New Obstacles for California Employers after “Black Swan” Internship Case

July 20, 2015 - California internships in the past have been viewed as a trade-off between well know, desirable employers and young students interested in the industry. The employers get workers and the interested students get experience in their chosen field. Many college students and recent graduates vie for a limited number of highly coveted internship positions in Hollywood and Silicon Valley. Companies offer unpaid positions (internships) and students and new grads vie for the chance to start building a relevant network. The simultaneously beneficial nature of the internship means there has been a limited amount of litigation related to the arrangements. But as of 2013, there’s a ruling that is affecting the symbiotic relationship between employers and interns.

In 2013, a federal District Court in New York found that interns of the movie Black Swan were entitled to pursue a class action. The class action seeks millions of dollars for unpaid wages, overtime, etc. Studios and tech business employers are taking note.

With Glatt v. Fox Searchlight Pictures, Inc., the U.S. Court of Appeals for the Second Circuit attempted to answer the basic question, what is an intern? There are interns across the county, but there is a surprisingly limited amount of actual law related to this particular workplace relationship. The Second Circuit’s decision actually turned on a case from almost 70 years ago regarding railroad apprentices. California employers are discovering that the direction this particular discussion is taking holds both good news and bad news for the future of their workplaces.

The Good News: According to the Second Circuit’s decision, wage-hour cases in relation to interns are rarely subject to resolution in a class action or collection action due to the highly individualized nature of the setup.

The Bad News: Fox, the studio that produced the movie, convinced the court to impose a test to determine who the primary beneficiary of the intern/employer relationship is. This test was to be used to determine whether the worker was an intern or an employee. The court put together 7 non-exhaustive questions for a trial court to consider when attempting determining if a worker is an intern or an employee.

1. Is there a clear understanding that there is no expectation of compensation for work performed?
2. Does the internship offer any hands on training or clinical experience as would be provided by a school?
3. Is the internship a part of the coursework of the “intern”/will they receive academic credit?
4. Does the internship coincide with the academic calendar?
5. Is the internship limited to the time period during which the setup would provide beneficial learning opportunities?
6. Does the intern’s work compliment or replace the work of paid employees?
7. Is there a clear understanding that the intern is not entitled to a paid job once the internship is completed?

The primary beneficiary test is bad news for employers who offer internships with limited educational benefits for interns or for those whose interns are performing work that would be completed by employees in their absence. The opinion of the court indicated that the more menial the work assigned to an intern, the less likely that they would legally be considered an intern. Employers, particularly those in tech and entertainment industries, are finding that they need to rework their model in order to suit this new finding. It’s the first significant appellate opinion on this issue, but it will not be the last. There are other intern related cases on appeal and awaiting decision by other courts throughout the nation. In California, the opinion will probably have a fairly lasting impact. California employers are already hustling to bring their internship programs up to snuff. Interns considered employees might very well begin seeking to recover unpaid wages, overtime, etc. in accordance with the penalties of violating the California Labor Code.

If you are unsure what constitutes a valid internship or if you need additional information regarding being misclassified as an intern instead of an employee, contact the southern California employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.

Worker Misclassified as Independent Contractors Sues Google

Jacob McPherson, former Google Play unit site merchandiser out of New York, sued Google and the online staffing company Elance-oDesk. He alleges that he and others in similar positions were misclassified as independent contractors by the online search engine giant. He is demanding unpaid wages, including wages that should have been paid for overtime hours. He also seeks damages and attorneys’ fees.

The plaintiff, McPherson, worked for Google from January 2013 through December 2013 as contracted. McPherson claims that he (and many others) worked up to 45 hours/week, but that Google never provided them with payment for more than 30 hours/week. While at Google, McPherson worked through oDesk who released a statement regarding the lawsuit. In their statement about the overtime suit, oDesk stated that they were committed to operating in a “lawful and ethical manner.” They researched the claims and are confident that they have no merit.

McPherson was offered employment at $35/hour for a maximum of 15 hours per week (the maximum hours per week was later raised to 30 hours, according to the suit filed against Google). McPherson was required to register at oDesk in order to receive their employment offer and he would be considered a freelancer paid only through oDesk.

McPherson claims in the lawsuit that he performed work similar to that of (and alongside at the same offices as) W-2 employees. He was assigned to teams that included W-2 employees. He was required to be in attendance for mandatory meetings and training alongside W-2 employees. He was even issued a Google owned cell phone, tablet and laptop just like the W-2 employees of the massive online search engine giant. “Freelancers” were also required to use an email signature that designated them as representatives of Google and offering the office address, follow a Google-approved method for completing assigned tasks, adhere to dress codes and the Google blogging policies, etc.

This case could be a stepping-stone for others and could mean drastic changes for online staffing and freelance sites regarding the risk associated with managing independent contractors.

If you have questions regarding your employer/worker relationship and whether or not the classification of independent contractor is appropriate according to federal regulations, contact the southern California employment law experts at Blumenthal, Nordrehaug & Bhowmik. 

Recruiting Manager Files Overtime Suit Against Robert Half

On September 5, 2014, a California recruiting manager filed an overtime suit against Robert Half International Inc. The recruiting manager, Theresa Daniels, worked at Robert Half as a recruiting manager from January 2014 through June 2014. She filed suit in San Mateo County Superior Court in California.

The suit filed by Ms. Daniels made a number of claims, including:

• The company misclassified her and other, similar employees as exempt from overtime.
• She and other, similarly classified employees, did not have managerial duties that would classify them as exempt from California overtime laws.
• She and other, similarly classified employees, did not have managerial authority.
• She and other, similarly classified employees, had only a minimal role in supervising employees and not authority to make employment related decisions regarding other employees.
• All recruiting managers, Theresa Daniels included, were strictly monitored and tightly controlled by both the company policy and their direct supervisors.

The suit seeks class action status and back overtime pay for unpaid wages.

Robert Half indicated that there are meritorious defenses to the allegations being made by Ms. Daniels and they will be defending themselves against litigation.

If you or someone you know are misclassified as exempt – preventing you from receiving the overtime pay you are entitled to at work, please contact your southern California employment law experts right away: Blumenthal, Nordrehaug & Bhowmik.

Warehouse Wage Theft Case Results in $21 Million Settlement

Walmart and their most prominent import distribution subcontractor, Schneider Logistics, Inc. will pay an historic $21 million settlement for wage and hour violations (federal and state level) in connection to case Carrillo vs. Schneider Logistics et al. Violations were committed at a warehouse facility in Riverside County, California. According to the terms of the settlement, Schneider is to pay the full settlement awarded for unpaid wages as well as interest and penalties for multiple wage and hour violations that occurred over the process of a decade. The facility was dedicated to Walmart operations, but the settlement agreement doesn’t indicate whether or not Walmart will be contributing to the settlement payment as a part of a behind the scenes agreement. Walmart did receive a complete release alongside Schneider in the settlement.

The settlement will go to over 1800 workers employed between 2001 and 2013 at three different distribution centers in Mira Loma, California. All three facilities were dedicated 100% to Walmart distribution. Together, the three facilities function as the largest Walmart distribution center in the western United States.

Allegations made in the suit included major wage theft over the course of 10 years against “lumpers.” Lumpers are workers who are paid to load and unload boxes by hand from shipment containers arriving on site onto trailers waiting to be loaded for Walmart delivery. Workers often worked double shifts (meaning 16 hours/day), seven days per week. There were no mandated, required breaks and no overtime premiums. The work they completed was often done for wages lower than the federally mandated minimum wage. Payment rates were based on an elaborate piece rate system that was changed quickly after the suit was filed in November 2011. (It was found to be illegal).

For additional information on wage and hour violations and how to identify them in the workplace, contact Blumenthal, Nordrehaug & Bhowmik, the wage and hour theft experts.