Mary Kate and Ashley Olsen’s fashion company Dualstar has come under fire for allegedly mistreating its unpaid interns. But now the water is a bit murkier on where the line for unpaid internships ends, how successful will the case be?

 Photo Credit: N▲POLEON IN ▲QUAMARINE  cc
Photo Credit: N▲POLEON IN ▲QUAMARINE cc

If this class action, which reportedly could be representing as many as 40 current and former interns, had been brought a couple months ago it would likely have been a sure thing. The Department of Labor’s test had been the barometer for how to conduct “proper” unpaid internships since an unpaid intern class action suing for back wages won in 2013. After that, unpaid internships seemed to be growing scarcer every day. That was then. Now it might not be so simple.

From the accounts in the court documents, the Dualstar unpaid internship sounds like exactly what the classic unpaid internship nightmare is: menial labor including running personal errands for paid employees, coffee runs, organizing materials; and fielding still work calls (and errands) late into the night. The class action alleges interns worked 50-hour work weeks of menial work, all for no pay and allegedly without breaks. The lead plaintiff, Shahista Lalani, even claims she wound up hospitalized for dehydration as a result of the job.

It was like 100 degrees outside. I’d just be sweating to death. I probably carried like 50 pounds worth of trench coats” to Row factories,” Lalani told the New York Daily News. And the average working conditions sounded no less grueling. “The head technical designer was like, ‘Go get my Advil. I need this and this because I’m feeling sick and I have this meeting’…“I was doing the work of three interns. I was talking to her all day, all night. Emails at nighttime for the next day, like 10 p.m. at night.”

Of course Dualstar’s reps have maintained that these allegations are “groundless,” and that the fashion company is committed to “treating all individuals fairly and in accordance with applicable laws.” The problem is, there isn’t any definitive guidance on this issue.

Under the old six bullet test from the Department of Labor, Dualstar would have quite the mess on their hands, likely flunking four of the six requirements: Is the internship similar to training the intern would receive in an educational environment? Hopefully not, if the allegations are true. Is the internship designed for the benefit of the intern; will they learn new skills or gain college credit? When she was a design intern, Lelani seemed to do some work that might teach her new skills. But many of the tasks she described were not.

Does the intern work alongside regular employees without filling in for them? According to the lawsuit, there was a lot of overlap. Does the intern not provide the employer with any immediate advantages or services? If your internship looks a lot like a cliche–sorting mail and fetching coffee–then your internship is not legit. Which is exactly the problem for Dualstar. According to this test, it’s the substance of the duties that matters to an FLSA complaint, and Dualstar does abysmally.

But just last month, the Second Circuit handed down a decision in Glatt et al v. Fox Searchlight Pictures, Inc. that rejected the district court’s analysis which relied on the DOL test. In its place, the Second Circuit adopted the “primary beneficiary test,” urged by defendants. With that, the more appropriate inquiry was whether the intern was the primary beneficiary of the unpaid internship, or the employer was. The non-exhaustive list of considerations from the decision:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Under this new test, which may or may not be the test courts adopt when considering the issue, it won’t be as simple as saying that Dualstar had its unpaid interns conduct tasks that didn’t seem in keeping with “educational” environment of unpaid internships, as Jennifer B. Scheu writes for New York Labor & Employment:

The Court explained that these considerations require “weighing and balancing all of the circumstances” and that a single factor will not be dispositive for a court to find that an intern is entitled to minimum wage.  The Court went on to observe that its decision reflects the “modern internship,” and the importance of internships in an intern’s formal education.  While the Court recognized that some internships may not pass muster under the primary beneficiary test, it established a protocol for designing internship opportunities that will qualify.

If the conditions are as rotten as Lelani and her fellow interns allege, there may still be a case for them. But the stars are far from aligned on this subject, and only time will tell how successful their case proves to be.