Tag Archives: Class Action lawsuits

SUPER BOWL SPECIAL – NFL Teams Serve as a Reminder of Wage and Hour Issues

Contributed by Michael Wong

As many prepare this week for Super Bowl parties to cheer on their favorite team, NFL teams’ treatment of cheerleaders serves as a reminder to employers that no one can escape wage and hour laws. Moreover, it serves as reminder that if businesses/franchises worth billions of dollars have made the mistake of misclassifying an individual as an independent contractor instead of an employee, then so can you.

Over the past few years, more than five NFL teams including the Buffalo Bills, Cincinnati Bengals, New York Jets, Tampa Bay Buccaneers and Oakland Raiders have faced class action wage and hour lawsuits brought by their cheerleaders. In an industry, where many players and coaches make hundreds of thousands of dollars per game, it was “industry standard” to classify cheerleaders as independent contractors and only pay an appearance fee for each game.

Football stadiumDespite identifying cheerleaders as independent contractors, teams would typically exert significant control over how the cheerleaders performed – including their attire, dances, music, when and where they were to appear, participation in mandatory promotional events, and promotional materials. Additional mistakes included waiting to pay cheerleaders their appearance fees until the end of the season – at which time a team may unilaterally deduct fines. Similarly, many times expenses incurred by the cheerleader, such as travel, equipment, uniforms, etc., were deemed the sole responsibility of the cheerleader.

The Cost: The Oakland Raiders agreed to a $1.25 million dollar settlement; the Tampa Bay Buccaneers an $825,000 settlement, New York Jets a $325,000 settlement, Cincinnati Bengals a $255,000 settlement. Be aware, damages for wage and hour claims can grow very quickly and be enticing to pursue as they include liquidated damages, interest, and attorneys’ fees and costs.

What to Avoid:

  • Do not blindly follow industry standard. Class action lawsuits are changing the “industry standard” in many industries, including but not limited to construction contractors, truck drivers, limo drivers, taxi drivers, security guards, painters, cable installers, etc.
  • Understand if they are independent contractors – this means they must truly be independent from your control.  So, if you control the number of hours they work, where they work, how they work, their appearance, what tools they use, how much they charge, or what they must do, then you may really be their employer.
  • Are you the only company the individual does work for? If so, the scale just leaned a little more in favor of employee rather than independent contractor.
  • Finally, do not blindly follow the advice of your accountant. While some accountants are aware of the legal standards, your accountant may not be aware of the most recent changes or case law.

If you are unsure of the individual’s classification, seek the advice of legal counsel to determine whether the position is properly classified and what, if any, changes must be made to ensure you have a strong defense against a lawsuit or DOL audit.

Is Your Contractor Really Independent?

Contributed by Noah A. Frank

Recently, a California labor commissioner found that an Uber driver was an employee and not an independent contractor (“IC”), awarding the driver over $4,000 in expenses (Uber Techs., Inc. v. Berwick, CGC-15-546378 (Cal. Sup. Ct. June 16, 2015)). Similar lawsuits, including class action matters, are being filed around the country.  The implications for Uber are huge: unemployment taxes, workers’ compensation insurance, minimum wage, overtime, and third-party tort liability to start.

What is so surprising about this ruling is that Uber drivers seem to epitomize the IC relationship. They enter into explicit IC agreements, work when and where they want, accept the fares they want, supply their own vehicle, pay their own gas and maintenance costs, and work for competitors (i.e., Lyft and traditional taxi services). Uber generally requires drivers to complete an application, be safe drivers, and be knowledgeable about the city’s geography. Uber processes the fare, deducts its fee, and pays the remainder to the driver.

How did the IC relationship become so complex?  Well, the law favors the employer-employee relationship as the default.  It ensures workers receive minimum and overtime wages, are covered by workers’ compensation and unemployment benefits when the relationship ends. Of course, this also means that the government receives taxes (rather than hope an IC actually pays taxes), and will not become the guarantor of an unemployed or uninsured individual through social welfare programs like Medicaid.

ContractIt’s not so simple after all.  Here are five tips for engaging an Independent Contractor:

  • First, consider whether the IC arrangement is really best for your business. For example, if you want a lot of control versus an end product, it may be better to hire employees.
  • Second, will you be engaging individuals or companies?  Most employment law tests favor the IC arrangement when the two parties are independently established businesses.
  •  Third, have a good, tailored contract.  While not conclusive, contracts are meant to provide black-and-white evidence of the parties’ intent (which, by its nature, is drafted when things are going well to protect them for when things go south).
  • Fourth, perform an audit of the relationship under the various substantive laws governing your industry (e.g., special rules for construction, trucking, and temporary labor to name a few) before entering into the IC relationship.  The key is: would the relationship satisfy an administrative agency’s test if an IC complained?
  • Finally, seek the advice of counsel to ensure that the four steps above are conducted with an objective eye towards protecting your business now and going forward.  While most business deals can be made, upfront review may save costly legal fees in litigation and otherwise.