one of the first apply to the Glatt test and provides more guidance to companies as they review their internship policies and practices to ensure that programs are properly designed to provide the intended "classroom learning with practical skill development in a real-world setting."
If you have any questions about compliance, or are unsure how this new enforcement initiative may impact your business, please contact the Labor & Employment attorney at Barclay Damon with whom you normally work or any attorney in our Labor & Employment Practice Area.

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