Court Holds That Unpaid Interns Are Not Protected From Sexual Harassment Under the New York City Human Rights Law

Although unpaid interns recently obtained a court victory on the wage and hour front (i.e., a ruling that they are “employees” under federal and state wage/hour laws), Southern District Judge P. Kevin Castel recently issued them a defeat on the discrimination/harassment front.

In Wang v. Phoenix Satellite Television US Inc., the court dismissed an intern’s hostile work environment claim under the New York City Human Rights Law. The court held that unpaid interns are not “employees”, and are therefore not protected, under that statute. The court ruled in plaintiff’s favor, however, on her failure-to-hire claims.

Plaintiff Wang, an unpaid intern at the New York branch of Phoenix Satellite Television US, Inc., alleged that bureau chief Liu subjected her to a hostile work environment, quid pro quo sexual harassment, and retaliation for rejecting his advances.

The Court concluded that “because Ms. Wang was an unpaid intern, she may not assert claims under the cited provisions of the NYSHRL and NYCHRL, except for her failure to hire claims.”

“Employee”

Whether an unpaid intern may bring an employment discrimination claim under the NYCHRL was, observed the court, an issue of first impression in the Second Circuit.

Initially, the court looked to the NYCHRL’s plain language, which makes clear that its coverage only extends to “employees”. It reasoned that an employer “logically cannot discriminate against a person in the ‘conditions or privileges of employment’ if no employment relationship exists.” Plaintiff conceded that she must be an “employee” to bring an NYCHRL claim.

She argued, however, that she qualifies as an “employee” under the NYCHRL as amended (and broadened) by the Local Civil Rights Restoration Act of 2005. Specifically, she argued that, under the comparatively broad NYCHRL, “the proper analysis is one that considers the other indicia of an employment relationship under the preexisting test for NYCHRL claims—hire, power of dismissal, and supervision and control of tasks performed—and balances those factors along with whether the plaintiff was compensated.”

The court disagreed.

Plaintiff was unable to cite, nor was the court aware of, a single case applying the four-factor balancing test of Emrich v. GTE Corp., 109 A.D.2d 1082, 487 N.Y.S.2d 234 (4th Dept. 1985) to the claims of an unpaid intern. This was so “because this balancing test is used to determine whether a defendant is actually a plaintiff’s ’employer’ under the state and local civil rights laws, not whether a plaintiff may be considered an employee under those statutes in the first instance.”

Next, the court relied on analogous interpretations of Title VII of the Civil Rights Act of 1964 and the New York State Human Rights Law. Specifically, it cited the Second Circuit’s opinion in O’Connor v. Davis, 126 F.3d 112, 115 (2d Cir.1997), for the proposition that “the preliminary question of remuneration is dispositive” of the inquiry. Thus, “remuneration is a threshold inquiry in establishing the existence of an employment relationship.”

Finally, the court looked to the legislative history of the NYCHRL. It noted that several amendments made it broader, yet failed to extend it explicitly to unpaid interns or volunteers.  This was “particularly telling in light of the fact that it has long been axiomatic that in order for one to be held liable for employment discrimination under New York law, there must have existed between the parties, at the time of the action complained of, the relationship of employer and actual or prospective employee, the touchstone of which is mutually beneficial economic substance.”

For example, when the NYCHRL was amended in 1991, the Second Department had already held that the State Human Rights Law did not extend coverage to unpaid volunteers. Thus, “[a]t the time of the 1991 amendments, the New York City Council was presumably aware of this six-year-old precedent, as well as the fact that courts then treated employment discrimination claims brought pursuant to the NYSHRL and the NYCHRL as coextensive.”

In sum, the court held that plaintiff failed to state a hostile work environment claim under the NYCHRL.

Failure to Hire

All was not lost, however.  The court held that plaintiff plausibly alleged a failure-to-hire claim under the State and City Human Rights Laws.

“In order to sustain a claim for failure to hire, a plaintiff must allege that she applied for an available position for which she was qualified and was rejected under circumstances giving rise to an inference of unlawful discrimination.”

At the pleading stage,

For a failure to hire claim to withstand a motion to dismiss, a plaintiff must allege specific positions to which she applied and was rejected. … To qualify as an application, a plaintiff’s actions must be more than a general request for employment. This does not require, however, that a plaintiff must always allege a formal application, though the exception is narrow. To be excused from the specific application requirement, a plaintiff must show that (1) the vacancy at issue was not posted, and (2) the employee either had (a) no knowledge of the vacancy before it was filled or (b) attempted to apply for it through informal procedures endorsed by the employer. … When an applicant is unaware of open positions because an employer does not post vacancies, it is sufficient for a plaintiff to express interest in a particular class of positions.

The court held that plaintiff’s “complaint plausibly gives rise to an inference that there was an unposted vacancy, and that Ms. Wang attempted to apply for the vacancy through informal procedures.” 

As to the unposted nature of the job opportunity and plaintiff’s interest, the court held:

Ms. Wang alleges that she was led to believe that her internship would serve as a potential basis for later employment and had been told that she could obtain employment for the year following the expiration of her student visa, and perhaps afterwards. She discussed permanent employment with other reporters, and investigated Phoenix’s visa sponsorship policies. At all times, Ms. Wang’s actions indicate interest for a single class of position, that of a full-time reporter. In addition, statements and conduct by Mr. Liu, the bureau chief, indicated that such a position may be made available to Ms. Wang; during the course of her internship, he spoke with her about permanent employment opportunities. Later, when Ms. Wang later called asking about employment, Mr. Liu, rather than informing her there was no position, invited her to Atlantic City for the weekend to discuss “job opportunities.” Therefore, it may properly be inferred that unposted job opportunities, including a reporter position, may have been available.

Next, the court held that plaintiff plausibly alleged that Phoenix had an informal hiring process, which she attempted to use:

The entire hiring process in the New York office was in the sole discretion of Mr. Liu. Phoenix did not have a human resources department in the New York office, nor were there any officers in the United States who supervised Mr. Liu. When Ms. Wang contacted Mr. Liu about permanent employment, Mr. Liu’s response was to invite her to Atlantic City for the weekend, rather than to solicit a formal application. Furthermore, it may be inferred that Ms. Wang received her earlier internship at Phoenix through an informal hiring process. She learned about the internship from a Phoenix employee in Hong Kong and interviewed for the position with Mr. Liu, who made the decision to hire her. Ms. Wang’s prior experience at Phoenix and Mr. Liu’s subsequent behavior give rise to the inference that Phoenix followed informal hiring procedures in their New York office, and that Ms. Wang’s actions were an attempt to apply for a position using these informal procedures.

Plaintiff’s complaint therefore survived defendant’s motion to dismiss these claims.

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