The Attack of the Unpaid Interns

We’ve warned before about the potential issues raised when you utilize unpaid interns.  Employers used to be able to take a level of comfort from internships run through educational institutes but, no more. 

The Charlie Rose show recently settled a class action law suit brought by unpaid interns for up to $250,000.00.  The lead plaintiff claimed that the tasks she performed such as conducting background research on guests, compiling press packets, and cleaning the show’s green room, were “real work,” not part of the sort of training program that should comprise an internship.  Given that interns are not supposed to perform productive work, or displace regular employees, this likely led the show to settle.

Employers are not supposed to derive any benefit from having interns who are not paid at least minimum wage.  Rather, in theory and under the Department of Labor regulations unpaid interns are supposed to disrupt the business providing the internship and to take supervisors away from their work to train and oversee the unskilled interns.  To be exempt from paying minimum wage and overtime pay to interns, a business needs to ensure that its internship program is akin to a job-training program that provides general business skill that the intern can apply anywhere—not specific training applicable only to that business (or no real training at all).  Thus, according to the DOL, having an internship program is something that businesses should be doing to contribute to the greater good of corporate America and its future workforce—not to obtain free labor.

It is no wonder that plaintiffs’ lawyers have gotten on the unpaid intern band wagon.  A New York law firm has filed another class action lawsuit in February 2013, this time against the Elite Model Management Corporation.  The Complaint asserts that the agency misclassified employees as interns specifically to avoid paying them minimum wage.

Employers need to take care with their internship programs—even when partnering with educational institutions that provide the interns with college credit.  If you determine to institute an internship program, make sure that it looks like one—have the interns shadow different employees to get an idea of what they do on the job; schedule meetings where different employees talk to the interns in a group about how they got into that business; take the interns on field trips; have the interns rotate each week into a different department where they are closely supervised by an employee who just might get upset at having the intern underfoot.  Don’t merely structure your internship program as a stepping-stone into a job.

While internships may have given many people in the past an inside look into the industry of their dreams, the Department of Labor wants to ensure that if someone is actually working, they are getting paid for their labors.

The Buck Stops Here: Family Dollar Stores Settles Class Action Law Suit for 14 Million Dollars

Family Dollar Stores, a discount retailer chain in multiple states, is no stranger to lawsuits that stem from the executive exemption provision in the Fair Labor Standards Act (“FLSA”).  In order to meet the executive exemption, an employee’s primary duty must be management, they must supervise at least two Full-time employees, and must usually have the authority to hire and fire.  And if a court finds that an employee does not meet this exception, depending upon the size of the company and the length of wrongful classification, a company could incur significant monetary damages in back overtime pay owed. 

Despite two recent decisions involving Family Dollar Stores where it was found  that their employees met the executive exemption provision (and therefore the store was not liable for unpaid overtime wages), Family Dollar Stores recently announced it had reached a preliminary settlement in a class action lawsuit brought by over 1,700 New York store managers.  These managers claimed that because they were improperly classified as executives, they were entitled to lost overtime wages.  While Family Dollar Stores did not explain why they settled, it may be that they did not want to place a great deal of emphasis on the two prior decisions. 

Our prior blog noted that the 4th Circuit held that managers that spent the majority of their time on non-managerial duties can nonetheless be found exempt from overtime pay requirements.   In addition, in August 2012, a federal judge in North Carolina found in Ward v. Family Dollar Stores found that a manager was exempt under the FLSA.  While these two decisions obviously pleased Family Dollar Stores, in deciding to settle, they most likely did not forget that in 2008 the Eleventh Circuit upheld a $35.6 million judgment against them. 

Ultimately, like a snow flake, each case involving whether an employee qualifies under the executive exemption exception is unique.  Despite these two recent decisions, Family Dollar Stores knew there was still a risk for a costly loss.  While Courts will review prior awards for guidance, the facts (i.e., what duties the employees in question perform) will dictate how they rule.   Accordingly, companies still should proceed cautiously by paying close attention to the job duties of employees who can bring claims under the executive exemption provision.   

Hospital Overtime Case Settled for $8.5 Million

If non-exempt employees work, they are supposed to be paid for their time, as a Boston hospital learned that just settled a class-action overtime lawsuit for $8.5 million. As we discussed last year (Perils of Having Employees Work Through Lunch)

employees entitled to overtime pay cannot be permitted to work through lunch, or beyond the end of their scheduled shift, without counting that time as working time and paying the employees for those hours.

This seemingly simple concept is apparently repeatedly ignored, and plaintiffs’ lawyers are not shy about bringing class action claims. In this case, up to 9,000 current and former employees stand to benefit from the settlement.

Employers would be wise to review their time keeping practices and ensure that employees are being paid for all hour that they work.

Beware the BlackBerry® in Non-Exempt Hands

It is generally common knowledge that employees who do not fall into one of the statutory exemptions to the overtime pay regulations (i.e. “non-exempt” employees) need to be paid for all of the time they work. What about those after-hour minutes checking e-mails and text messages on BlackBerrys® and other PDA devices? Actually, it is possible that employees should be paid for this work-related activity, even if it is occurring outside what would be considered to be normal working hours.

T-Mobile recently found this out the hard way when it was the recipient of a class-action lawsuit asserting claims for overtime wagesAmong other assertions, the employees claim that they were required to review and respond to numerous “e-mails and text messages at all hours of the day and night.”

T-Mobile is not the first.  AT&T Mobility was subject to a similar suit at the end of 2008 which is still on-going, and a Milwaukee office of property management firm CB Richard Ellis  was sued by a maintenance worker earlier this year alleging that he was forced to work after hours without compensation for time spent on his BlackBerry®. 

This topic is not new. In fact, a Yahoo! TECH blog post warned about such potential lawsuits over a year ago.

In an environment where so many non-exempt employees now use a myriad of hand-held devices to send and receive work-related e-mails, and where companies are expecting fewer employees to do the work of the former many, companies need to be mindful of the overtime pay requirements so that they do not become targets of such lawsuits as well. In short, if non-exempt employees are performing work, they need to be compensated for it. Companies are advised to review the time-keeping policies and after-hours communications policies they impose on non-exempt employees. In the long run, it will likely be less expensive to devise a time-keeping system and pay the employees for after-hours work, rather than defend against a class-action lawsuit.