July 30, 2014

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July 30, 2014

Payment Required: New York Court Finds No Violation Of New York Labor Law Section 193 Where Unpaid Interns Did Not Receive Wages From Employer

In Wang, et al. v. The Hearst Corporation, 12 CV 793 (HB) (January 9, 2013), Judge Harold Baer of the United States District Court for the Southern District of New York granted the Hearst Corporation’s (“Hearst”) motion for partial judgment on the pleadings, finding that requiring unpaid interns to purchase college credit does not constitute an improper wage deduction under Section 193 of the New York Labor Law (“Section 193”). In reaching this decision, the Court unequivocally held that “there can be no ‘deduction’ within the meaning of [Section 193] when . . . plaintiff did not receive any payment – or anything arguably close – that could constitute ‘wages’ under Section 193.”

The Plaintiff in Wang was employed as an unpaid intern at Hearst during the summer of 2010. As an unpaid intern, Plaintiff was responsible for communicating with modeling agencies, selecting models, and attending casting meetings. As a condition of employment, Hearst required Plaintiff to purchase college credit from an accredited university. As a result of this arrangement, Plaintiff alleged that Hearst “took unlawful deductions by requiring [Plaintiff] to purchase academic credit . . . as a condition of employment” and that these “deductions” constituted “payments by separate transaction” in violation of Section 193.

Under Section 193, employers are prohibited from making deductions from employee wages unless such deductions are either authorized by law (e.g. tax withholdings or Medicare contributions) or are expressly enumerated in Section 193. Section 193(3)(a) further provides that “[n]o employer shall make any charge against wages, or require an employee to make any payment by separate transaction unless such charge or payment is permitted as a deduction from wages under the provisions of subdivision one of this section . . . .”

With this statutory framework in mind, the Court dismissed Plaintiff’s claim, finding that “the insurmountable hurdle faced by Plaintiff is that Plaintiff did not receive any payment – or anything arguably close – that could constitute ‘wages’ under Section 193.” In fact, Plaintiff admitted that she was “paid no wages at all for the work for [Hearst].” Since Plaintiff was not paid any wages, the Court reasoned that Hearst cannot be found to have violated Section 193 because “Section 193(3)(a) does not prohibit ‘any payment by separate transaction’ in itself but such a payment ‘as a deduction from wages.’” Stated another way, the Court held that “there can be no ‘deduction’ within the meaning of the statute where there is nothing from which to take away or subtract.”

In light of the Court’s decision, and provided that the employer satisfies the New York Department of Labor’s test for determining when a person is actually an unpaid intern and not an employee, employers who hire unpaid interns and require those interns to purchase college credit as a condition of employment can be more confident that the practice does not run afoul of Section 193 and its prohibition against deductions from an employee’s wages.

Copyright © 2014, Sheppard Mullin Richter & Hampton LLP.

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