Just last month, the U.S. Court of Appeals for the Second Circuit seemingly struck a blow for unpaid intern lawsuits with its decision in Glatt v. Fox Searchlight Pictures, Inc.Glatt rejected the long-held idea that interns should be classified as employees when the employer receives any benefit from their services and instead held that an individual is properly classified as an unpaid intern where he or she "is the primary beneficiary of the relationship."
While Glatt is arguably an employer-win, unpaid intern lawsuits are not going away any time soon. Twin sisters Mary-Kate and Ashley Olsen's Dualstar Entertainment Group LLC ("Dualstar") was hit with a putative class action for the purported misclassification of unpaid interns in Lalani v. Dualstar Entertainment Group LLC. The plaintiffs allege Dualstar illegally failed to pay the putative class members the state minimum wage under the New York State Labor Law ("NYLL"). Curiously, the plaintiffs failed to also allege a violation of the federal Fair Labor Standards Act ("FLSA"). Had both claims been alleged, plaintiffs could possibly have recovered double the available liquidated damages under both the federal and state laws.
Lalani's decision to forego a FLSA claim should not be taken lightly. She has potentially taken a 100% damages multiplier off the table. This may be a simple pleading error but it may also be part of a larger strategy to circumvent Glatt and possibly obtain a more favorable decision in state court (which is not bound to follow Glatt when interpreting the state NYLL). Indeed, Lalani's complaint pleads that Dualstar is liable because Dualstar allegedly "derived a significant benefit from the work performed" by the unpaid interns – an allegation that nearly mirrors the standard specifically rejected by the Second Circuit in Glatt.
Absent removal to federal court, it remains to be seen whether this is Lalani's strategy. Until then, the Lalani filing is a strong message to employers that unpaid interns will continue to challenge their classification (and the current state of the law). Therefore, employers should still take steps to ensure they are properly classifying their interns and should keep apprised of any possible changes in the intern test that might deviate from the standard set forth in Glatt.