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Oct 23 2013

Conde Nast Ends Internship Program Over Lawsuits: Let the Blame Game Begin!

Condé Nast, the publishing giant, has decided to discontinue its vaunted internship program following a class-action lawsuit filed by two former interns saying that they were paid less than $1 dollar an hour, according to an article in Women’s Wear Daily yesterday.

Back in June, Condé Nast, which owns and operates popular and influential magazines like GQ, New Yorker, Vanity Fair and Vogue, was sued by a former W Magazine intern named Lauren Ballinger and a former New Yorker intern named Matthew Leib, both who claimed their employers had violated federal labor laws requiring the payment of minimum wage and overtime.

FLSA ChartThe decision comes while the lawsuit against them is still pending in Federal Court. The same law firm handling the Condé Nast case is also representing an intern with Harper’s Bazaar who sued Hearst Corporation in 2012 for being made to work up to 55 hours per week with no pay. Earlier this year, intern Eric Glatt won his lawsuit against Fox Searchlight Pictures for using unpaid interns in the production of the 2010 film, “Black Swan.”

I first wrote about this in 2010, with regular articles along the way, but its worth refreshing everyone on the state of the law in this area. The Wage and Hour Division of the US Department of Labor has come up with a six part test to help determine if an intern is an “employee” (must be paid) or a “trainee” (need not be paid) for purposes of the Fair Labor Standards Act (FLSA).
Here are the factors:

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees;
  3. The trainees do not displace regular employees, but work under close observation;
  4. The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded;
  5. The trainees are not necessarily entitled to a job at the completion of the training period; and
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

Unless all six factors are met, the DOL will find that an employment relationship exists. In DOL guideline letters, summer internships have been found to come under the FLSA even where the students simultaneously received college credit for the internship so the feds generally line up on the side of the interns. In that case, which was decided in 2004, the students worked flexible hours and were told that they would be taught basic marketing and promotional strategies, but they also had to wear company uniforms and it appeared that the company reduced its regular workforce during the summer when the internships were running.

The federal courts do not have to apply the six factor test, so courts who are reviewing these cases generally apply a “totality of the circumstances” analysis. That is, they look at the overall picture and try to determine who was the primary beneficiary of the internship experience – the employer or the intern? If the facts make it appear that the employer was getting cheap labor and not really teaching the intern anything relevant, then the courts will find that it was employment not training. If on the other hand, the student benefited from the experience and learned new skills and especially if the internship disrupted the regular business of the company, then the company will be off the hook. It’s funny that when I wrote my original blog piece on this in 2010 called “Do Unpaid Internships Violate Federal Law?” I wrote: Understand that these issue normally arise when the DOL makes an on-site visit to a company; most student-interns will not sue the company after they leave for wages (though they legally could if they should have been compensated). Now interns are flocking to the courthouses.

Companies would be wise to plan a little more than usual when running an internship program. They should look at the six factors used by DOL and the several policy guidelines issued by the Dept. to make sure they don’t find themselves in a “no good deed goes unpunished” scenario.

So who’s to blame? The “greedy interns” who took the internships knowing they were unpaid and no doubt bragged to their friends about scoring such a high-profile position in a very tight field? Their “greedier lawyers” who filed these lawsuits that “brought the program to its knees”? The “slave-driving” “mega-corporation” that makes billions yet has interns working 55 hours per week for free? Because the state of the law is pretty clear on this issue, some blame has to go to the companies for not addressing their programs in light of all the recent discussion on this topic. Reducing their hours, paying them minimum wage, or specifically having in-service training along with tasks to be performed all could go a long way to reducing the risk of lawsuit.

The interns also have to accept some blame for staying with the program the whole session and then suing afterwards. If they did not like what was going on during the first few weeks of the position, they should have spoken with management or quit. I am not saying they should then forfeit their right to sue, but it certainly would lessen their damages if they would be accountable for sticking around when they knew exactly what was going on. As for their lawyers, hey, I have not been shy about attacking lawyers on this blog. But here they were just following the law. If the lawsuits they filed were frivolous, then the Federal Courts could award sanctions against them. If there is no proof of wrongdoing, then they lose and get nothing as almost all of them work on contingency fees. So while I am sure most of the blame on social media will fall on my fellow members of the Bar (usually my adversaries as, for the record, I usually defend these types of lawsuits for companies, not bring them) I think they take the least blame here.

It will be interesting to see if other companies start dropping their programs but I doubt it. I think Conde Nast is behaving in a Chicken Little, over-the-top, cut-your-nose-off-to-spite-your-face manner. Most companies will figure out a way to re-tool their programs in such a way as to bring them back to the win-win situation they are supposed to be for both parties.

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