Why it matters: For $5.85 million, former interns at Conde Nast Publications agreed to resolve their employment dispute in New York federal court. Two different courts in the state have split on the issue of whether interns should be considered employees, with the question currently pending before the Second U.S. Circuit Court of Appeals. Instead of waiting to see what standard the federal appellate panel decides on, Conde Nast settled the suit brought by former interns at its publications. An estimated 7,500 former interns dating back four years for a nationwide class and seven years for a New York state class will be eligible to receive a share of the settlement fund, which will also cover attorneys’ fees, costs, and claims administration fees. The multimillion-dollar settlement serves as a reminder to employers to use caution when considering whether to hire – and how to compensate – interns.

Detailed Discussion

In June 2013, Lauren Ballinger and Matthew Leib filed suit against Conde Nast Publications. Ballinger, a former intern at W, and Leib, who interned at The New Yorker, claimed that the publisher violated both New York labor law and the Fair Labor Standards Act (FLSA) by failing to pay them the minimum wage for the hours they worked.

The parties began preliminary discovery and exchanged some motions. But during this time, two federal courts in New York reached two very different conclusions about the legal status of interns under state labor law. In Glatt v. Fox Searchlight Pictures, the court determined that interns were employees under state law and granted summary judgment for the plaintiffs on their FLSA claims; the opposite conclusion was reached in Wang v. Hearst Corp.

“These very different outcomes demonstrate the uncertainty that the parties face,” the plaintiffs wrote in their motion in support of preliminary approval of the settlement. With the cases on appeal to the Second U.S. Circuit Court of Appeals, the parties engaged in multiple settlement conferences and reached a deal.

Pursuant to the agreed-on terms, a settlement fund of $5.85 million provided by Conde Nast would cover payments to two classes of plaintiffs: a national class of FLSA claimants who worked at Conde Nast dating back to June 2010 and a statewide class of New York interns for the publisher since June 2007.

The estimated 7,500 interns will be paid based on an allocation formula of three factors: whether the internship was a “closet internship,” where the intern’s primary activities were performed in a fashion magazine closet; whether the internship occurred during the summer; and whether the intern received a stipend resulting in payment of less than minimum wage.

Under the formula, payments would range from a maximum of $1,900 for a summer closet internship where no stipend was received down to $700 for a non-closet internship that did not occur during the summer with a stipend provided. The payout represents more than 60 percent of the unpaid wages for class members, according to the plaintiffs’ motion.

The fund also includes attorneys’ fees (not to exceed 11 percent or $650,000), costs, expenses, claim administration fees, and service payments of $10,000 for the two named plaintiffs.

To read the motion in support of preliminary settlement approval in Ballinger v. Advance Magazine Publishers, Inc., click here.