New Year, New Settlement: Another Big Payout Over Unpaid Interns

By John E. Thompson

As was anticipated in light of the intensified focus upon internships over three years ago, the next stage was a spate of high-profile lawsuits by unpaid or allegedly underpaid interns under the federal Fair Labor Standards Act and/or state wage-hour laws.

One of them was filed last May against Elite Model Management Corporation under the FLSA and similar New York state laws.

Elite has now agreed to tender as much as $450,000 to settle the litigation. Payment to an individual who elects to participate in the settlement will generally be based upon how many weeks he or she devoted to the internship.

Counsel for the interns seeks one-third of this amount as fees and costs. A $20,000 portion will be set-aside for distribution to claimants who became involved in the case prior to the settlement’s announcement. Elite does not admit any liability in agreeing to the settlement.

The court has preliminarily approved the resolution but will reserve final judgment until after a hearing on May 1, 2014. Even if the court ultimately endorses the agreement, it is still possible that at least some former interns will not take part and will pursue their own claims.

A new internship “season” approaches  …

Taken in conjunction with the earlier highly publicized $250,000 settlement of a similar lawsuit against Charlie Rose and his production company, it is entirely foreseeable that more complaints, and more big-dollar settlements in litigation already underway, are likely to follow.

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Unless and until a court consensus develops that provides more clarity and certainty in this area, internships will as a practical matter necessarily pose some risk of lawsuits or government investigations, and possibly of liability, in many if not most of the more-common scenarios.

Consequently, companies and other organizations would be wise to think hard about whether to allow these arrangements in the current environment.

Any who do decide to permit internships must be committed to structuring and administering them so as to minimize (and this is not to say “eliminate”) the possibility of claims and exposure.

This was originally published on Fisher & Phillips’ Wage and Hour Laws blog.

John Thompson is a partner in the Atlanta office of the law firm Fisher & Phillips. His practice focuses on wage and hour law, assisting employers in preventive efforts designed to ensure compliance, and he handles both investigations conducted by government agencies and litigation in the wage and hour area. John has served as a Special Assistant Attorney General for wage-hour matters for the State of Georgia. Contact him at jthompson@laborlawyers.com.

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1 Comment on “New Year, New Settlement: Another Big Payout Over Unpaid Interns

  1. Unpaid internship lawsuits under FLSA is a new and emerging issue. The Supreme Courts denial of cert on an unpaid internship case from the 11th Cir. last year, means that the there will be a deepening circuit split regarding who should qualify as an employee under the FLSA. The Elite settlement that covers minimum wage over a four-week period. That means the recovery for these interns ranges from a couple hundred dollars to $1,750 each for up to a month of work at $7.25 an hour; seems pretty reasonable.

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