Just last month, the U.S. Court of Appeals for the Second
Circuit seemingly struck a blow for unpaid intern lawsuits with its
decision in Glatt v. Fox Searchlight Pictures, Inc.
Glatt rejected the long-held idea that interns should be
classified as employees when the employer receives any benefit from
their services and instead held that an individual is properly
classified as an unpaid intern where he or she "is the primary
beneficiary of the relationship."
While Glatt is arguably an employer-win, unpaid intern
lawsuits are not going away any time soon. Twin sisters Mary-Kate
and Ashley Olsen's Dualstar Entertainment Group LLC
("Dualstar") was hit with a putative class action for the
purported misclassification of unpaid interns in Lalani v.
Dualstar Entertainment Group LLC. The plaintiffs allege
Dualstar illegally failed to pay the putative class members the
state minimum wage under the New York State Labor Law
("NYLL"). Curiously, the plaintiffs failed to also allege
a violation of the federal Fair Labor Standards Act
("FLSA"). Had both claims been alleged, plaintiffs could
possibly have recovered double the available liquidated damages
under both the federal and state laws.
Lalani's decision to forego a FLSA claim should not be taken
lightly. She has potentially taken a 100% damages multiplier off
the table. This may be a simple pleading error but it may also be
part of a larger strategy to circumvent Glatt and possibly
obtain a more favorable decision in state court (which is not bound
to follow Glatt when interpreting the state NYLL). Indeed,
Lalani's complaint pleads that Dualstar is liable because
Dualstar allegedly "derived a significant benefit from the
work performed" by the unpaid interns – an allegation
that nearly mirrors the standard specifically rejected by the
Second Circuit in Glatt.
Absent removal to federal court, it remains to be seen whether this
is Lalani's strategy. Until then, the Lalani filing is
a strong message to employers that unpaid interns will continue to
challenge their classification (and the current state of the law).
Therefore, employers should still take steps to ensure they are
properly classifying their interns and should keep apprised of any
possible changes in the intern test that might deviate from the
standard set forth in Glatt.
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