NEW YORK LAW SCHOOL MOOT COURT ASSOCIATION
THE 38TH ANNUAL ROBERT F. WAGNER
NATIONAL LABOR & EMPLOYMENT LAW MOOT COURT COMPETITION
__________________________________________________________________
In the
Supreme Court of the United States
SPRING TERM, 2014
Docket No. 14-1331
___________________________
SAUL GOODMAN, WALTER WHITE, LYDIA RODARTE-QUAYLE,
AND JESSE PINKMAN, INDIVIDUALLY AND ON BEHALF OF
ALL OTHERS SIMILARLY SITUATED,
Petitioners,
- against GUS CORPORATION, INC.,
Respondent.
___________________________
On Writ of Certiorari to the
United States Court of Appeals for the Thirteenth Circuit
__________________________________________________________________
THE FACT PATTERN
(Cite as: Goodman v. Gus Corp., 185 F. Supp. 3d 216 (D. Wag. 2013))
UNITED STATES DISTRICT COURT
DISTRICT OF WAGNER
________________________________________________
SAUL GOODMAN, WALTER WHITE, LYDIA RODARTE|
QUAYLE, AND JESSE PINKMAN, INDIVIDUALLY AND
|
ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
|
|
Plaintiffs,
|
|
- against |
|
GUS CORPORATION, INC.,
|
|
Defendant.
|
________________________________________________|
Case No. 13-2338
JAFFERY, District Judge.
Saul Goodman, Walter White, Lydia Rodarte-Quayle, and Jesse Pinkman (collectively
“Plaintiffs” or alternatively, the “Interns”) bring this action on behalf of themselves and all
others similarly situated against Defendant Gus Corporation, Inc. (“the Company”). Plaintiffs
allege that the Company violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201–
219, and the Wagner State Labor Law (“WSLL”),1 by classifying them as interns instead of
employees entitled to the minimum wage and overtime pay. Plaintiffs move for summary
judgment that they were “employees” covered by the FLSA and WSLL. Plaintiffs also move for
class certification of their WSLL claims and collective action certification under the FLSA. The
Company moves for summary judgment on the following grounds: (1) Plaintiffs were not
“employees” under the FLSA and WSLL; (2) the collective action conditionally certified under §
1
WSLL is identical in all respects to New York Labor Law (“NYLL”). N.Y. LABOR LAW §§ 1–1200 (McKinney
2013).
1
216(b) of the FLSA2 should be decertified; and (3) class action certification under the WSLL is
inappropriate. For the reasons set forth below, both of Plaintiffs’ motions are GRANTED and the
Company’s motions are DENIED.
BACKGROUND
The Company is incorporated in the State of Wagner and manufactures, markets, and
sells electronic cigarettes (“e-cigarettes”). It is a relatively new corporation that was hit hard
during the 2008 financial crisis, which ultimately delayed the release of its latest e-cigarette—the
Xhale. The Company has four major divisions: (1) Legal, (2) Research and Development
(“R&D”), (3) Corporate, and (4) Manufacturing.
In 2008, the Company started an unpaid summer internship program for undergraduate
college students and law students. The Company’s intern policy authorized each of its four
divisions to request interns to assist in day-to-day operations. A memorandum to all Company
employees described the dual objectives of the program, namely, to “provide interns with an
educational and real-world experience and serve as a valuable recruiting tool for the Company.”
Each division head had discretion to design the summer intern program to fit that division’s
needs. The policy also created an Intern Committee, comprised of two representatives from each
division as well as the Human Resources (“HR”) Director, which hosted company-wide intern
events.
The Company’s founder, Gustavo Fring, is an alumnus of Wagner State University
(“WSU”). He supports his alma mater by recruiting interns from both the undergraduate program
and law school, the Wagner State University School of Law (“WSUSOL”). The Company’s HR
office recruited each year’s intern class through an on-campus recruitment process. The career
2
By Memorandum Order 13-2836 dated January 17, 2013, this court conditionally certified Plaintiffs’ collective
action claims under § 216(b) for the purpose of giving notice to potential opt-in plaintiffs. See Appendix A.
2
services office of both academic institutions kept track of the number of summer interns who
were offered full-time positions with the Company after graduation. Since the internship
program began, 45% of those interns eligible for jobs were offered a full-time, permanent
position by the Company, and 85% of those interns offered a position accepted. In the fall of
2011, the Company interviewed 100 student candidates for its 2012 summer intern class. After
the interviews, the Company accepted sixteen interns—four for each division.
Every intern was required to attend the two-day Summer Intern Orientation at the start of
the program, at which they learned about the history, business, philosophy, and structure of the
Company. [*217] The Intern Committee also scheduled weekly company-wide seminars for the
interns, including regular Friday morning sessions. At these sessions, a current Company
employee would discuss his or her position, and offer advice about how to have a successful
career at the Company.
Each of the named Plaintiffs interned in one of the Company’s four divisions during the
summer of 2012. Plaintiff Saul Goodman (“Goodman”), a rising third-year law student at
WSUSOL, was hired as a summer legal intern in the Legal division with the Office of the
General Counsel (“OGC”). The OGC is responsible for the company’s legal affairs. OGC
employee and lawyer, Matthew James Babineaux, son-in-law of the Company’s founder, was
assigned to mentor Goodman and the three other legal interns, all rising third-year students at
WSUSOL. Babineaux distributed and reviewed every assignment and was solely responsible for
giving individualized feedback to each intern. He also offered general career advice and
answered questions.
Goodman was assigned to research and write substantive legal memoranda and maintain
the database that tracks the Company’s ongoing litigation. OGC interns were required to use
3
their personal laptops to complete their assignments. Babineaux also told Goodman that, to save
the OGC money on legal research costs, “it would reflect very well” on Goodman to use his
school-provided LeiboLaw and PegsusNexus3 accounts for his assignments rather than the OGC
accounts to which Goodman had access. The OGC held intern trainings on LeiboLaw and
PegsusNexus tailored to researching potential liability and intellectual property issues related to
e-cigarettes. Goodman was also responsible for an ongoing research project concerning the
Wagner State Legislature's proposal to ban e-cigarettes in public places. Goodman worked
alongside law clerks, who were recent law school graduates and were paid an hourly rate. Many
of the law clerks were former Company interns, and after bar admission, the Legal division
would consider some for permanent positions as entry-level assistant corporate counsel.
Plaintiff Walter White (“White”), a rising undergraduate junior majoring in applied
chemistry at WSU, interned with the R&D division. R&D develops new products and researches
the chemical composition of components in e-cigarettes, including new flavors and the propylene
glycol filler solution, which catalyzes vaporization. R&D interns also worked alongside
employees classified as Laboratory Technician I, mostly new hires from the previous year’s
summer intern class.
Gale Boetticher (“Boetticher”), an assistant researcher employed full-time by the
Company, was the assignment coordinator for, and supervisor of, all R&D interns. He distributed
assignments including laboratory experiments, computer models, and research for scientific
publications discussing the health effects of e-cigarettes and the technology behind creating new
nicotine flavor compounds and their subsequent vaporization. All R&D interns participated in a
three-day laboratory safety course.4 White conducted research experiments and drafted reports
3
4
LeiboLaw and PegsusNexus are legal research databases similar to Westlaw and LexisNexis.
Such safety trainings are mandated by the Occupational Safety and Health Administration (“OSHA”).
4
on the results. He excelled because the work was very similar to his advanced chemistry
laboratory assignments at school, for which he earned straight A’s.
When Boetticher recognized White’s exceptional qualifications, he assigned White to
assist him with research and publication for an article on the positive health effects of ecigarettes, which he co-authored with the Company. [*218] For his hard work on the publication,
White was listed as a contributor in the paper’s acknowledgments. Although Boetticher usually
spent two months researching and drafting his articles for publication, he spent four months
researching and writing this particular paper, in part because he needed to review all of White’s
findings.
Due to the R&D division’s focus on e-cigarettes, White had the unique opportunity to use
new technology that he had not studied in school. Boetticher told White that the technology,
which analyzed ways to improve heating to vaporize liquid, was industry-specific to the
development of e-cigarettes.
Plaintiff Lydia Rodarte-Quayle (“Rodarte-Quayle”), a rising undergraduate junior finance
major at WSU, served as a 2012 Corporate division summer intern. As required by the division,
Rodarte-Quayle enrolled, at her expense, in a three-credit summer course at WSU entitled
“Externship Seminar & Placement.” Because the division has a lateral-governance structure,
Rodarte-Quayle and her fellow Corporate interns had no direct supervisor, but instead were
supervised by the Company’s Intern Committee.
A week before the summer internship program began, Marie Schrader, the lead
administrative assistant in the division, took a three-month maternity leave. Rodarte-Quayle and
the other Corporate interns divided up Schrader’s daily clerical responsibilities including sorting
mail, running errands, making copies of documents, and answering phones. When they were not
5
performing clerical duties, the Corporate interns were assigned to shadow Company executives.
Rodarte-Quayle also entered data and tracked records necessary for financial bookkeeping. One
day while sorting files, she discovered a printed email in which an executive suggested that the
division use interns to distribute free samples of the Company’s new Xhale e-cigarettes at local
bars on Saturday nights to advertise the product. See Appendix B. Rodarte-Quayle told the other
Corporate interns about the email.
Plaintiff Jesse Pinkman (“Pinkman”), an undergraduate engineering student at WSU,
interned in the Manufacturing division where he helped increase organizational efficiency. He
assisted the lead quality engineer, Mike Ehrmantraut (“Ehrmantraut”), to improve clerical and
industrial workflows. Pinkman worked alongside Quality Specialist I employees—entry-level
engineers who received substantial supervision during the first six months of employment. As
part of his responsibilities, Pinkman also operated heavy machinery, such as a lathe and milling
machine, when working on projects aimed at creating more efficient industrial designs of the
machinery that produce e-cigarettes. Production interns were closely supervised and were
required to take the Company’s safety classes before operating heavy machinery.5
Ehrmantraut spent a substantial part of his day directly supervising interns and assessing
the quality of their work. The Manufacturing division internship program provided a hands-on
experience in which the interns acquired new skills. For example, Pinkman learned how to use
“True Blue A1 VapoTech,” a proprietary atomizer technology that provides an efficient
vaporizing mechanism specific to the Company’s latest model of e-cigarette.6 He also learned
how to operate patented machinery that manufactured the latest e-cigarette model. [*219] One
day, Ehrmantraut commended Pinkman for a job well done on a design project that increased
5
These safety courses are required by federal and state OSHA regulations.
An example of this product can be found at http://smokelessimage.com/filter-tips/clearonano/volt-miniclearomizer.html.
6
6
efficiency by more than fifty percent and stated, “I could use hard workers like you. Keep up the
good work and I may well keep you on past the summer.”
Goodman, White, Rodarte-Quayle, and Pinkman usually met for lunch at the Company’s
communal cafeteria that served free lunches to the interns. On July 24, 2012, White told them
about the exciting research he worked on with Boetticher. Pinkman mentioned he was thrilled to
acquire skills and experience using equipment that he had only read about in courses at WSU.
Rodarte-Quayle was less enthusiastic. She was bored with her monotonous clerical tasks and
upset that her Saturday nights would be sacrificed if Corporate required its interns to distribute
Xhale samples at local bars. Goodman, who avidly followed legal trends, mentioned a recent
article he read in the WAGNER LAW JOURNAL about unpaid interns in New York who brought
suit against a major movie studio for wages and overtime. Rodarte-Quayle lit up, asserting that
she should be paid for her work, especially if she would be assigned overtime on Saturday
nights.
The next day over lunch, Rodarte-Quayle convinced the three other interns to meet with
Todd Alquist—a plaintiffs’ employment attorney—about getting paid for their hard work at the
Company. On Tuesday, July 31, they consulted with Mr. Alquist after work, and he was
enthusiastic about their potential claim. He advised them that other interns from their summer
class and, possibly past summer interns at the Company, could join their lawsuit. The four
interns were enthusiastically on board to vindicate their rights and the rights of other interns.
In August 2012, the Plaintiffs sued in the U. S. District Court for the District of Wagner
for violations of the minimum wage and overtime provisions of the FLSA and WSLL as
collective and class actions. On January 17, 2013, by Memorandum Order 13-2836, attached
hereto as Appendix A, this court conditionally certified the Plaintiffs’ collective action claims to
7
give notice to potential opt-in plaintiffs. Plaintiffs then published a notice to potential class
members on their web site www.savewalterwhite.com. Ultimately, sixty-seven individuals who
had been summer interns at the Company since 2008 opted in to the litigation under FLSA
§216(b).7 Plaintiffs moved for summary judgment that they were employees under the FLSA and
WSLL8 and for collective and class action certification, respectively, under each statute. The
Company filed a cross-motion for summary judgment that Plaintiffs were not employees under
the FLSA and WSLL and, in any event, did not meet the requirements for collective and class
action certification under the two applicable statutes.
DISCUSSION
I.
SUMMARY JUDGMENT STANDARD
A party is entitled to summary judgment if there is “no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” FED R. CIV. P. 56(a). To defeat a
summary judgment motion, the nonmoving party must present “specific facts showing that there
is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986) (quoting FED. R. CIV. P. 56(e)) (internal quotation omitted) (emphasis in original).
[*220] This showing requires more than the “mere existence of a scintilla of evidence.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
We must review a summary judgment motion in the light most favorable to the
nonmoving party and resolve factual ambiguities and draw reasonable inferences in their favor.
7
FLSA § 216(b) provides that “[n]o employee shall be a party plaintiff to any such action unless he gives his
consent in writing to become such a party and such consent is filed in the court in which such action is brought.”
8
The statutory definitions of “employee” (“means a mechanic, workingman or laborer working for another for
hire”) and “employed” (“includes permitted or suffered to work”) under the WSLL are nearly identical to the
definitions of “employee” (“any individual employed by an employer”) and “employ” (“to suffer or permit to
work”) under the FLSA and, therefore, the claims are evaluated using the same legal analysis.
8
Id. at 255. The nonmoving party may introduce evidence to show there is a genuine dispute of
material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
II.
FLSA AND WSLL PAYMENT CLAIMS
A. ARE INTERNS EMPLOYEES?
In 1938, Congress enacted the FLSA as part of President Franklin Delano Roosevelt’s
New Deal legislation to promote economic recovery from the Great Depression. See 29 U.S.C.
§§ 201–219 (1938). In passing the Act, Congress intended to eliminate “labor conditions
detrimental to the maintenance of the minimum standards of living necessary for the health,
efficiency and well-being of workers.” Id. § 202(a); see also United States v. Rosenwasser, 323
U.S. 360, 361 (1945). The FLSA established minimum wage, overtime, and record-keeping
standards governing both full and part-time workers in the public and private sector.
In interpreting the Act, the Supreme Court determined that its remedial purpose was to
alleviate “unequal bargaining power as between employer and employee,” and provide “certain
segments of the population [with] required federal compulsory legislation to prevent private
contracts on their part which endangered national health and efficiency.” Brooklyn Sav. Bank v.
O’Neil, 324 U.S. 697, 706 (1945). The Court also found the FLSA was designed to protect the
country’s most vulnerable workers by “aid[ing] the unprotected, unorganized and lowest paid of
the nation’s working population; that is, those employees who lacked sufficient bargaining
power to secure for themselves a minimum subsistence wage.” Id. at 707 n.18.
To effectuate the FLSA’s expansive remedial purpose, Congress used equally broad
statutory language. Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1534 (7th Cir. 1987).
Specifically, the Act defines “employee” as “any individual employed by an employer,” and
“employ” as “to suffer or permit to work.” 29 U.S.C. §§ 203(e)(1), (g). Senator Hugo Black, the
9
bill’s sponsor, referred to the “definition of employee . . . [as] the broadest definition that has
ever been included in any one act.” 81 Cong. Rec. 7656–57 (1935).
However, the Act’s general command to interpret its language broadly has proven
difficult to apply. See Henthorn v. Dep’t of Navy, 29 F.3d 682, 684 (D.C. Cir. 1994). In light of
the Act’s circular definitions of “employee” and “employ,” courts have differed over which
groups of workers are covered by the Act. As the Supreme Court observed in a 1992 decision
involving enforcement of the substantive provisions of ERISA that turned on whether a former
insurance agent was an “employee” and, therefore, a benefit plan “participant”: “We have often
been asked to construe the meaning of ‘employee’ where the statute containing the term does not
helpfully define it.” Nationwide Mutual Ins. v. Darden, 503 U.S. 318, 322 (1992) (“employee” in
the context of ERISA); see also Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947)
(“employee” in the context of the FLSA). The Court has applied traditional tools of statutory
interpretation to decide who is an “employee,” Darden, 503 U.S. at 326, as well as an “economic
realities” test [*221] to determine the breadth of FLSA coverage, Rutherford Food, 331 U.S. at
727–29.
B. “ECONOMIC REALITIES” TEST AND THE “TRAINEE” EXCEPTION
In Rutherford Food Corp. v. McComb, workers who boned beef in a meat processing
plant were found to be employees under the FLSA and not independent contractors, despite the
fact that they worked under individual contracts, owned their own tools, and were paid
collectively per hundredweight of boned beef that they divided among themselves. 331 U.S. at
724. The Court did not apply a common law agency test to decide whether the workers were
employees or independent contractors because, as the Tenth Circuit explained, “the [FLSA]
concerns itself with the correction of economic evils through remedies which were unknown at
10
common law.” Id. at 727–29. The Court noted that, as in other federal legislation, the FLSA
contained “no definition that solves problems as to the limits of the employer-employee
relationship.” Id. at 728.
The Court cited its 1947 decision in Walling v. Portland Terminal Co. for the proposition
that although the FLSA’s definition of “employ” was expansive, it was not so broad as to include
those workers “who, without any express or implied compensation agreement, might work for
their own advantage on the premises of another.” 330 U.S. 148, 150, 152 (1947). The application
of the “underlying economic realities” test in light of the totality of the circumstances led the
Court to the conclusion that the beef boners were employees. Rutherford Food, 331 U.S. at 730.
The Court considered the nature of the employees’ duties on the assembly line, the fact that the
work was conducted primarily on the employer’s premises, the level of supervision over the
employees, and the extent to which the employees’ work was coordinated towards a common
goal. Id. at 726. The Court concluded that the “operations at the slaughterhouse constituted an
integrated economic unit.” Id. at 729
In support of its position that the Interns herein were not “employees” under the FLSA
and the WSLL, the Company argued that the Interns fell under the “trainee” exception
established by the Supreme Court in Portland Terminal. In that case, the U.S. Department of
Labor (“DOL”) sought to enjoin a railroad from refusing to pay the minimum wage to workers
who were applicant-trainees for yard brakemen positions. Portland Terminal, 330 U.S. at 149.
After successful completion of a seven to eight day training course, applicant-trainees
were considered for employment as yard brakemen. Walling v. Portland Terminal Co., 155 F.2d
215, 217 (1st Cir. 1946). In the course, an applicant “learn[ed] the routine activities by
observation and [was] then gradually permitted to do actual work under close scrutiny.” Portland
11
Terminal, 330 U.S. at 149. Only when the trainee-applicants had completed this closelysupervised training and were deemed competent by their supervisors, were they added to a list
“from which the company [drew] when their services [were] needed.” Id. at 150. Notably, the
company paid each trainee four dollars per day after an applicant-trainee had completed the
course and was added to the pool of eligible brakemen, but did not pay trainees during the
training program. Portland Terminal, 155 F.2d at 217. Consequently, an applicant-trainee
received no remuneration if he did not complete the training period or was not certified as
competent. Id. [*222]
The Court analyzed the applicant-trainees’ employment status at the railroad taking into
consideration the totality of the circumstances of the training program. Portland Terminal, 330
U.S. at 150. The railroad derived no “immediate advantage from any work done by the trainees”
aside from increasing their prospective labor pool. Id. at 153 (internal citation omitted).
Additionally, the Court found that the trainees may have “actually impede[d] and retard[ed]” the
railroad’s business inasmuch as supervisors conducted the practical training. Id. at 150. Further,
the trainees did not displace regular employees because regular employees were assigned to
supervise their work. Id. Ultimately, the railroad employed trainees who successfully completed
the training and were deemed competent. Id. The Court concluded that the statute “cannot be
interpreted so as to make a person whose work serves only his own interest an employee of
another person who gives him aid and instruction.” Id. at 152.
Portland Terminal established a narrow exception to FLSA coverage for non-employee
trainees not applicable here. The Company’s unpaid internship program was not merely a tool
used to screen prospective workers; the interns worked on substantive projects for the Company
analogous to that of paid employees. Accordingly, this court declines to follow Portland
12
Terminal because the interns in the four divisions of the Company were not “applicant-trainees.”
C. DOL FACT SHEET #71
In 2010, the DOL issued Fact Sheet #71 to address Portland Terminal’s application to
internships at “for-profit” private sector employers. Fact Sheet #71, Internship Programs Under
The
Fair
Labor
Standards
Act,
DEP’T
OF
LABOR
(April
2010),
available
at
http://www.dol.gov/whd/regs/compliance/whdfs71.pdf (“Fact Sheet #71”).9 In the fact sheet, the
DOL promulgated a six-factor test, noting that internships “in the ‘for-profit’ private sector will
most often be viewed as employment, unless the test below relating to trainees is met.” Id. The
DOL warned that an “exclusion from the definition of employment is necessarily quite narrow
because the FLSA’s definition of ‘employ’ is very broad.” Id. The DOL stated, further, that
exclusion from FLSA coverage would require that all six factors be met for the court to conclude
that an employment relationship did not exist under the FLSA. Id. The specific criteria adopted
from Portland Terminal and applied to private sector internships are:
1. The internship, even though it includes actual operation of the facilities of the
employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of
existing staff;
4. The employer that provides the training derives no immediate advantage from the
activities of the intern; and on occasion its operations may actually be impeded;
9
The DOL previously issued agency guidelines relying on Portland Terminal to clarify when an individual is a
trainee or an employee under the FLSA. See Reich v. Parker Fire Prot. Dist., 992 F.2d 1023, 1027 (10th Cir. 1993)
(the same six factors “have appeared in Wage and Hour Administrator opinions since at least 1967.”). Courts
deferred to these DOL guidelines to determine an individual’s employment status under the FLSA. E.g.,
McLaughlin v. Ensley, 877 F.2d 1207, 1211–12 (4th Cir. 1989) (DOL guideline is a “reasonable application of the
Fair Labor Standards Act and Portland Terminal and entitled to deference by this court.”); Atkins v. Gen. Motors
Corp., 701 F.2d 1124, 1127–28 (5th Cir. 1983) (deferring to the DOL guidelines to find individuals in state-run
training program for an automobile headlight plant were trainees); compare Reich, 992 F.2d at 1027 (“We are
satisfied that the six criteria are relevant but not conclusive to the determination of whether these firefighter trainees
were employees under the FLSA.”).
13
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the
time spent in the internship. Id. [*223]
1. Was the Company’s training similar to that offered in an educational environment?
For training in an internship program to be “educational” it need not be identical to that in
a classroom. See Glatt v. Fox Searchlight Pictures, Inc., 293 F.R.D. 516, 532 (S.D.N.Y. 2013).
However, training cannot merely educate interns about the employer’s policies as the Intern
Committee did with the two-day Summer Intern Orientation. Instead, the training must “teach
skills that are fungible within the industry.” Reich, 992 F.2d at 1028. Furthermore, an internship
is not necessarily an educational experience simply because an intern received academic credit.
Cf. Kaplan v. Code Blue Billing & Coding, Inc., 504 Fed. Appx. 831, 834 (11th Cir. 2013)
(interns at a medical billing and coding company were not FLSA employees, in part because they
received academic credit for their degrees in medical billing). The content of the interns’ training
in all divisions here was not similar to coursework in a classroom. Nor was the internship
program structured around an academic experience in which the interns acquired skills
applicable to multiple employment settings. Fact Sheet #71, supra. Additionally, RodarteQuayle’s receipt of academic credit was not determinative of this DOL factor. As a condition of
her internship, the Corporate division required her to pay tuition for credits. Conditional
academic credit did not insulate the Company from FLSA liability. See, e.g., Kaplan, 504 Fed.
Appx. 831. Rodarte-Quayle completed clerical tasks, including sorting mail and answering
telephone calls. These tasks were not fungible skills required to succeed in the corporate business
world. In the DOL’s view, an internship with broader academic content is a bona fide
educational experience rather than employment. See Fact Sheet #71, supra.
14
2. Was the internship experience for the benefit of the Interns?
In addition to listing the internship on their resumes, the interns acquired new skills and
benefited from professional development opportunities. White received a publication credit from
his research with Boetticher. Under supervision, he performed research and co-authored
scientific scholarship that required an advanced degree in chemistry. Pinkman worked on
specialized equipment to manufacture e-cigarettes. He assisted in designing the proprietary
atomizer used in the Company’s Xhale e-cigarette created specifically for the Company’s
patented propylene glycol filler solution that catalyzes vaporization. The mechanism produced
96% pure vapor, giving the Company a competitive advantage. Pinkman was a member of a
small group with specialized knowledge of this technology. Goodman drafted legal memoranda
in an emerging field of law, namely, products liability of e-cigarettes—a new, highly specialized
field that required both legal and technical proficiency. He also assessed the legality of the
Wagner State Legislature’s proposal to ban e-cigarettes from public accommodations. RodarteQuayle shadowed Corporate executives to meetings where she learned methods of marketing ecigarettes to millions of consumers.
The Company reaped the public relations benefits of Boetticher and White’s publication
regarding the positive health effects of e-cigarettes. [*224] Likewise, Pinkman’s assistance in
designing proprietary technology was a boon to the Company’s revenues. Goodman worked to
protect the Company from legal exposure through his research. Rodarte-Quayle’s acumen was
put to good use in making the Company’s product more popular on a global scale. Although the
Company benefited from each individual intern’s work, this did not negate the benefit enjoyed
15
by the interns. Therefore, this factor favored the Company’s position that the Plaintiffs were not
employees.
3. Did the Plaintiffs displace regular employees?
The Company used Interns to displace at least one regular employee. Marie Schrader,
lead administrative assistant in the Corporate division, started maternity leave a week before the
Interns began working. The Company did not hire a replacement during the summer but rather
had the Corporate interns share Schrader’s clerical tasks. Furthermore, the tasks performed by
White, Pinkman, and Goodman were the same as those performed by the full-time employees in
entry level positions of their respective divisions. Because the Interns performed the work of
regular employees, and because their work was supervised, this factor unequivocally favored the
Plaintiffs’ employee status.
4. Did the Company obtain an immediate advantage from Plaintiffs’ work?
An employer must derive no immediate advantage from the intern’s activities unless that
advantage is de minimis. Atkins v. Gen. Motors Corp., 701 F.2d 1124, 1129 (5th Cir. 1983).
Here, the Company received an immediate benefit from the Plaintiffs’ work despite the fact that
supervisors directed them. The Company’s argument that the Interns were exempt from FLSA
protection because they required supervision is unpersuasive. Courts have found that “[a]n
employee is entitled to compensation for the hours he or she actually worked, whether or not
someone else could have performed the duties better or in less time.” Donovan v. New Floridian
Hotel Inc., 676 F.2d 468, 471 n.3 (11th Cir. 1982); see also Glatt, 2013 WL 2495140 at *13. The
evidence showed that some work performed by the Interns was comparable to that assigned to
newly-hired employees. In the OGC, for example, the Interns did not perform more advanced
16
work than that of the paid law clerks; their work was of comparable complexity. However, the
law clerks, awaiting bar admission, worked on an hourly basis.
Furthermore, many Interns performed work in a cost-saving manner. The Company saved
money by requiring the legal Interns to complete some work that had been started by law clerks,
and required the Interns to work on their personal laptops while at the office. Finally, legal
Interns were encouraged to use their school-provided LeiboLaw and PegsusNexus accounts,
rather than the Company’s accounts, to perform research projects at a substantial savings to the
Company. The R&D and Manufacturing divisions also derived an immediate advantage from the
Interns who conducted studies and experiments that contributed to the findings of positive health
effects of e-cigarettes and ways to improve efficiency in their production. The results of these
experiments put the Company at a competitive advantage in the marketplace.
Both White and Pinkman were heavily supervised, thereby impeding the work of their
supervisors. [*225] However, the DOL noted that “if the intern receives the same level of
supervision as the employer’s regular workforce, this would suggest an employment relationship,
rather than training.” Fact Sheet #71, supra. In the Manufacturing division, Pinkman received
supervision similar to that provided to entry-level engineers. All of the engineers’ work was
reviewed during their first six months of employment. Ehrmantraut reviewed Pinkman’s work to
the same extent he reviewed all entry-level employees. Furthermore, the record did not show that
supervisors’ productivity would have increased in the absence of the Interns. Although
Boetticher worked for two months on most publications, the research paper with White was more
complicated and time-consuming. The paper on the positive health effects of e-cigarettes took
four months to complete in part because he reviewed White’s findings. It might have taken
Boetticher even longer if White had not conducted independent research. Thus, while
17
supervising the Interns may have impeded the work of Boetticher and Ehrmantraut to some
degree, the net gain to the Company gave it an immediate advantage. This DOL factor favored
the Plaintiffs’ employee status.
5. Were Plaintiffs entitled to a job at the end of their internships?
Plaintiffs relied on job placement statistics and an isolated remark by one supervisor,
Ehrmantraut, to Pinkman, to show that they expected permanent jobs after the internship. The
job placement statistics were collected by WSU and WSUSOL based on offers extended to, and
accepted by, former Company interns within the last few years. Although the Company
employed many WSU and WSUSOL graduates after their internships, they had no reasonable
expectation of continued employment or re-employment because such a guarantee was not made
an explicit part of their internship program, nor were they informed otherwise. Rodarte-Quayle,
who had two years remaining to complete her undergraduate degree, could have had no
reasonable expectation that the Company would have a position available for her two years
hence. See Reich, 992 F.2d at 1025, 1029.
Furthermore, the isolated remark by Ehrmantraut to Pinkman about the possibility of
keeping him beyond the summer did not create a reasonable expectation of employment on
Pinkman’s part. Ehrmantraut did not have authority to make employment decisions, nor did he
specify if the extension was an offer of permanent employment or merely a few additional weeks
as an unpaid intern. Therefore, these facts were insufficient to create an expectation of
employment. This DOL factor favored the Company’s argument that Plaintiffs were not
employees.
18
6. Did the Company and the Plaintiffs understand they were not entitled to wages?
The Company advertised at WSU and WSUSOL that its summer program was an unpaid
internship, and students who applied and were recruited were made aware of this fact. Although
this factor favored the Plaintiffs’ intern status, it does not hold much weight and is disregarded.
FLSA minimum wage and overtime pay coverage are protections that cannot be waived. See
Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 301–02 (1985) (“Alamo
Foundation”). There is strong public policy preventing individual waiver because an employer
would gain a market advantage from volunteer labor. See Brooklyn Sav. Bank v. O’Neil, 324
U.S. 697, 710 (1945). [*226] This would reduce the minimum wage and overtime protections of
the labor force as a whole. See Alamo Foundation, 471 U.S. at 302.
An analysis of the above six factors, viewed in the totality of the circumstances of the
Company’s internship program, reveals that Plaintiffs were, in fact, employees for the purposes
of the FLSA. Under a totality of the circumstances approach, “[n]o single factor is controlling.”
Glatt, 293 F.R.D. at 532. The evidence did not prove all six factors required by the DOL to find
that the Interns were “trainees” and thereby excluded from FLSA protection. Plaintiffs did not
receive training similar to that provided in an educational environment, displaced one regular
employee, and provided the Company with an immediate advantage. Plaintiffs’ understanding
that they would not receive compensation is irrelevant because FLSA protections cannot be
waived. Two of the six factors favored “trainee” status, namely that the internship benefited the
Interns and they had no reasonable expectation of permanent employment thereafter. These two
factors are insufficient to overcome the presumption that Plaintiffs were employees.
Further, the Company’s internship program differed in material respects from the one-totwo week training program in Portland Terminal in which the railroad trained prospective
19
employees in a transferable skill. Here, Plaintiffs worked for several months alongside other
entry-level workers and completed identical tasks. Plaintiffs did not fall within Portland
Terminal’s narrow trainee exception to the FLSA. This court concludes, therefore, that the
Company violated both the FLSA and WSLL for failing to pay the Interns the minimum wage
and overtime pay.
The Company urged this court to disregard the DOL factors and find that the Interns were
“trainees.” First, the Company contended that the DOL factors were not entitled to judicial
deference. In the Company’s view, the DOL misapplied Portland Terminal to the extent that
some or all of the six factors were merely present in the railroad’s training program and were not
necessary to deem an individual a “trainee” rather than an employee. Second, relying on the
reasoning of the Sixth Circuit in Solis v. Laurelbrook Sanitarium & Sch., Inc., the Company
argued that this court should apply a “primary beneficiary test” to determine whether the benefits
to the Interns outweighed the benefits to the Company. 642 F.3d 518, 526 (6th Cir. 2011).
This court notes that the Thirteenth Circuit has not addressed whether interns fall within
the “trainee” exception to the FLSA. Although some circuits have applied a “primary
beneficiary” test to decide employment status under the FLSA, the test has little support in
Portland Terminal. The Supreme Court did not weigh the benefits to the trainees against those to
the railroad, but relied on the fact that the training program served only the trainees’ interests and
that the employer received “no ‘immediate advantage’ from any work done by the trainees.”
Portland Terminal, 330 U.S. at 153. Furthermore, Portland Terminal created a narrow exception
for a special class of “applicant-trainee” brakemen. The Court has held that “[a] broader or more
comprehensive coverage of employees [under the FLSA] . . . would be difficult to frame.”
20
Rosenwasser, 323 U.S. at 362. The Court had “no doubt as to the Congressional intention to
include all employees within the scope of the [FLSA] unless specifically excluded.” Id. at 363.
Moreover, a “primary beneficiary” test is subjective and unpredictable. [*227] The
Company argued the same internship position might be compensable as to one intern, who took
little from the experience, but not compensable as to another, who learned more. Under this
standard, an employer could not predict whether it would be required to pay its interns. Such a
standard is unmanageable. By contrast, the DOL factors were drawn specifically from Portland
Terminal. Promulgated by the DOL, the six-factor test is entitled to deference. This court agrees
with the courts that have deferred to the DOL’s expertise in wage and hour cases and applied the
six factors to determine employee status under the FLSA,10 and concludes that Plaintiffs were
employees under the FLSA and WSLL.
III.
CERTIFICATION OF PLAINTIFFS’ RULE 23 CLASS ACTION CLAIMS AND
FLSA SECTION 216(b) COLLECTIVE ACTION CLAIMS
Plaintiffs move to certify a class action and a collective action consisting of: [a]ll
individuals who had unpaid internships at Gus Corporation in the State of Wagner between May
1, 2008, and September 1, 2012.
A. LEGAL STANDARD FOR RULE 23 CLASS ACTIONS
Class certification is governed by Rule 23. Under Rule 23(a), the party seeking
certification must demonstrate, first, that: (1) the class is so numerous that joinder of all members
is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or
Other courts, notably Judge Harold Baer of the Southern District of New York, have expressed uncertainty about
how to apply the DOL factors. Wang v. Hearst Corp., 293 F.R.D. 489, 493 (S.D.N.Y. 2013) (“While the weight to
be given to these factors is far from crystal clear, the Fact Sheet adds to the confusion with [its] introductory
language: whether an internship or training program meets this exclusion depends upon all of the facts and
circumstances of each such program.”) (internal quotations omitted). Judge Baer further elaborated that “the six
factors in Fact Sheet #71 ought not be disregarded; rather, it suggests a framework for an analysis of the employeeemployer relationship. After all, they emanate from the agency that administers the laws under which Plaintiffs
brought this lawsuit.” Id. at 493–94.
10
21
defenses of the representative parties are typical of the claims or defenses of the class; and (4)
the representative parties will fairly and adequately protect the interests of the class. FED. R. CIV.
P. 23(a). Second, the proposed class must satisfy at least one of the three requirements in Rule
23(b). Plaintiffs relied on Rule 23(b)(3), which “requires the party seeking certification to show
that ‘questions of law or fact common to class members predominate over any questions
affecting only individual members’ and that class treatment would be superior to individual
litigation.” Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010).
B. FLSA COLLECTIVE ACTION DEFINED
The FLSA provides a mechanism by which an employee may sue to recover damages for
violations of the Act on behalf of himself and “similarly situated” employees. 29 U.S.C. §
216(b); Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013). Such a representative suit
is known as a “collective action.” See Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 169–70
(1989).11 Section 216 created a specific cause of action for employees with minimum-wage and
overtime pay claims and included in its original form a provision for the modern day collective
action device. As originally enacted, the FLSA allowed employees: (1) to maintain suits “for and
in behalf of himself or themselves and other employees similarly situated,” or (2) “designate an
agent or representative to maintain such action for and in behalf of all employees similarly
situated.” § 216(b); 29 C.F.R. § 790.20 (2013). Thus, the FLSA did not require plaintiffs to
affirmatively opt into a suit, but allowed plaintiffs to designate an agent or representative to
maintain an action on behalf of all employees similarly situated.
The FLSA’s opt-in requirement distinguished it from class actions under Rule 23. [*228]
When Rule 23 was amended in 1966, the FLSA collective action was unchanged, with express
11
“Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the
employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime
compensation, as the case may be, and in an additional equal amount as liquidated damages.” § 216(b).
22
direction from Congress that the FLSA’s opt-in requirement was “not intended to be affected by
Rule 23.” FED. R. CIV. P. 23, advisory committee notes (1966). In view of the fact that the FLSA
expressly provides for collective actions, a claim for wages or overtime pay under the FLSA may
not be pursued as a traditional class action under Rule 23. The Act did not define “similarly
situated,” or provide a mechanism for certifying an action. Courts therefore have applied a twostep process to determine whether employees are “similarly situated.” O’Brien v. Ed Donnelly
Enters., 575 F.3d 567, 584 (6th Cir. 2009); Hipp v. Liberty Nat. Ins. Co., 252 F.3d 1208, 1219
(11th Cir. 2001).
The first stage, known as the “notice” or “conditional certification,” requires a court to
determine whether notice of the action should be given to potential opt-in plaintiff-employees.
Hoffman-La Roche, 493 U.S. at 169–70. At this stage, a plaintiff must make a threshold showing
that plaintiff(s) and members of the proposed action are “similarly situated.” See Quinteros v.
Sparkle Cleaning, Inc., 532 F. Supp. 2d 762, 772 n.6 (D. Md. 2008). As set forth in Appendix A,
this court issued an order conditionally certifying the collective action on January 17, 2013.
The second stage, “typically precipitated by a motion for ‘decertification’ by the
defendant usually filed after discovery is largely complete and the matter is ready for trial[,] . . .
the court has much more information on which to base its decision and makes a factual
determination on the similarly situated question.” Hipp, 252 F.3d at 1218. The “similarly
situated” standard at the second stage is less “lenient” than at the first, as is the plaintiffs’ burden
in meeting the standard. Andersen v. Cagle’s, Inc., 488 F.3d 945, 953 (11th Cir. 2013).
C. PRIOR ORDER OF CONDITIONAL CERTIFICATION UNDER FLSA
This court granted Plaintiffs’ motion for conditional certification by order dated January
17, 2013. See Appendix A.
23
D. REQUIREMENTS MET FOR RULE 23 CLASS ACTION CERTIFICATION
The numerosity requirement is met if “the class is so numerous that joinder of all
members is impracticable.” FED. R. CIV. P. 23(a)(1). “[N]umerosity is presumed at a level of 40
members.” Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 2005). While a
party seeking class certification must prove “there are in fact sufficiently numerous parties,”
Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011), there is no minimum number
required. Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993). Each circumstance must be
examined on a case-by-case basis. Gen. Tel. Co. v. E.E.O.C., 446 U.S. 318, 330 (1980).
Although the proposed class does not approach the level where numerosity is unequivocal, it is
large enough such that joinder would be impractical under the circumstances.
Plaintiffs offered the respective intern databases of the Company, WSU, and WSUSOL,
as proof that at least sixty-seven class members interned at the Company between May 1, 2008,
and September 1, 2012. Inexplicably, the Company argued that this evidence was not reliable as
proof of numerosity. At the very least, the proposed class was likely to be larger than forty
members given the fact that the Company and the schools have been affiliated for more than five
years, and the record suggests that the Company consistently hired interns throughout this
period. [*229] The proposed class period also dates from 2008, but sixteen of the sixty-seven
interns in the proposed class were accepted into the 2012 summer internship program.
Furthermore, because the amount of each individual’s recovery is expected to be relatively low,12
and there exist many more graduates from the Company’s internship program than the proposed
class, joinder is impracticable. As a result, the numerosity requirement has been met.
12
Plaintiffs’ expert estimated that each intern’s two-month, forty-plus hours per week internship at the federal
minimum wage, entitled each of them to $2,320 for regular hours and $870 for overtime, before taxes.
24
Commonality is the crux of the analysis under Rule 23. The Company argued that the
Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes represented a watershed that
heightened the Rule 23(a)(2) commonality standard that must be applied to all motions for class
action certification.13 131 S. Ct. 2541 (2011). The Company argued that the Plaintiffs must
demonstrate that the prospective class members “have suffered the same injury,” and that they
cannot prove this injury by showing “merely that they have all suffered a violation of the same
provision of law,” which, prior to Wal-Mart, had been sufficient to satisfy commonality. Id. at
2551. Furthermore, the Company contended that Wal-Mart articulated a new test for the
commonality requirement, namely, that the common contention “must be of such a nature that is
capable of classwide resolution—which means that determination of its truth or falsity will
resolve an issue that is central to the validity of each one of the claims in one stroke.” Id. This
court disagrees.
In a 5-4 decision, the Supreme Court in Wal-Mart addressed the commonality
requirement of Rule 23(a)(2). Dukes and her female co-workers alleged sex discrimination on
behalf of 1.5 million female employees of Wal-Mart in violation of Title VII of the Civil Rights
Act of 1964, as amended. Id. at 2547. The plaintiffs argued that despite Wal-Mart’s written
corporate policy of non-discrimination, local managers’ discretion over individual employee pay
13
The Company’s assertion that the Wal-Mart decision was the “death knell of employment class actions,”
McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 05-C-6583 (RWG), 2011 WL 4471028, at *1
(N.D. Ill. Sept 19, 2011), is undermined by the recent class action certification in McReynolds v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012). Judge Posner, reversing the lower court’s denial of class
certification based on Wal-Mart, certified a class of 700 African-American brokers and former brokers challenging
two company policies as racially discriminatory under Title VII on the grounds that a common contention, for the
purposes of Rule 23 commonality, existed as to whether it was lawful for the brokerage to adopt company policies
that enabled individual acts of bias. McReynolds, 672 F.3d at 489. Merrill Lynch adopted a policy that permitted
teams to form and to exercise their discretion in admitting new members, and adopted a second policy that
exacerbated the racial disparity arising from the delegation of discretion. Id. Because the policies provided the
commonality that bound the class together, the court did not require more evidence of commonality. Id. at 490.
Essential to McReynolds were companywide policies that contributed to the alleged disparate impact that arose from
the delegation of discretion to individual brokers. See Bolden v. Walsh Constr. Co., 688 F.3d 893, 898 (7th Cir.
2012) (“This single national policy [in McReynolds] was the missing ingredient in [Wal-Mart].”).
25
and promotions favored male employees, and had a disproportionately negative impact on
women. Id. at 2548. Plaintiffs’ proposed class included “all women employed at any Wal-Mart
domestic retail store at any time since December 26, 1998, who have been or may be subjected
to Wal-Mart’s challenged pay and management track promotions policies and practices.” Id. at
2549 (internal citations omitted).
Justice Scalia, writing for the majority, found that the class of female retail employees
failed to meet Rule 23’s commonality requirement because commonality required a “common
contention,” consisting of both common questions and answers that must be resolved classwide.
Id. at 2551, 2556–57. Justice Scalia found that the only relevant policy was the one that provided
local managers with broad discretion over employment decisions about pay and promotions. Id.
at 2554. However, this policy did not raise common questions about the class claim, as there was
no common manner in which the local managers exercised this discretion. Id. Even if pay and
promotion decisions had a disparate impact, the class lacked commonality because Wal-Mart
could raise different defenses to these claims. Id. at 2555. Therefore, the class must rely on the
same employment practice required under Title VII’s disparate impact standard. Id.14
This court finds that the circumstances surrounding the heightened commonality
requirement in Wal-Mart are absent in this case and, therefore, finds it to be inapplicable. Rule
23 requires “questions of law or fact common to the class.” FED. R. CIV. P. 23(a). [*230] It does
not “require that all questions of law or fact raised in the litigation be common[,] . . . even a
14
Justice Ginsburg’s dissent criticized the majority for “disqualify[ing] the class at the starting gate by holding that
the plaintiffs cannot cross the ‘commonality’ line set by Rule 23(a)(2).” Wal-Mart, 131 S. Ct. at 2562. Justice
Ginsburg found that the lower court properly identified a common question in the litigation, namely, whether WalMart’s policy of discretion for pay and promotion decisions gave rise to unlawful discrimination under Title VII. Id.
at 2564. She objected to the majority’s more rigorous standard under Rule 23(b)(3), Id. at 2565, and criticized the
majority for focusing on the dissimilarities rather than the similarities and creating a chilling effect on potential
class-action plaintiffs, Id. at 2567. According to Justice Ginsburg, Rule 23 was meant to protect low-income
employees such as Betty Dukes and her female co-workers, who did not have the individual means to vindicate their
rights under federal law. The same may be said about the Plaintiffs in the instant matter.
26
single question of law or fact common to the members of the class will satisfy the commonality
requirement.” Wal-Mart, 131 S. Ct. at 2566 n.9 (Ginsburg, J., concurring in part and dissenting
in part) (emphasis added). Plaintiffs also identified several common questions concerning
possible WSLL violations including but not limited to: (1) whether the Company derived an
immediate advantage from Interns’ work; (2) whether interns displaced regular employees; and
(3) whether the Company’s internship program was for the benefit of the Interns. Plaintiff also
referred to evidence that is capable of answering common questions on a classwide basis.
The decision to certify the Intern Class despite Wal-Mart finds support in two recent
district court decisions in the Southern District of New York involving intern suits under the
FLSA and New York State Labor Law. See Glatt v. Fox Searchlight Pictures, Inc., 293 F.R.D.
516 (S.D.N.Y. 2013); Wang v. Hearst Corp., No. 12 CV 793(HB), 2013 WL 105784 (S.D.N.Y.
Jan. 9, 2013). With respect to the question of class action certification of the plaintiff-interns,
Judge William Pauley III in Glatt granted certification of the New York Labor Law claims,
finding that evidence of intern recruitment during busy periods, intern displacement of
permanent employees, and uncertainty about the legality of the internships from those who
managed the program was sufficient to generate common answers to wage and hour liability.
Glatt, 293 F.R.D. at 538–39. In contrast, Judge Baer in Wang came to the opposite conclusion.
While noting that the issue was a “close question,” he held that the commonality requirement
was not satisfied because the plaintiffs could not “show anything more than a uniform policy of
unpaid internship,” which was insufficient to establish commonality under Wal-Mart. Wang v.
Hearst Corp., 293 F.R.D. 489, 495 (S.D.N.Y. 2013). However, Judge Baer observed that even
after Wal-Mart, courts in the Southern District of New York have “routinely found commonality
in analogous misclassification cases under the NYLL.” Id. at 496.
27
Typicality “requires that the claims of the class representative be typical of those of the
class, and is satisfied when each class member’s claim arises from the same course of events, and
each class member makes similar legal arguments to prove the defendant’s liability.” Marisol A.
v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997) (internal citations omitted). Because the claims
“only need to share the same essential characteristics, and need not be identical, the typicality
requirement is not highly demanding.” Bolanos v. Norwegian Cruise Lines Ltd., 212 F.R.D. 144,
155 (S.D.N.Y. 2002). When it is alleged that the same unlawful conduct was “directed at or
affected both the named plaintiff and the class sought to be represented, the typicality
requirement is usually met irrespective of minor variations in the fact patterns underlying
individual claims.” Robidoux, 987 F.2d at 936–37 (1993) (internal citation omitted).
The Company argued that Plaintiffs did not meet this requirement because some Interns,
specifically Rodarte-Quayle and five Interns from previous years, received academic credit for
their internships. Plaintiffs countered that they were recruited by the same process and by the
same group of Company employees, and that each Intern’s wage claim was nearly identical to all
others under the WSLL. A university’s decision to grant academic credit is irrelevant to WSLL
coverage that relies on the working conditions and training provided by the alleged employer.
See Wang, 2013 WL 105784 at *3. [*231] The claims of the named and class Plaintiffs are
homogenous in that they were unpaid interns who should have been paid, and thus, the typicality
prong has been met.
The requirement that the named plaintiffs adequately represent the class “is motivated by
concerns similar to those driving the commonality and typicality requirements, namely, the
efficiency and fairness of class certification.” Marisol A., 126 F.3d at 378. Adequacy depends on
whether: “1) plaintiffs’ interests are antagonistic to the interest of other members of the class[,]
28
and 2) plaintiff’s attorneys are qualified, experienced and able to conduct the litigation.” In re
Flag Telecom Holdings Ltd. Sec. Litig., 574 F.3d 29, 35 (2d Cir. 2009) (quoting Baffa v.
Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000)) (internal quotations
omitted). The Company did not dispute either point.
To determine whether “a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy,” the court must consider:
(A) the class members’ interests in individually controlling the prosecution or
defense of separate actions; (B) the extent and nature of any litigation concerning
the controversy already begun by or against class members; (C) the desirability or
undesirability of concentrating the litigation of the claims in the particular forum;
and (D) the likely difficulties in managing a class action.
FED. R. CIV. P. 23(b)(3). In the instant circumstances, the “small recoveries available to
individual plaintiffs make a class action a more efficient mechanism.” Glatt, 293 F.R.D. at 538.
There are no known actions raising the same issue. Finally, this court is a desirable forum
because the proposed class was educated, lived, and worked in Wagner.
In addition to Rule 23(a)’s requirements, a plaintiff seeking to obtain certification of a
class action for money damages must establish one of the prongs of Rule 23(b). Amgen, Inc. v.
Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1191 (2013). The Rule 23(b)(3) predominance
inquiry “tests whether proposed classes are sufficiently cohesive to warrant adjudication by
representation.” Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 594 (1997). It is a more
demanding criterion than the commonality inquiry under Rule 23(a). Id. at 623–24. Class-wide
issues predominate “if resolution of some of the legal or factual questions that qualify each class
member’s case as a genuine controversy can be achieved through generalized proof, and if these
particular issues are more substantial than the issues subject only to individualized proof.” Moore
v. PaineWebber, Inc., 306 F.3d 1247, 1252 (2d Cir. 2002).
29
Plaintiffs have submitted generalized proof on the issue of the Company’s liability. As
long as a sufficient constellation of common issues binds class members together, variations in
the sources and application of statutes of limitations will not automatically foreclose class
certification under Rule 23(b)(3). See 5-23 Moore’s Federal Practice, § 23.46[3] (Matthew
Bender 3d ed. 2013). In a wage and hour class action under state law, common questions of
liability predominate over individual calculations of damages. See Torres v. Gristede’s Operating
Corp., No. 04 Civ. 3316 (PAC), 2006 WL 2819730, at *15 (S.D.N.Y. Sept. 29, 2006). [*232]
Plaintiffs cited Rule 23(b)(3), under which they must establish that “the questions of law
or fact common to class members predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy.” Id. at *16. The Supreme Court issued guidance on the Rule
23(b)(3) analysis most recently in Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013).
Comcast involved a class action antitrust suit by cable subscribers in the Philadelphia area
alleging that Comcast’s practice of concentrating operations within that region lead to supracompetitive pricing for their subscribers. Id. In seeking to certify a class action under Rule
23(b)(3), the district court held, and the Supreme Court agreed, that the plaintiffs had to show:
(1) that the existence of individual injury resulting from the alleged antitrust violation was
“capable of proof at trial through evidence that [was] common to the class rather than individual
to its members”; and (2) that the damages resulting from that injury were measurable “on a classwide basis” through use of a “common methodology.” Behrend v. Comcast Corp., 264 F.R.D.
150 (E.D. Pa. 2010). The Supreme Court held, first, that if the class action plaintiffs were to
prevail on their claims, they would only be entitled to damages resulting from the single theory
of liability accepted by the district court. Second, the Court held that evidence of damages in the
30
class action claims must measure only those damages attributable to that particular theory. Third,
if such evidence, in that case a statistical model, does not even attempt to measure damages
attributable to that theory, it could not “possibly establish that damages are susceptible of
measurement across the entire class for purposes of Rule 23(b)(3).” Comcast, 133 S. Ct. at 1433.
The circumstances in this case did not rise to the level of complexity and magnitude of
the claims or damages presented in Comcast. Every intern in the proposed class pleaded damages
that can be calculated by basic arithmetic and these damages all stem from a single theory of
liability: that the Company violated the WSLL by not classifying them as employees and not
paying them the minimum wage and overtime pay. Unlike Comcast, there are no significant
permutations involving different theories of liability among the damages claimed by individual
members. See id. at 1434. For the foregoing reasons, this court certifies Plaintiffs’ proposed class
under Rule 23(b)(3), with Saul Goodman as class representative.
E. MOTION FOR FLSA COLLECTIVE ACTION CERTIFICATION
CURRENTLY BEFORE THE COURT
In evaluating step two of the FLSA collective action certification process, courts must
look at relevant factors including: “(1) disparate factual and employment settings of the
individual plaintiffs; (2) the various defenses available to defendant[s] [that] appear to be
individual to each plaintiff; [and] (3) fairness and procedural considerations.” Thiessen v. GE
Capital Corp., 267 F.3d 1095, 1103 (10th Cir. 2001). Plaintiffs must establish, first, that their
“factual claims and employment backgrounds are sufficiently similar to warrant collective
treatment.” 2 Ellen C. Kearns, The Fair Labor Standards Act 19–154 (2d ed. 2010). Courts
further consider the class members’ job duties, geographic locations, employer supervision, and
compensation (or lack thereof in this case), and may take into consideration the existence of a
31
common employer policy, practice, or plan that allegedly violated the FLSA. Rawls v. Augustine
Home Health Care, Inc., 244 F.R.D. 298, 300 (D. Md. 2007). [*233]
The allegations of both the lead and opt-in Plaintiffs were straightforward, namely, that
the Company refused to compensate them as employees. Furthermore, the sixty-seven plaintiffs
who opted in after notification of the conditionally certified claim are all Wagner residents who
graduated from WSU and WSUSOL, and are alumni of the Company’s summer internship
program. The named and opt-in Plaintiffs’ shared employment experience is the “meaningful
identifiable [fact] or legal nexus that bind[s] [their] claims.” Falcon v. Starbucks, 580 F. Supp. 2d
528, 535 (S.D. Tex. 2008). This factor weighs heavily in favor of collective action certification.
With respect to the second factor, that is, available defenses, to the extent that an
employer’s defenses are general defenses applicable to the entire class, that factor militates in
favor of class certification. See Rawls, 244 F.R.D. at 300. Where common proof and
representative evidence prove plaintiffs’ claims, decertification is not proper. Morgan v. Family
Dollar Stores, Inc., 551 F.3d 1233, 1264 (11th Cir. 2008). The Company’s defense in its initial
answer to Plaintiffs’ complaint, and thereafter, was that the named and opt-in plaintiffs were not
employees under the “trainee exception” in Portland Terminal. The Company did not offer
individualized defenses to any of the claims, but merely alleged that individual defenses were
required for interns working in different divisions.
Concerning the third factor of fairness and procedural considerations, courts weigh
whether it is fair to both parties, as well as procedurally feasible, to adjudicate the action
collectively, keeping in mind the primary objective of § 216(b) to: (1) lower the burden on
individual plaintiffs by pooling resources; and (2) promote judicial efficiency by resolving in one
proceeding common issues of law and fact arising from the same cause of action. Nerland v.
32
Caribou Coffee Co., 564 F. Supp. 2d 1010, 1025 (D. Minn. 2007); see also Hoffmann-La Roche,
493 U.S. at 170. Where employees are not similarly situated, courts have decertified collective
action because it was unfair to require an employer to defend its position based on representative
proof. Johnson v. Big Lots Stores, Inc., 561 F. Supp. 2d 567, 588 (E.D. La. 2008). However, as
the FLSA is a remedial statute that should be broadly construed, courts have held that close calls
should be resolved in favor of certification. See Morgan, 551 F.3d at 1265; see also Falcon, 580
F. Supp. at 541. Here, because the class of opt-in plaintiffs is homogenous in that all members
were employed by the same company, recruited from the same pool of applicants, and performed
substantially similar duties, fairness and judicial economy dictate that they be resolved
collectively.
Therefore, Plaintiffs’ motions for summary judgment are hereby GRANTED and
Defendant’s motions for summary judgment are hereby DENIED.
IT IS SO ORDERED.
Dated: September 16, 2013
33
(Cite as: Gus Corp. v. Goodman, 165 F.3d 2255 (13th Cir. 2013))
UNITED STATES COURT OF APPEALS
FOR THE THIRTEENTH CIRCUIT
________________________________________________
GUS CORPORATION, INC.,
|
|
Defendant-Appellee,
|
|
-against|
|
SAUL GOODMAN, WALTER WHITE, LYDIA RODARTE|
QUAYLE, AND JESSE PINKMAN, INDIVIDUALLY AND
|
ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
|
|
Plaintiffs-Appellants.
|
________________________________________________|
Case No. 13-3556
Opinion of the court delivered by NOCIOLO, C.J., joined by BALDWIN, J. and RICCHIUTO,
J.
This matter is on appeal from a decision by the United States District Court for the
District of Wagner, holding that the Gus Corporation (“the Company”) violated the minimum
wage, overtime, and recordkeeping requirements of the Fair Labor Standards Act (“FLSA”), 29
U.S.C. §§ 201–219, and the Wagner State Labor Law (“WSLL”), and certifying a class for the
Appellees’ claims under the WSLL to include: “All individuals who had unpaid internships at
Gus Corporation in the State of Wagner between May 1, 2008, and September 1, 2012.” Also on
appeal is the District Court’s certification of the interns as a collective action under FLSA §
216(b). The Company appeals both issues. For the reasons that follow, we hold that: (1) the
Appellees (“the Interns”) were not employees under the FLSA and WSLL; and (2) that the
Interns have not met the standard to certify their claims either as an FLSA collective action or a
class action under Rule 23 of the Federal Rules of Civil Procedure.
34
I. Whether Interns Are Employees Under the FLSA and WSLL
A. Standard of Review
We review de novo the District Court’s decision that the Interns are the Company’s
employees. See Fegley v. Higgins, 19 F.3d 1126, 1132 (6th Cir. 1994) (“Whether a particular
situation is an employment relationship is a question of law.”).
B. FLSA and WSLL Claims
The FLSA provides minimum wage, overtime, and other protections to covered
employees. See 29 U.S.C. § 206(a). As the District Court noted, the broad statutory definitions of
“employee” (“any individual employed by an employer”) and “employ” (“to suffer or permit to
work”) do not provide an answer to the central question in this case: that is, whether unpaid
interns are employees for the purposes of the Act.1 29 U.S.C. § 203(e)(1), (g). The Supreme
Court has held that where a statutory definition is not helpful in defining employment status, an
“economic realities test” should guide the interpretation of who is a covered employee. Goldberg
v. Whitaker House Coop., Inc., 366 U.S. 28, 33 (1961); Rutherford Food Corp. v. McComb, 331
U.S. 722, 727–29 (1947).
Courts have not relied solely on labels such as “intern” to determine employment status.
See Powell v. U.S. Cartridge Co., 339 U.S. 497, 528 (1950) (Frankfurter, J., dissenting) (FLSA’s
“applicability is not fixed by labels that parties may attach to their relationship nor by common
law categories nor by classifications under other statutes.”). Rather, an employment relationship
is determined on a case-by-case basis depending on the circumstances of the entire activity. See
Rutherford Food, 331 U.S. at 730. In Rutherford Food, the Supreme Court affirmed the lower
1
The statutory definitions of “employee” (“means a mechanic, workingman or laborer working for another for
hire”) and “employed” (“includes permitted or suffered to work”) under the WSLL are nearly identical to the
definitions of “employee” (“any individual employed by an employer”) and “employ” (“to suffer or permit to
work”) under the FLSA and, therefore, the claims are evaluated using the same legal analysis.
35
court’s reasoning that meat boners at a slaughterhouse were employees because of the underlying
economic realities of their working conditions, viewed in the “circumstances of the whole
activity.” Id. The workers, who had similar individual employment contracts, performed
specialty boning work on the production line using the employer’s equipment and were
supervised closely by the plant manager. Id. [*2256] Their wages, calculated based on their
efficiency, were “more like piecework” than profits from “an enterprise that actually depended
for success upon the initiative, judgment or foresight of the typical independent contractor.” Id.
Thus, the Court reasoned that based on the economic realities of the facts and circumstances of
employment, the boners were employees under the FLSA. Id.
Although Congress intended the FLSA’s definition of “employee” to be interpreted
broadly, the Act does not protect all workers. See Tony & Susan Alamo Found. v. Sec’y of
Labor, 471 U.S. 290, 295 (1985). The Supreme Court in Walling v. Portland Terminal Co.,
decided that certain trainees2 were excluded from the FLSA definition of employee. 330 U.S.
148 (1947) (“Portland Terminal”). A railroad required trainees for the position of yard brakeman
to participate in a training program conducted by supervisors in the yard before being considered
for employment. Id. at 153. The brakemen’s training was similar to instruction at a vocational
school in that the trainees performed the tasks of the position and the railroad’s utilization of
supervisors to conduct the training impeded the railroad’s business. Id. at 152–53. The Court
recognized, at the outset, that the Act “was obviously not intended to stamp all persons as
employees who, without any express or implied compensation agreement, might work for their
own advantage on the premises of another.” Id. at 152. The Court found that because the trainees
2
District Judge Jaffery referred to the trainees as “applicant-trainees”; however, this term is absent from Portland
Terminal and bears little weight on the Supreme Court’s, as well as this court’s, holding.
36
“most greatly benefit[ed]” from the training and the railroad derived no immediate advantage
from the trainees’ work, the trainees were not employees under the FLSA. Id. at 153.
Whether Portland Terminal’s trainee exception applies to internships with private-sector
employers is an issue of first impression for this court. Some circuits have adopted a “primary
beneficiary” test to determine if the narrow trainee exception applies to a group of workers. See,
e.g., Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518 (6th Cir. 2011); McLaughlin v.
Ensley, 877 F.2d 1207 (4th Cir. 1989). Under this standard, courts analyze whether the
individual or the employer was the primary beneficiary of the training. See McLaughlin, 877
F.2d at 1209. If the individual is the primary beneficiary of the training, he or she falls under the
trainee exception and is not an employee for FLSA purposes. Id. The Sixth Circuit found that
this approach “readily captures the distinction the FLSA attempts to make between trainees and
employees.” Solis, 642 F.3d at 529. We agree.
Because these Interns fall within the trainee exception, the District Court erred in relying
on the six factors set forth in the U.S. Department of Labor’s (“DOL”) Fact Sheet #71 to
conclude that an employment relationship existed between the Company and its interns. See Fact
Sheet #71, Internship Programs Under The Fair Labor Standards Act, DEP’T OF LABOR (April
2010), available at http://www.dol.gov/whd/regs/compliance/whdfs71.pdf. Unless an employer
has proven all six factors, the DOL will presume the existence of an employment relationship
between interns and employers. Id. However, this rigid test is both inconsistent with, and has no
basis in, Portland Terminal. See Solis, 642 F.3d at 526 n.2 (Portland Terminal did not create the
six-factor test adopted by the DOL for trainee status because the Court “gave no indication that
such facts must be present in future cases to foreclose an employment relationship”) (emphasis
added). The factors that the DOL derived from Portland Terminal were sufficient in that case to
37
find that the yard brakemen were trainees. [*2257] The Court neither concluded in Portland
Terminal, nor in subsequent cases, that a finding of trainee status required proof of certain
enumerated factors. Rather, the Court in Portland Terminal held only that the trainees “most
greatly benefit[ed]” from the railroad’s training and, thus, were not employees under the FLSA.
330 U.S. at 153.
Furthermore, the DOL factors are not binding on this court. See Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944). Judicial deference to an administrative guideline “will depend upon
the thoroughness evident in its consideration, the validity of its reasoning, its consistency with
earlier and later pronouncements, and all those factors which give it power to persuade, if
lacking power to control.” Id. For the reasons set forth above, we decline to defer to the DOL’s
misinterpretation of Portland Terminal represented by the six factors.
Instead, this court adopts the primary beneficiary test, applied on a case-by-case basis in
light of the totality of the circumstances. See Rutherford Food, 331 U.S. at 730. Our analysis is
guided by the underlying economic realities of the terms and conditions of the internships. See
Goldberg, 366 U.S. at 33. However, this governing principle does not provide an adequate
analytical framework because “economic realities” is an amorphous concept. See Solis, 642 F.3d
at 522–23 (“To state that economic realities govern is no more helpful than attempting to
determine employment status by reference directly to the FLSA’s definitions themselves.”).
Rather, a court must evaluate the issue with a greater degree of specificity and there must be
“some ultimate question to answer, factors to balance, or some combination of the two.” Id. at
523. We turn to the primary beneficiary test as the framework that encapsulates the economic
realities principles into a workable test. In doing so, we are guided by the Fourth, Sixth, and
Eleventh Circuits’ application of this test.
38
The Fourth and Sixth Circuits have applied the primary beneficiary test with conflicting
results. See Solis, 642 F.3d at 532 (finding the students were the primary beneficiaries of the
employer’s training program); McLaughlin, 877 F.2d at 1210 (finding the employer was the
primary beneficiary of the training). In Solis, Seventh-Day Adventists operated a boarding
school and an adjoining nursing home. 642 F.3d at 520. As part of its religious mission, the
school administration believed that practical training was an integral part of a student’s
education. Id. Students were required to enroll in vocational courses that placed them to work in
the housekeeping or kitchen departments of the nursing home. Id. After students turned sixteen
years old, they could participate in a state-approved certified nursing assistant program, where
they would assist nursing home patients in administering their medical care. Id.
The Sixth Circuit found that these students fell under Portland Terminal’s trainee
exception. Id. at 532. The court acknowledged that while the school benefited from the work
performed by students in operating and maintaining its nursing home, this benefit was undercut
by the significant amount of time the nursing home staff spent supervising students. Id. at 530.
Furthermore, the court found that since the nursing home was staffed by regular employees, it
could operate at the same level without the students’ assistance. Id.
The court weighed the benefit to the school against the tangible and intangible benefits
received by the students. Id. at 531. [*2258] The tangible benefits the students received included
supervised and hands-on training, vocational courses, and an introduction to the tools used in
food service, grounds management, and nursing. Id. Additionally, the students received
intangible benefits of learning responsibility and leadership, which the court found significant
based on the testimony of parents, alumni, and employers. Id. The court noted that employers
who hired graduates of the school testified that the school’s alumni possessed “a strong work
39
ethic, leadership skills, and other practical skills that graduates of other vocational programs
lack.” Id. The court found that the benefits to the students outweighed the benefits received by
the school. Id. Thus, the students were not employees under the FLSA. Id. at 532.
The Fourth Circuit reached a contrary result in McLaughlin, a case where a snack food
distributor received benefits from the work of candidates for delivery route truck driver
positions. 877 F.2d at 1208. Candidates for a position as a delivery route truck driver were
assigned to drive with experienced routemen to restock vending machines and sell packaged
snacks to retailers for five days. Id. The candidates learned to drive, load and unload the trucks,
perform simple vending machine maintenance, and complete paperwork. Id. The court found that
this training period primarily benefited the employer because, by assisting with the distribution
of snack foods, the candidates were more experienced when they were hired as permanent
employees. Id. The employer also benefited from the opportunity to evaluate the candidates’
performance before they were hired. Id. at 1210. By comparison, the candidates learned skills
limited to the snack food distribution business. Id. Further, the fact that all candidates were hired
suggested that the employer always considered them employees. Id. Because the employer was
the primary beneficiary of the training, the candidates were deemed employees under the FLSA.
Id.
The Eleventh Circuit has recently decided a case involving facts similar to those in the
instant matter. Kaplan v. Code Blue Billing & Coding, Inc., 504 Fed. Appx. 831 (11th Cir.
2013), cert. denied, 134 S. Ct. 618 (Nov. 12, 2013). In Kaplan, students were enrolled in a
program to learn medical billing and coding and receive a degree. Id. at 832. The school required
them to complete an externship in the field for academic credit. Id. Each student completed an
unpaid externship at a different medical billing company. Id. at 833. The students sued, alleging
40
that they were employees under the FLSA and entitled to the minimum wage for their work. Id.
They argued that their externships provided little educational value because their tasks were
repetitive and performed under minimal supervision. Id. Thus, the students argued that they
provided the companies with an economic benefit. Id. The court disagreed.
First, the court applied a primary beneficiary test and found that the externship benefited
the students because they received academic credit for their work, satisfied a degree requirement,
and completed hands-on work related to their studies. Id. at 834–35. The court also found that
the companies received no immediate advantage from the student externs because employees
trained, supervised, and reviewed the student externs’ work. Id. at 834. As a result, the
companies ran “less efficiently and caused at least some duplication of effort.” Id. The court
found that the student externs were not employees entitled to minimum wage under the FLSA
and instead fell under Portland Terminal’s trainee exception. Id. The court reached the same
conclusion after applying the DOL factors. Id. [*2259]
Here, the Interns, like the students in both Solis and Kaplan and the trainees in Portland
Terminal, worked for their own advantage. Applying the economic realities test to the present
case, the evidence shows the Interns performed tasks in the Company’s program to attain
marketable skills in their respective fields of study. Goodman developed his skills drafting legal
memoranda in an emerging field of law: e-cigarette liability and intellectual property. White
received a publication credit for his research on his supervisor’s paper about the positive effects
of e-cigarettes. Rodarte-Quayle earned academic credit towards her degree in finance. Pinkman
was trained to operate new equipment—the True Blue A1 Vapo Tech—in his field of
engineering. The Interns worked for their own advantage, but happened to be on the premises of
the Company.
41
The facts in McLaughlin are distinguishable from those in the instant case. In
McLaughlin, the delivery route candidates learned the routine tasks of the employer’s business
operation over a five-day period. The delivery route training, standing alone, did not constitute a
resume listing valued by future employers. Nor did it translate into a tangible benefit outside the
context of the employer’s business such as that found in the instant case, which included credit
towards a degree, recognition of achievement within a particular industry, or training on
specialized equipment.
Similar to Portland Terminal and Solis, the Interns received training sufficiently akin to
vocational education. See Portland Terminal, 330 U.S. at 153; Solis, 642 F.3d at 520. The
Company’s training helped the Interns develop transferable skills within their respective areas of
study. The Interns’ work with experienced employees was directly related to their respective
academic majors. Most Interns had a mentor or supervisor—similar to a teacher in an
educational environment—to guide them and answer questions about their projects and offer
career advice. For example, Goodman was trained in legal research on the PegsusNexus and
LeiboLaw databases to review materials related to e-cigarette liability and intellectual property.
White and Pinkman both received OSHA-mandated safety training about the proper way to use
laboratory equipment, specifically the lathe and milling machinery. Additionally, both Interns
were trained on new technology unique to the e-cigarette industry, namely, the True Blue A1
Vapo Tech, and a mechanism to analyze new ways to improve heating to vaporize liquid. In fact,
White successfully performed his intern assignments because they were similar to his chemistry
coursework. Finally, as in Kaplan, Rodarte-Quayle received academic credit towards a degree in
finance for her work in the Corporate division. See Kaplan, 504 Fed. Appx. at 832. Although
Rodarte-Quayle performed clerical duties, her training was vocational because she shadowed the
42
Company’s corporate executives. Ultimately, the training allowed the Interns to develop skills
transferable within their fields of study. Cf. McLaughlin, 877 F.2d at 1210 (finding the training’s
brevity reflected that the skills learned had no transferable use).
The Interns also learned valuable tools to enhance their career development, such as how
to network and find mentors. In the weekly company-wide seminars, the Interns learned about
the career paths of Company employees and executives. Finally, the Interns benefited by gaining
an advantage for future employment at the Company.3 [*2260]
The second part of the primary beneficiary test weighs the benefits to the Interns against
the benefit to the Company. The inquiry is not whether the Company received any benefit, but
whether the Company was the primary beneficiary of the internship program. See Solis, 642
F.3d at 531. If the Company received some benefit, it does not necessarily mean the Interns were
employees. Id.
The record shows that the Company vetted potential employees, received some work
product from them during the summer internships, assigned Corporate Interns to perform the
work of an administrative assistant on maternity leave, and saved money from having Goodman
use his personal laptop and his law school’s legal research accounts rather than those of the
Legal division. As in Solis, the value of the benefit of the Interns’ work to the Company was
undermined by the expenditure of resources—time and money—necessary to supervise them.
See Solis, 642 F.3d at 530–31. Mike Ehrmantraut, a lead quality engineer in the Manufacturing
division, and Matthew James Babineaux, an attorney in the Office of the General Counsel
(“OGC”), both spent a substantial amount of time assigning and reviewing the work of their
respective Interns. Gale Boetticher, from the R&D division, spent twice as long writing a
research paper because he had to take the time needed to review White’s findings. Similar to the
3
The record shows that, in the past, a considerable percentage of Interns accepted job offers from the Company.
43
railroad supervisors in Portland Terminal, the supervision here did not “expedite the company
business, but may, and sometimes d[id], actually impede and retard it.” 330 U.S. at 150.
Although the Company benefited from the clerical work performed by Rodarte-Quayle and other
Corporate Interns, this benefit was merely temporary and outweighed by the long-term benefit
that she and others earned for their internships in the form of academic credits toward their
degrees.
While the Company may have enjoyed benefits similar to those of the employer in
McLaughlin, such as evaluating the performance of candidates before an offer of full-time
employment, and the ability to hire candidates who were better qualified, the benefits must be
considered in context. In McLaughlin, the benefits to the delivery route candidates for
participating in the employer’s five-day training program were minimal. Any substantial benefit
to the employer outweighed the minimal benefits to the candidates. In contrast, the Interns
received a great number of benefits as discussed above. Even assuming the Company benefited
in a manner similar to the employer in McLaughlin, we do not find that the Company was the
primary beneficiary. Any benefit to the Company must be weighed against those received by the
Interns.
After weighing the benefits that flowed to each party, we find that the Interns were the
primary beneficiaries of the internship program. The Interns worked for the advantage of
enhancing their career marketability. The Company tailored the program to provide an
“educational and real-world experience” for its interns through its company-wide seminars and
the individualized training in each division. In evaluating the primary benefits through the lens of
economic realities, the Interns received numerous long-term benefits that promoted their careers,
while the Company received only a short-term benefit of additional help and a reduction in
44
certain minor costs. [*2261] The totality of the activity leads to the conclusion that the benefits
to the Company were offset by the expense of lost work product from employees who supervised
the Interns, thereby tipping the scale in favor of the Interns as the primary beneficiaries of the
training. Therefore, the Interns fit within Portland Terminal’s trainee exception to the FLSA
definition of employee. The District Court’s decision in this regard is reversed.
II. Certification of Intern Class as a Class Action or a Collective Action
A. Class Action Certification of WSLL Claims
Rule 23 of the Federal Rules of Civil Procedure allows plaintiffs to bring a representative
suit to promote efficient resolution of similar claims with multiple parties, to eliminate repetitive
litigation, and to avoid inconsistent judgments. See Donovan v. Univ. of Tex. at El Paso, 643
F.2d 1201, 1207 (5th Cir. 1981). Class actions are an “exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v.
Dukes, 131 S. Ct. 2541, 2550 (2011) (internal quotation and citation omitted).
In Wal-Mart, the Supreme Court held that “Rule 23 does not set forth a mere pleading
standard,” but requires lower courts to engage in a “rigorous analysis” before certifying a class
action. Id. at 2551. Courts will certify a class action claim if the plaintiffs meet the requirements
of Rule 23. See FED. R. CIV. P. 23. In order to certify a class, plaintiffs must satisfy all four
requirements of Rule 23(a): numerosity, commonality, typicality, and adequate representation.
Id.
Once plaintiffs satisfy Rule 23(a), they must also satisfy one of the requirements of Rule
23(b).4 Id. The proposed Intern Class relied on the predominance requirement of Rule 23(b)(3),
4
Rule 23(b) provides that the party seeking certification must prove:
(1) prosecuting separate actions by or against individual class members would create a risk of:
(A) inconsistent or varying adjudications with respect to individual class members that would
establish incompatible standards of conduct for the party opposing the class; or
45
arguing that the question of whether the Interns were employees predominated over all the class
claims, and, further, that the question can be answered with generalized proof that is outcome
determinative to liability under the WSLL. The Company contends that the District Court erred
because the answer to this question cannot be shown with generalized proof, but requires,
instead, a highly individualized analysis of the terms and conditions of the internships in each
division. Following this argument, the Company contends that there was no common question
that can be analyzed in a uniform manner, and therefore the predominance requirement is
defeated.
We need not reach the analysis of Rule 23(b) predominance because we disagree with the
District Court that the proposed class action met Rule 23(a)’s commonality requirement. The
proposed Intern Class should not have been certified. See McKeen-Chaplin v. Provident Sav.
Bank, FSB, No. 2:12-cv-03035-GEB-JFM, 2013 WL 5883794, at *4 (E.D. Cal. Oct. 30, 2013)
(stating courts need not address the other requirements of Rule 23 once a party fails to meet one
requirement).
(B) adjudications with respect to individual class members that, as a practical matter, would be
dispositive of the interests of the other members not parties to the individual adjudications or
would substantially impair or impede their ability to protect their interests;
(2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so
that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole;
or
(3) the court finds that the questions of law or fact common to class members predominate over any
questions affecting only individual members, and that a class action is superior to other available methods
for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:
(A) the class members' interests in individually controlling the prosecution or defense of separate
actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against
class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular
forum; and
(D) the likely difficulties in managing a class action.
46
1.
Rule 23(a)(2) Commonality Requirement
Rule 23(a)(2) provides that a plaintiff must demonstrate that “there are questions of law
or fact common to the class.” FED. R. CIV. P. 23(a)(2). [*2262]
The District Court erred when it failed to apply Wal-Mart to this class certification. We
agree with the Company’s argument that “the Wal-Mart decision has been described as the death
knell of employment class actions.” McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
No. 05-C-6583 (RWG), 2011 WL 4471028, at *1 (N.D. Ill. Sept. 19, 2011), rev’d, 672 F.3d 482
(7th Cir. 2012). The Wal-Mart standard for commonality should be applied to all Rule 23
actions, not just class certification of Title VII actions. See Tamas v. Family Video Movie Club,
Inc., No. 11 C 1024, 2013 WL 4080649, at *5–7 (N.D. Ill. Aug. 13, 2013); see also Siegel v.
Bloomberg L.P., No. 13 civ 1351, 2013 WL 4407097 (S.D.N.Y. Aug. 16, 2013). The District
Court also relied incorrectly on a decision in the Southern District of New York involving
factually similar circumstances, which found that the proposed intern class met the commonality
standard.5
A proposed class satisfies the commonality requirement if it raises common questions
that will be resolved by common answers. Wal-Mart, 131 S. Ct. at 2548. The common question
must be “capable of classwide resolution-which means that determination of its truth or falsity
will resolve an issue that is central to the validity of each one of the claims in one stroke.” Id. at
2551. A proposed class must allege significant evidence of an unlawful company policy or
practice which is carried out in the same way. Id. at 2553. Additionally, a “rigorous analysis” of
commonality often overlaps with the merits of the claim in the same manner as other preliminary
5
In Glatt v. Fox Searchlight Pictures, Inc., Judge Pauley applied Wal-Mart to a factually similar situation without
the required “rigorous analysis” to determine whether the plaintiffs’ common questions would generate common
answers. 293 F.R.D. 516 (S.D.N.Y. 2013). Judge Baer in Wang v. Hearst Corp., though hesitant in applying WalMart, held that Wal-Mart governed a state wage and hour claim and that the plaintiffs did not meet that standard.
See 293 F.R.D. 489 (S.D.N.Y. 2013).
47
litigation issues. Id. at 2551. Furthermore, “[d]issimilarities within the proposed class . . . have
the potential to impede the generation of common answers.” Id.
Here, the proposed Intern Class did not rely upon any Company policy that allegedly
violated the WSLL. As in Wal-Mart, the Company’s policy delegated discretion to division
supervisors to request the number of needed interns and to set their terms and conditions to fit
the division’s needs. Each internship experience was highly individualized. These factual
disparities defeat the appropriateness of classwide resolution under Rule 23.
To assess whether there is a common answer to the legal question presented, the
underlying merits of the claims must be analyzed. See id. at 2553. The test of employee status
adopted by this court and applied to this case is whether the Intern or the Company was the
primary beneficiary of the internship. Applying the test to each Intern will not yield the same
answer. For example, White, an intern in the R&D division, received close and direct supervision
(especially with Gale Boetticher on his research publication), received a publication credit for his
work, and performed work on new technology to which he would not otherwise have had access.
Rodarte-Quayle, an intern in the Corporate division, received a minimal amount of supervision,
earned academic credit for her experience, performed some clerical tasks, and occasionally
shadowed executives. The proposed Intern Class cannot expect the court to evaluate all of the
Interns’ experiences as if they were one and the same.
The dissimilarities in the proposed Intern Class become readily apparent when the
composition of the proposed class as a whole is considered. Included in the class are interns from
previous summers as far back as 2008. It is unlikely that the internship experiences within the
same division during the summer of 2012 will be sufficiently similar to those in 2008. [*2263]
Each division supervisor had discretion to design the internship program to meet its particular
48
needs, and these needs will vary from year to year. Those variances will likely result in different
outcomes in the primary beneficiary analysis. For example, Interns in a certain division in one
year may have enjoyed greater benefits than the Company; in another year, the Company may
have benefited more from the work of the Interns.
The overriding question is whether the underlying claim will generate a common
question with a common answer. See id. at 2548. No common question exists in this case. Each
class member requires a highly individualized, fact-intensive assessment to determine whether he
or she was the primary beneficiary of the internship. The answer is critical to determine the
Company’s liability under both the WSLL and the FLSA. In this case, the answer will not be the
same for each Intern. Therefore, classwide resolution is inappropriate because there is no single
answer or piece of evidence that can “resolve an issue that is central to the validity of each one of
the claims in one stroke.” Id. at 2551.
B. Collective Action Certification of FLSA Claims
The FLSA protects workers from, among other things, an employer’s failure to pay
minimum wages or overtime pay. See 29 U.S.C. §§ 206–07, 215 (2013). The Act provides a
private right of action to employees to recover from their employers for such violations. Id. §
216(b). Thus, “[a]ny employer . . . shall be liable to the employee or employees affected in the
amount of their unpaid minimum wages, or their unpaid overtime compensation . . . and in
additional equal amount as liquidated damages.” Id. An employee or employees may bring an
action to vindicate their own FLSA rights or “in behalf of . . . themselves and other employees
similarly situated.” Id.
A representative FLSA suit is referred to as a “collective action.” Hoffmann-La Roche
Inc. v. Sperling, 493 U.S. 165, 170 (1989). The primary difference between a Rule 23 class
49
action and an FLSA collective action is procedural. See Espenscheid v. DirectSat USA, LLC,
705 F.3d 770, 772 (7th Cir. 2013). In a Rule 23 class action, a class member must opt out of the
action so as not to be bound by the judgment. FED. R. CIV. P. 23; see also Espenscheid, 705 F.3d
at 771–72. Alternatively, in an FLSA collective action, an eligible individual must opt in to be
bound by the judgment. See 29 U.S.C. § 216(b); see also Espenscheid, 705 F.3d at 771–72.
A two-step certification process is required in an FLSA collective action. The Intern
Collective met the first stage of certification when the District Court granted its motion for
conditional certification on January 17, 2013. See Appendix A. However, the Company moved
for decertification of the conditional certification. At issue on appeal is whether the District
Court properly denied the Company’s motion in the second step of FLSA collective action
certification by using a more stringent standard. See Thiessen v. GE Capital Corp., 267 F.3d
1095, 1103 (10th Cir. 2001).
The inquiry in the second step of FLSA collective action certification rests on whether
the opt-in plaintiffs are “similarly situated” to the named plaintiffs. 29 U.S.C. § 216(b). Due to
the amorphous quality of the “similarly situated” language, federal courts have adopted different
approaches to analyze whether a conditionally certified collective action meets this standard. See
Thiessen, 267 F.3d at 1102–03 (describing three different approaches). [*2264] Most recently,
the Seventh Circuit suggested that Rule 23 standards should be incorporated into the analysis of
the second step of collective action certification. See Espenscheid, 705 F.3d at 772.
In Espenscheid, a class of technicians who installed and repaired satellite equipment
brought a “hybrid” action alleging FLSA claims and parallel state law claims—as did the Interns
in the instant matter—for failure to pay overtime. Id. The technicians were paid on a piece-rate
basis and earned a certain dollar amount per job, but were still employees covered by the FLSA.
50
Id. at 773. However, some jobs required technicians to work overtime, and this overtime pay was
not included in the piece-rate compensation for the particular job. Id. Ultimately, Judge Posner
affirmed the lower court’s decertification order because the class did not produce a sufficient
trial plan to assess a damage calculation due to the variances among the class members. Id.
At the outset, Judge Posner found that despite the opt-out versus opt-in requirement and
more detailed procedural provisions in Rule 23, “there isn’t a good reason to have different
standards for the certification of the two different types of action, and the case law has largely
merged the standards, though with some terminological differences.” Id. at 772. The court
emphasized the need for clarity and simplicity in this area of law particularly because plaintiffs
often bring both a class action and a collective action in a single suit. Id. Judge Posner then
analyzed the analogous claims as “if it were a single class action.” Id.
Although Espenscheid affirmed decertification because of an insufficient trial plan to
assess damages, district courts in the Seventh Circuit have adopted Judge Posner’s reasoning and
extended it to decide whether the named plaintiffs are similarly situated to the opt-in plaintiffs.
See Freeman v. Total Sec. Mgmt. - Wisc., LLC, No. 12-cv-461-wmc, 2013 WL 4049542, at *5
(W.D. Wis. Aug. 9, 2013) (similarly situated analysis is “comparable to the ‘typicality’ and
‘commonality’ requirement of Rule 23 class certification”); Brown v. Club Assist Rd. Serv. U.S.,
Inc., No. 12 cv 5710, 2013 WL 5304100, at *12 (N.D. Ill. Sept. 19, 2013) (second stage of
collective action certification “is where the certification becomes more akin to the familiar Rule
23 class action certification standard”); Clark v. Honey-Jam Cafe, LLC, No. 11 C 3842, 2013
WL 1789519, at *3 (N.D. Ill. Mar. 21, 2013) (“For purposes of determining certification of a
collective action and a class action in a single suit, the Court applies the same standard for
certification of both types of cases.”). We agree with this approach.
51
When questioned at oral argument about the intersection of FLSA collective actions and
Rule 23 class actions, counsel for the Interns cited Hoffman-La Roche and Genesis Healthcare
for the proposition that the two inquiries are fundamentally different. See Hoffman-La Roche
Inc. v. Sperling, 493 U.S. 165 (1989); Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523
(2013). However, both cases are inapplicable to the instant matter. Although Genesis Healthcare
stated that “Rule 23 actions are fundamentally different from collective actions,” this was a
general statement that did not prohibit incorporating standards from class actions to collective
actions. See 133 S. Ct. at 1524, 1529 (quoting Hoffman-La Roche, 493 U.S. at 177–78 (Scalia,
J., dissenting)). Specifically, in a case that alleges overlapping class action and collective action
claims, this fundamental difference evaporates. See Espenscheid, 705 F.3d at 773. [*2265]
Further, both cases are factually distinguishable from the case at bar. In Hoffman-La
Roche, the plaintiffs brought a collective action to challenge the employer’s demotion and
discharge of 400 workers as a violation of the Age Discrimination in Employment Act
(“ADEA”).6 493 U.S. at 167. The lower court ordered the employer to produce the names and
addresses of discharged employees so the plaintiffs could send notice about the lawsuit to
potential collective members. Id. at 167–68. Justice Kennedy, writing for the majority, endorsed
the discretion of district courts to prescribe terms and conditions to notify potential opt-in
members during the conditional phase of ADEA collective action certification. Id. In Genesis
Healthcare, registered nurses brought a collective action for FLSA violations arising from
automatic deductions of meal break hours even if the nurses worked during those breaks. 133 S.
Ct. at 1527. The Court dismissed the named plaintiffs’ claim as moot because she did not accept
an offer from the employer that would have provided her with complete relief. Id. at 1529. Here,
6
The ADEA incorporates the FLSA collective action enforcement provisions. See Hoffman-La Roche, 493 U.S. at
167.
52
we are deciding, at the more stringent phase of collective action certification, whether the opt-in
plaintiffs were similarly situated to the named plaintiffs. Thus, Hoffman-La Roche and Genesis
Healthcare do not apply.
Because the Interns failed to satisfy Rule 23 commonality requirements, they necessarily
fail the FLSA’s collective action “similarly situated” standard at the second phase of
certification. Cf. Clark, 2013 WL 1789519 at *3 (finding a class that met Rule 23 certification
also met collective action certification).
III. Conclusion
Accordingly, we REVERSE the District Court’s decision granting the Interns’ summary
judgment motion that they were employees under the FLSA and WSLL. We also REVERSE the
District Court’s decision certifying both the Rule 23 class action and FLSA collective action.
IT IS SO ORDERED.
Dated: December 31, 2013
53
APPENDIX A
UNITED STATES DISTRICT COURT
DISTRICT OF WAGNER
__________________________________________
SAUL GOODMAN, WALTER WHITE, LYDIA
|
RODARTE-QUAYLE, AND JESSE PINKMAN,
|
INDIVIDUALLY AND ON BEHALF OF ALL OTHERS
|
SIMILARLY SITUATED,
|
|
V.
|
|
GUS CORPORATION, INC.
|
__________________________________________|
No. 13-2836
MEMORANDUM ORDER
Plaintiffs Goodman, et al. (“Plaintiffs”) move to certify their claims for unpaid wages and
overtime conditionally under FLSA § 216(b).
During oral argument in support of its motion to deny conditional certification of a
collective action, Defendant Gus Corporation, Inc. argued that, based on the facts, this court
should find that the internships in dispute varied from intern to intern. I disagree. At the initial
assessment stage, before discovery is completed, “the Court does not resolve factual disputes,
decide substantive issues going to the ultimate merits or make credibility determinations” and I
find no reason to disturb this well-settled practice. See Summa v. Hofstra Univ., 715 F. Supp. 2d
378, 385 (E.D.N.Y. 2010) (citing Francis v. A & E Stores, Inc., No. 06 Civ. 1638(CLB)(GAY),
2008 WL 2588851 at *1–2 (S.D.N.Y. June 26, 2008)) (internal quotation marks omitted); Cruz
v. Hook-SupeRX, LLC, No. 09 Civ. 7717(PAC), 2010 WL 3069558, at *2 (S.D.N.Y. Aug. 5,
2010) (“A fact-intensive inquiry . . . is inappropriate at the notice stage.”).
Rather, conditional certification, based on the pleadings and an affidavit submitted by
plaintiffs, is a preliminary tool to decide whether the potential class of “similarly situated”
54
plaintiffs should be given notice of the action. Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165,
169–70 (1989). Not until “after the opt-in period has ended [should the court] examine whether
the actual plaintiffs brought into the case are similarly situated[,]” Gortat v. Capala Bros., Inc.,
No. 07-CV-3629 (ILG), 2010 WL 1423018, at *10 (E.D.N.Y. Apr. 9, 2010) (emphasis in
original), and decide whether the opt-ins are similarly situated to the plaintiff and to one another.
See Myers v. Hertz Corp., 624 F.3d 537, 555 (2d Cir. 2010) (“At the second stage, the district
court will, on a fuller record, determine whether a so-called ‘collective action’ may go forward
by determining whether the plaintiffs who have opted in are in fact ‘similarly situated’ to the
named plaintiffs.”); Aros v. United Rentals, Inc., 269 F.R.D. 176, 180 (D. Conn. 2010) (any
“disparate factual and employment settings of the individual plaintiffs should be considered at
the second stage of analysis” and not at the conditional certification stage) (internal citation and
quotation marks omitted); Damassia v. Duane Reade, Inc., No. 04 Civ. 8819 (GEL), 2006 WL
2853971, at *7 (S.D.N.Y. Oct. 5, 2006) (“At the close of discovery, defendant will have ample
opportunity to explain why [its employee] affidavits, taken with other evidence, demonstrate that
plaintiffs' case should not proceed as a collective action.”).
Plaintiffs’ complaint alleged that the members of the Intern group are similarly situated
individuals who were misclassified as unpaid interns instead of paid “employees” in violation of
the FLSA, who would benefit from the issuance of a court-supervised notice of, and the
opportunity to join, the lawsuit. As such, conditional certification is GRANTED and leave is
given to distribute notice to potential opt-in plaintiffs.
Dated: January 17, 2013
Madrigal City, Wagner
/s/ Hon. Ali Jaffery
UNITED STATES DISTRICT JUDGE
55
56
In the
Supreme Court of the United States
SAUL GOODMAN, WALTER WHITE, LYDIA RODARTE-QUAYLE, AND JESSE
PINKMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED,
Petitioners,
v.
GUS CORPORATION, INC.
Respondent.
Order Granting Certiorari
[January 12, 2014]
The petition for writ of certiorari to the United States Court of Appeals for the Thirteenth Circuit
is hereby GRANTED so that this Court may hear and consider the following issues:
1. Are unpaid interns at a private employer “employees” under the Fair Labor Standards Act and
Wagner State Labor Law?
2. Should the Intern Class be certified as a class action under Rule 23 of the Federal Rules of
Civil Procedure and a collective action under § 216(b) of the Fair Labor Standards Act?
It is so ordered.
Dated: January 12, 2014
57