Student internships can provide worthwhile benefits to the students involved, who gain experience, contacts, and accomplishments to place on their resumes. Employers, too, can benefit from the work and insight of the intern, but may also want to take advantage of the benefits of free intern time. Recognizing the benefit to the interns, the Department of Labor permits an intern’s time to be unpaid if, in general terms, the parties understand that it is unpaid and the arrangement is primarily for the student’s educational benefit

In the wake of the recent recession, there has been a spate of lawsuits challenging whether various unpaid internships should be compensable because, it is generally argued, they are primarily for the benefit of the employer. A recent case from the Southern District of New York, while suggesting that such claims might be viable, also exposes the problem for the plaintiffs that they are probably not suitable for class action treatment.

In Wang v. The Hearst Corporation, Case No. 12 CV 793 (HB) (S.D.N.Y. May 8, 2013), the plaintiff brought a putative class and collective action arguing that the employer, a magazine publisher, improperly refused to pay its interns because, she argued, the internships were primarily for its own benefit. Several other interns opted into the litigation. The plaintiff claimed that the class had 3,000 potential members. The defendant moved for summary judgment and the plaintiffs moved for class certification.

The court first addressed, in a straightforward fashion, the allegations of the plaintiffs and opt-ins and whether the employer was entitled to summary judgment. The court looked to the Department of Labor’s Fact Sheet No. 71 at least for a framework to review the employer’s actions. Incidentally, as noted by the court, there is a substantial split of authority as to whether the fact sheet is binding, whether it is simply a guide, and the extent to which all six factors must be satisfied. The factors set forth in that fact sheet are:

(1) The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

(2) The internship experience is for the benefit of the intern;

(3) The intern does not displace regular employees, but works under close supervision of existing staff;

(4) The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

(5) The intern is not necessarily entitled to a job at the conclusion of the internship; and

(6) The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The court found that while the defendant had clearly established some of the elements necessary for an unpaid internship, other elements differed by degree, such as the amount of training, the level of supervision, and the benefit to the employer. It thus denied summary judgment.

But for the same reasons, the court also denied the plaintiffs’ motion for class certification. Although the employer had a uniform policy of not paying interns, it found that the fact that such an analysis was required and the variations among different departments meant that Rule 23(a) commonality did not exist. Further, it found no superiority or predominance under Rule 23(b)(3) due to the need for individualized proof. Thus, the court found no basis to certify the proposed class.

The Wang case is significant for at least two reasons. First, it is one of the first cases in what could have been a wave of litigation involving unpaid internships generally. While employers should obviously not take advantage of student interns, a contrary holding would have discouraged employers from having such programs and had a negative effect on hands-on educational opportunities for students.

Second, the Wang case reveals one of the fundamental issues in these types of actions. Plaintiffs will often seek certification based on uniform policies, but then argue inconsistently that individual differences or issues create fact issues when the employer moves for summary judgment. The Wang court, by ruling on both motions at the same time, shows that these cases are best handled on an individual basis.

The bottom line: Cases challenging unpaid internships are generally not suitable for class action treatment.