On January 9, 2014, the U.S. District Court for the Southern District of New York preliminarily approved a settlement between Elite Model Management Corporation (Elite) and a proposed class of unpaid interns who worked for Elite during Fashion Week. Davenport v. Elite Model Management Corp. No. 1:13-cv-01061-AJN (S.D.N.Y. Jan. 9, 2014). The group of interns will be paid $450,000.

The complaint, which was originally filed in February 2013, alleged that Elite knowingly misclassified the workers as unpaid interns instead of paid employees, and failed to pay them minimum wages and overtime compensation under New York Labor Law and the Fair Labor Standards Act (FLSA). The interns claimed they performed work for the benefit of Elite, including preparing modeling books of the agency’s clients and chaperoning models to advertising print and media shoots. Internship programs historically have been prevalent in the fashion industry.

The U.S. Department of Labor (DOL) and the plaintiffs’ bar have taken an increased interest in unpaid internships. According to the DOL, in order for an unpaid internship program to pass muster, the following factors must be considered:

  1. The internship, even though it includes actual operation of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the experience of the intern;
  3. The intern does not displace regular employees, but works under the 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 determination of whether an internship training program meets the exclusion depends upon the facts and circumstances of each program. However, if all of the factors are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the interns. To read the DOL’s Fact Sheet on internship programs, click here.