Why it matters: Employers across the country are facing an onslaught of collective actions filed by former unpaid interns seeking minimum wage and overtime. Now, in what class counsel is touting as the largest-ever settlement in a collective action brought by unpaid interns, Elite Model Management has agreed to pay a total of $450,000 to a class of approximately 123 former interns. As courts determine that interns were really employees – like a New York federal court judge held in a high-profile suit against Fox Entertainment Group last year – could the Elite settlement serve as a model for other employers facing similar suits?

Detailed Discussion

Spending weeks updating modeling books and chaperoning models to bookings constituted real work that should be compensated, Dajia Davenport claimed in her February 2013 complaint against Elite Model Management.

Davenport, who worked as a Fashion Week intern in New York City in 2010, claimed the agency relied upon unpaid interns that it classified as exempt trainees instead of hiring and paying employees, in violation of both New York labor law and the Fair Labor Standards Act. Filed as a putative collection action, Davenport sought $50 million in damages for unpaid wages and overtime, as well as liquidated damages and interest.

The parties notified the Court in October that they had reached a deal.

Under the proposed agreement, the modeling agency promised to pay a total of $450,000. The estimated 123 members of the class would each receive a minimum of $700.64 based on a four-week internship at $175.16 per week, up to a maximum of $1,751.61 for a ten-week internship. One-third of the settlement payment will be considered wages subject to wage withholdings and deductions. Class counsel plans to request an award of $143,500, or 31.8 percent of the total settlement fund.

U.S. District Court Judge Alison J. Nathan granted preliminary approval to the deal, certifying two classes of interns – those who worked for Elite in New York from Feb. 15, 2007, until the approval date, and unpaid interns employed elsewhere in the United States after Feb. 15, 2010.

A final approval hearing is set for May 1, 2014.

To read the order granting preliminary approval of the settlement in Davenport v. Elite Model Management, click here.