Written by Michael Arnold
I just finished reading a very interesting opinion in Wang v. Phoenix Satellite Television US, Inc., which Judge Castel issued late last week out of the Southern District of New York and which addresses the scope of the New York City Human Rights Law – arguably the broadest anti-discrimination statute in the nation. In it, the Court threw out the hostile work environment discrimination claims of the plaintiff, Lehuan Wang, finding that the NYCHRL does not extend its protections to unpaid interns. (Her separate failure to hire discrimination claims survived.) This holding does not seem all that controversial to me. The Federal, state and local anti-discrimination laws have traditionally never extended their protections to volunteers or unpaid interns unless their provisions explicitly provided for such coverage. However, I’m not sure employers should rest so easy here. Let me explain.
The crux of the Court’s analysis was that because the NYCHRL prohibits employers from discriminating against a “person” in “compensation or in terms, conditions or privilege of employment,” an “employment relationship” must exist in order to obtain the NYCHRL’s protections. The Court stated that an employment relationship cannot exist unless the individual received compensation in exchange for their services – an “essential condition” it said. Since Phoenix did not pay Ms. Wang for her internship, no employment relationship existed and her discrimination claim was dismissed.
But just thinking aloud here for a moment: the result of the Wang case hinged on the fact that Ms. Wang was an unpaid intern. Without compensation, she couldn’t successfully sue Phoenix. But what if Phoenix should have paid her? Would that have changed the Court’s analysis? As this blog (and many other employment blogs) have reported on recently, there is a new (or at least coming) wave of wage and hour lawsuits by unpaid interns arguing that the wage and hour laws did not permit their employers to obtain their services gratis. No, they argue, those laws required their employers to structure their internship programs to comply with rigid Department of Labor guidelines before they could escape any payment obligations. Thus, if an intern can demonstrate that their employer’s internship program would not pass muster under the wage and hour laws, and that therefore they are entitled to payments from that employer, could those same interns then assert any viable discrimination claims they may have against the employer?
Some of this sounds silly I admit (including because we’d expect any discrimination claim to be accompanied by a wage and hour claim, which did not happen here). But there’s a larger lesson here: You really do have to audit your internship program. If it won’t comply with both the Federal and New York State’s DOL’s guidelines, then you should either change the program so that it will (or risk exposure to a costly wage and hour lawsuit), or you should start paying your interns. If you start paying your interns, then you probably are one step closer to creating the “employment relationship” the Wang Court mentioned was a prerequisite to coverage under the anti-discrimination laws, including the NYCHRL. And thus, in that case: if you don't do so already, you must strongly consider accounting for your interns when administering your anti-discrimination policies and procedures (e.g. training, obtaining acknowledgments, investigating complaints, etc.), especially given an intern’s status on the corporate totem pole.