Category Archives: Class Action

07.24.23
by

Cry If You Want To: Individual Arbitration Agreements Can’t Stop PAGA Claims

A Nigerian comedian recently set out to beat the world record for continuous crying, seeking to cry for 100 consecutive hours. I expect that many new parents would object right here and point out that this record is bullsh@# because their infants have cried continuously for twice that long. But let’s assume the record here is for adult crying. Lacking the stamina of a newborn, the comedian failed miserably.

After six hours, the man experienced headaches, a swollen face, and lost his vision for 45 minutes.

A California Supreme Court decision last week may cause businesses to shed a few tears, but the ruling was no surprise, and companies just need to be prepared.

Remember how we love individual arbitration agreements as a tool for avoiding class action lawsuits? Companies that make widespread use of independent contractors should have these agreements in place, and most do. Courts generally enforce these agreements, which require claimants to bring any claims on an individual basis, not as part of a class action.

In California, there was an open question about whether an individual who is subject to an individual arbitration agreement could nonetheless bring a PAGA claim in California. PAGA refers to the Private Attorneys General Act, a California state law that allows “aggrieved individuals” to bring a claim on behalf of the state government, seeking relief for other employees. It’s not a class action but, to a defendant company, it feels like one.

In Adolph v. Uber, the California Supreme Court ruled that an individual whose claims are subject to an individual arbitration agreement may still be considered an “aggrieved employee” who can bring a PAGA claim seeking to remedy a defendant’s Labor Code violations against other employees.

The ruling was no surprise to the business community, but it clarifies an important point of law. You can read more about the decision here, in this BakerHostetler alert.

Businesses do not need to do anything differently on the preventive side, as a result of this ruling.

Businesses making widespread use of independent contractors should continue to require the contractors to sign individual arbitration agreements with class action waivers. While these agreements cannot prevent PAGA claims, they can often be used to delay PAGA claims. The agreement can include a clause requiring the parties to jointly request that any PAGA claim be stayed while the individual claim is arbitrated. This delay may frustrate the purpose of the PAGA claim, especially if your business prevails in arbitration against the individual.

So for now, nobody needs to follow the lead of the temporarily blind Nigerian comedian. Instead, follow the advice in this song:

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
12.05.22
by

Hairy Situation: Misclassification Settlement Disputes Settle for $6.5 Million; Multiple Tests Would Have Applied

If you have a beard at least 8 inches long, here’s an opportunity you might not have considered. At a bar in Casper, Wyoming, a group of bewhiskered patrons tied their beards together to take the world’s record for Longest Beard Chain.

How long? 150 feet, shattering the previous record of 62 feet, set by a shaggy German crew in 2007.

But that wasn’t even the hairiest highlight of the weekend. Down the street was the National Beard and Moustache Championships, a visual delight featuring moustache categories such as best handlebar, Dali, freestyle, and uber-stache, and partial beard categories including best friendly sideburns, goatee freestyle, musketeer, and Fu Manchu.

Meanwhile, 1,000 miles to the west, a different sort of hairy situation was nearing conclusion for several operators of gentleman’s clubs or nightclubs or strip joints, depending on your preferred terminology.

Last week, a federal district court in San Francisco approved a settlement that combined multiple class action claims of independent contractor misclassification brought by exotic dancers. The settlement covered more than 8,000 dancers and included a total payout of $6.5 million.

The cases were complicated by a number of legal issues, including the fact that — because of the timing of the lawsuit — the question of whether the dancers were contractors or employees was to be determined using different tests for different claims. The dancers’ classification for their California wage order claims would be determined using an ABC Test, but their classification under other Labor Code claims would be determined using the Borello balancing test, which is a California hybrid of Right to Control and Economic Realities Tests.

The class period covered 2010 through 2018, so the Dynamex decision applied to the wage claims, but AB5 had not yet been enacted, which left the Borello test to govern the Labor Code claims. This post explains the complicated situation that existed at the time. Had the class covered the period from January 2020 forward, the ABC Test likely would have been used to determine classification under all of the California claims.

But there were also Fair Labor Standards Act (FLSA) claims. The FLSA uses an Economic Realities Test to determine a worker’s classification, but that test is fluid too. The Economic Realities Test used by most courts is different from the test that was written into the current FLSA regulations in 2020, which is different from the test the DOL recently proposed to enact in a new set of regulations currently under consideration.

So for these class members, there were at least three different tests that would determine whether they were employees or independent contractors under different laws. That’s kind of like trying to determine who had the best musketeer or Fu Manchu but with everyone’s facial hair tied together in a 150-foot beard chain.

There are a few takeaways here for the rest of us.

First, misclassification claims by exotic dancers remain common. The business model needs some internal review. But that’s probably not your concern.

Second, the settlement is a good reminder of how complicated it can be to determine a worker’s classification when multiple laws apply. Different tests apply to different laws, even within the same state. The dancers, had they gone to trial, might have been employees under some laws and contractors under other laws.

Third, there are significant costs in reclassifying contractors to employees. The settlement required the clubs to reclassify their dancers to employees, which means the dancers would become eligible for unemployment, workers’ comp coverage, and protection under the anti-discrimination and leave laws that apply to employees.

Regardless of your business, it’s always a good idea to proactively review independent contractor relationships to see how well they would withstand a classification challenge in court. Misclassification cases are high stakes and can take many twists and turns. Sort of like the facial hair in the Full Beard Freestyle category. (Photos here.)

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
07.11.22
by

Dead End for Class Certification? Ninth Circuit Provides Roadmap for Defending Independent Contractor Misclassification Class Claims

For businesses using independent contractor vendors, misclassification claims are usually well-suited for class certification. A plaintiff’s path toward certifying a class can be relatively smooth when all vendors of a particular kind are treated as contractors. The argument goes that if one is misclassified, all are misclassified.

But a new Ninth Circuit ruling may help businesses change the path toward class certification into a dead-end road.

Click here to read the rest of the post, originally published on BakerHostetler’s Employment Class Action Blog.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
09.27.21
by

Nowhere to Run: New Case Serves as Reminder That FLSA Misclassification Settlements are Very Public

I just got back from running in a 200-mile relay, Muskegon to Traverse City, with a group of college friends. I ran three legs of 4, 4, and 5 miles. I had the easiest set of three legs among the 12 runners, but I’m happy just to have finished. It was great to see everyone, and I was able to disconnect from work life for a few days.

So, what I’m saying here is, I had a better weekend than the guys I’m about to write about. And for them, there’s no running away from their problems.

In yet another exotic dancer case to hit the news, the performers at King’s Inn Premier Gentlemen’s Club in Massachusetts are about to score a $292,000 settlement in a claim that they were misclassified as independent contractors. A hearing to approve the settlement is scheduled for this week.

There seem to be a lot of exotic dancer cases in the annals of independent contractor misclassification, and the clubs seem to lose their fair share of these cases. This case, like most of the dancer cases, is a wage and hour case. The dancers claimed they were denied a minimum wage and overtime pay, in violation of the Fair Labor Standards Act (FLSA). The club claimed the dancers were independent contractors and therefore were not covered under the FLSA.

But why do you care about a strip club exotic dancers case? Two reasons:

  • First, the Economic Realities Test is alive and well, and it applies to all industries.
  • Second, any settlement of an FLSA lawsuit must be approved, and it becomes public record.

You can read more about the first point here, in a collection of posts about this test and how it is used to determine whether someone is an employee.

The second point deserves a bit more attention, though. Most types of litigation can be settled in a private settlement agreement. An FLSA case cannot be. The law requires the settlement of an FLSA case to be approved by a judge, and there is a public hearing at which the settlement terms are considered.

Once you get sued for an FLSA violation, it’s very hard to get out of it with anything resembling confidentiality. This is the kind of claim you want to avoid in the first place.

How do you avoid an FLSA claim when you have independent contractors?

  • Be proactive. Evaluate your relationships using the Economic Realities Test and see if they hold up.
  • Review your contracts and see if they can be adjusted to better memorialize the facts that support independent contractor status.
  • Consider obtaining representations from the contractors up front to determine whether they really do operate independently.

Don’t wait until its too late to take action. You can’t just run away from an FLSA case.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
07.27.20
by

Up North, Uber Can’t Make Drivers Go to Amsterdam to Sue. (Wait, What?)

exposI bought a Montreal Expos t-shirt last week. Why? I needed some new work clothes.

I’ve been emailing with a friend in Ontario about the difference between the U.S. and Canada when it comes to coronavirus precautions, and we both agree it’s a good idea to keep the border closed for now. Did you see the Maid of the Mist pictures showing the Canadian boat with six well-distanced (and undoubtedly polite) passengers and the American boat packed like it’s 2019. Canada has hardly any cases. Anyway, I digress. As usual.

While Canada is on my mind, I’ll share a recent decision by the Supreme Court of Canada. The ruling will allow a proposed $400 million class action against Uber to proceed in Ontario on the issue of whether drivers are misclassified as independent contractors.

At issue was the validity of Uber’s arbitration agreements for drivers in Canada. The agreement required drivers to arbitrate any disputes in Amsterdam, following the rules of the International Chamber of Commerce and Netherlands law. Wait. What? Yes.

And there’s this: Filing a case would cost a driver US $14,500 in up-front administrative fees.

The Court’s opinion called the arbitration clause “unconscionable,” and Uber responded by confirming to The Star that it planned to update its arbitration agreements accordingly.

Gig economy platforms are under attack in Ontario, much like in the U.S. Think of Ontario as Canada’s version of California or Massachusetts but with better access to poutine.

According to The Star, the Ontario labour relations board ruled earlier this year that couriers for a food delivery app were not true independent contractors and therefore had the right to join a union. Drivers using the Uber Black platform are also challenging their classification as contractors. American expats are challenging the use of a superfluous U by the labour relations board.

Lesson: If you’re going to require arbitration, be reasonable. Amsterdam might be a nice place to visit (see the Vondelpark!), but it’s too much of a stretch to require an Ontario rideshare driver to go there to file a claim. Next time, try Greenland?

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

2018_Web100Badge

 

12.16.19
by

Octopus vs. Bald Eagle: Postmates to Defend 5,225 Individual Arbitration Claims

Bald eagle octopus postmates

The best laid plans can sometimes take an unexpected turn for the worse. Just ask this octupus.

Earlier this month, off the coast of Vancouver Island, an octopus was settling down for a meal consisting of one whole bald eagle, freshly caught but still alive. A team of nearby salmon fishermen heard the bald eagle’s screams and, having been trained in speaking eagle, immediately recognized the distress call. The salmon fishermen sprang into action. They poked the soft-bodied mollusc with a pole until it released the bird. The eagle survived, and the fishermen got some footage that made it onto CNN’s website.

While I love octopi (delicious when grilled), I like to think that I too would have favored the eagle when interfering with a battle sponsored by mother nature.

The delivery app company Postmates is also dealing with an unexpected turn of events, but this one involves no sea creatures or birds of prey. In defending a claim of independent contractor misclassification brought by thousands of delivery drivers, Postmates prevailed in showing that the drivers were bound by arbitration agreements with class action waivers. If the drivers wanted to proceed, they would have to arbitrate their claims one-by-one, all 5,225 of them.

Guess what happened next.

The plaintiffs’ firm representing the drivers filed 5,225 individual arbitration claims with AAA.

Faced with having to pay $10 million in arbitration filing fees, Postmates has been trying to figure out how that would work. Can AAA even handle 5,225 simultaneous arbitrations? After Postmates missed an initial AAA payment deadline, the plaintiffs’ firm filed a motion to hold Postmates in contempt for not paying the AAA fees.

Postmates is now defending the contempt motion and trying to figure out, logistically, how to proceed.

Arbitration agreements can be helpful to businesses that have lots of independent contractors, mainly because the agreements can include class action waivers. But this dispute shows the potential downside of class action waivers. A sophisticated plaintiffs’ class action firm can file thousands of simultaneous arbitration demands, flooding the system and leaving the company on the hook for millions of dollars in filing fees alone — before even getting to the merits or defense of a claim.

We’ll see how this one plays out. It’s an unexpected turn of events, much like the octopus getting poked by an eagle-defending salmon fisherman at dinner time.

2018_Web100Badge

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

06.03.19
by

Fun with Funerals? Cremation Company Settles Misclassification Case for $2.5 Million

Cannon cremation funeral Independent contractor misclassificationEveryone loves a fun funeral story, right? Apparently so. AARP.com posted this article about creative cremations. Available options for ashes include:

  • Being blasted out of a cannon to the tune of “Mr. Tambourine Man,” (Thank you, Hunter S. Thompson);
  • Being placed in an “environmentally safe, ball-shaped concrete memorial reef” and placed in the ocean to create a marine habitat, (giving a new and more literal meaning to “sleeps with the fishes”);
  • Being launched into space for an earth orbit; and
  • My personal favorite – being loaded into a five-foot biodegradable helium balloon and launched over the hills surrounding the deceased owner’s ranch so his buddies could shoot at the balloon until it burst, spreading the ashes over the surrounding foothills (so beautiful it almost makes me want to weep in my moonshine).

A cremation company had a less fun time last month, when a judge approved a $2.5 million settlement for independent contractor misclassification. The settlement included $1.65 million to a class of independent sales representatives and $825,000 in attorneys’ fees to the plaintiffs’ lawyers.

The company’s independent sales representatives had claimed that they were really employees, despite having signed an Independent Contractor Agreement in which they agreed they were contractors.

As we’ve noted many times before, though, it’s the facts of the relationship that matter, not what the parties call themselves. According to the plaintiffs, the cremation company told them when to work and where to work, paid them an hourly non-negotiable rate, required frequent reports, supervised their work, and provided them a handbook instructing them how to conduct themselves and how to perform their work. These are all facts that weigh in favor of employment status.

The sales reps’ lawsuit alleged that, when assessing the facts of the relationship, they were really employees and not independent contractors. They alleged violations of several laws that apply only to employees, including violations of California’s overtime, meal and rest break, waiting time, recordkeeping, and business expense reimbursement laws; and violations of the federal FLSA overtime rules.

The parties settled the dispute, and a federal judge approved the settlement.

There’s nothing suprising here, but the settlement should remind us that:

  • The facts of the relationship are what matter, even if the parties agree to call the workers “independent contractors” and they sign an Independent Contractor Agreement;
  • Different tests apply to different laws; here, there were claims that would have to be evaluated under:
  • Independent contractor misclassification remains a real and potentially costly risk.

The settlement did not say whether any of these sales representatives sold cannon, reef, space, or skeet shooting funerals along with cremation services. But I sure hope they did.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

2018_Web100Badge

 

04.29.19
by

Meatloaf Lyrics Inspire Supreme Court; Arbitration Agreements Can Be Implied to Include Class Action Waivers

Meatloaf Lamps Plus Arbitration agreements independent contractorhttps://youtu.be/_wO8toxinoc

Meatloaf’s “You Took the Words Right Out of My Mouth” opens with a dialogue by Jim Steinman, who wrote the song, and actress Marcia McClain, who played Dee Stewart in the soap opera As the World Turns. He asks, “On a hot summer night, would you offer your throat to the wolf with the red roses?”

For a quick trip back to 1978-79, listen to the album version, not the shortened single, which cut out the dialogue, presumably because it distracted the roller skaters. The song is about teenage lovers and passion, and the lyrics are rich with intense imagery.

Offering a new twist on this old classic, the Supreme Court last week issued a ruling on arbitration agreements that can be paraphrased as “You took the words right out of the air because they weren’t in my arbitration agreement.” This decision will inflame passions in the pro-worker camp, but it’s a good decision for businesses. The case is called Lamps Plus v. Varela.

Continue reading →

03.11.19
by

“So Tired of Being Alone”? Blogger Managers at SB Nation Claim Independent Contractor Misclassification

Bloggers independent contractor misclassificationThe good reverend and crooner Al Green was “so tired of being alone,” but he sang it in a way that made me want to keep listening. Stay solo, Rev. Al. On a more somber note, The Motels’ song, Only the Lonely is depressing. Why can only the lonely play? Everyone should be able to play.

Blogging can be a lonely endeavor. Bloggers write and push out content, hoping people will read. Fortunately for me it’s just a side gig, but for many it’s a way of life.

A lawsuit involving bloggers at SB Nation serves as a reminder that bloggers’ status as independent contractors is subject to challenge. In this case, three blogger/site managers allege that, despite their independent contractor agreements (Blogger Agreements), they were really employees entitled to overtime pay. According to the plaintiffs, site managers are required to watch games and report on breaking news on their assigned teams.

In a recent decision, the federal district court granted conditional certification to the Continue reading →

02.21.19
by

“Flooding” Tactic Creates New Risk for Using Mandatory Arbitration Agreements with Independent Contractors

flood arbitration independent contractorsIn the Biblical story of Noah’s Ark, a world-engulfing flood destroys everyone except Noah, his family, and his mini zoo. A similar story appears in the Quran, and a much earlier world-engulfing flood was described in the Epic of Gilgamesh, a Babylonian poem dating back to the 19th Century BC, featuring Utnapishtim as our hero, a fellow who was awarded with immortality but whose name (unfortunately, IMHO) appears much less frequently on the Social Security Administration’s list of most popular baby names than our more recent pal, Noah.

A more recent trend in flooding comes from our friends in the plaintiffs’ bar. A popular tactic by companies wishing to avoid class action misclassification lawsuits has been to require independent contractors to sign arbitration agreements with class action waivers. These agreements force misclassification clams into arbitration on an individual basis, where each individual single claim has little value. By forcing claims into individual arbitration, there’s much less incentive for plaintiffs’ lawyers to take these cases since each case is worth very little. It’s only in the class action arena that these claims are worth big money.

But according to a recent article in Bloomberg Law, some of the larger, more organized plaintiffs’ firms are fighting back by flooding companies with mass arbitration filings. Continue reading →