Two recent cases involving strippers and interns have made headlines involving
entitlement to minimum wage and overtime wages under the
Fair Labor Standards Act ("FLSA"). And while employers may discount the importance of
these cases as being inapplicable to their business, let me suggest that
you should take time to consider how these cases may actually impact your business.
Just this month, the United States Court of Appeals for the 2nd Circuit rejected the United States Department of Labor's six-factor
test to determine whether an individual qualifies as an intern or an employee
for purposes of the FLSA. Instead, the court employed a flexible "primary
beneficiary" test to make such determinations. The case,
Glatt v. Fox Searchlight Pictures, Inc., involved claims by college interns class/collective action case filed
against Fox Searchlight Pictures, Inc. and Fox Entertainment Group, Inc.
The primary beneficiary test adopted by the court (1) focuses on what
the intern receives for engaging in the internship; and (2) provides the
courts flexibility to examine the "economic reality" between
the intern and the employer. The court provided the following non-exhaustive
considerations that should be weighed and balanced by the trial courts
when determining if an intern at a for-profit employer is an "employee:"
- Extent to which there is an expectation of compensation;
- Extent to which the internship provides training similar to that which
would be given in an educational environment;
- Extent to which the internship is tied to the intern's formal education
program by integrated coursework or the receipt of academic credit;
- Extent to which the internship corresponds to an academic calendar;
- Extent to which the internship's duration is limited to the period
in which the internship provides the intern with beneficial learning;
- Extent to which the intern's work complements, rather than displaces,
the work of paid employees while providing significant educational benefits
to the intern; and
- Extent to which the intern and the employer understand that the internship
is conducted without entitlement to a paid job at the conclusion of the
While the Court did not rule that the interns were employees, it did send
the case back to the trial court to apply the primary beneficiary test
to make such a determination.
And while this decision was being rendered, another class action case involving
strippers in Florida was settled for $6 million. In
Adonay Encarnacion et al v. J.W. Lee Inc. et al., the plaintiffs alleged that he owners of Scarlett's clubs in Hallandale Beach, Tampa and Toledo,
Ohio, misclassified the dancers as independent contractors rather than
employees. Plaintiffs sought back wages. Plaintiffs maintained the dancers
should be considered employees entitled to minimum wage under the federal
Fair Labor Standards Act.
While the case was settled before a ruling, it is important to note that
in other cases that have resulted in rulings, courts have held that the
dancers are "employees" as opposed to "independent contractors."
They have looked to the fact that clubs typically set the prices for tableside
dances, set the dancer's schedules, create rules of conduct, discipline
the dancers, and otherwise control the method and manner in which the
So what's the takeaway from these cases? Employers must be cognizant
of the fact that it littles not what they call their staff, but only on
what the realities of the relationship are. Calling someone an intern
when that person is providing valuable benefits to the employer or calling
someone an independent contractor when, in fact, they are controlled in
all aspects in the manner they perform their work, will not suffice.
The consequences of misclassifying your employees and underpaying them
are significant. Aside from potential penalties from the Secretary of
Labor, a private plaintiff (or in some cases a class of private plaints)
may seek damages (the unpaid amount of minimum wages and overtime wages),
plus liquidated damages equal to the same amount, attorney's fees
The distinguished team at Rosenthal Law Group has a deep and broad experience
within the field of employment and labor law.
Contact us for valuable and comprehensive legal counsel.