independent contractor

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I often preach that, when dealing with a class action, the employer should try to pick off the named plaintiff, perhaps overpaying to do so (or maybe not).  In this interesting case, the parties settled (i.e. with the named plaintiff) right after the class had been decertified.  The plaintiff had argued that he was misclassified as an independent contractor.  The case is entitled Roberson et al. v. Restaurant Delivery Developers LLC et al., and was filed in federal court in the Middle District of Florida.

The settlement came after the Judge held that the named plaintiff had not shown that there was sufficient similarity between he and the other workers he wanted in the collective action.  Thus, the Court granted the employer’s motion to decertify the collective action due to this dissimilarity between the employees.

The suit began in March 2017, on the theory that the Company had misclassified the workers as independent contractors and was not paying overtime.  The Judge granted conditional certification in September 2017.  The Company defended by asserting that it never hired Roberson (or anyone else) and was a consulting company that assisted local restaurant delivery entities in getting off the ground and which would use the Doorstep Delivery in a manner similar to being a franchisee.  These new companies would then use delivery drivers who were deemed to be independent contractors.

Mr. Roberson contended that this company gave out a manual to its customers, the licensed restaurant delivery companies.  The Judge, however, concluded that did not mean that the discrete delivery companies had put the polices into operation.  The Judge also noted that the manual did not have any guidance for significant components of the job, such as whether they could face penalties for refusing deliveries.

Thus, the Court dismissed claims of the opt-in plaintiffs, but allowed Mr. Roberson to continue to pursue his own claims.

The Takeaway

This is an excellent result.  All the more better if it can be done sooner, rather than later, in the litigation “process.”

And a lot cheaper…

There is a tripartite test for independent contractor under the New Jersey Unemployment Compensation statute (and many other States), the so-called “ABC” test.  Under this test, services performed by an individual for remuneration shall be deemed to be employment unless it is shown to the satisfaction of the Department of Labor that: (a) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; (b) Such service is either outside the usual course of business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and, (c) Such individual is customarily engaged in an independently established trade, occupation, profession or business. All three of the above conditions must exist; the New Jersey unemployment compensation test traditionally has been one of the most difficult to meet and the NJ Supreme Court has adopted this test.

In this case, the Employer claimed that the exotic dancers who worked at the club from 2002-2005, were independent contractors. The DOL Commissioner found that the dancers were employees because they worked for tips, which represented compensation under the statute.  The Court also found that none of the three prongs of the ABC test were satisfied.  The case is entitled Dance, Inc. v NJDOL and issued from the New Jersey Appellate Division.

The statue defined “employment” as any service “performed for remuneration or under any contract of hire, written or oral, express or implied.”  This was broad enough to encompass “all compensation for personal services, including commission and bonuses and the cash value of all compensation in any medium other than cash.”  Although wages paid by an employer were one type of compensation, tips or “gratuities” were as well.

The dancers worked only for tips from the customers.  They all signed a “State Rental/License Agreement” setting forth that they were independent contractors.  Also, they had to “lease” the right to use the club’s stage.  There was no rental amount set forth; it was also in English, with the fact that the dancers spoke only Spanish or Portuguese.

The Company claimed that the dancers were independent contractors who took no direction from the Company, could work when they wanted and came and went as they pleased.  The Court noted, however, that the website showed pictures of numerous, scantily-dressed women and gave their work schedules.  The dancers performed every night, demonstrating that they were (obviously) integral to the Club’s operation, a sure sign of employee status.

The Takeaway

These independent contractor tests, especially an ABC type test, are very hard for an employer to overcome.  That is why retaining independent contractor relationships with single-person “businesses” is often very dangerous, because these are exactly the kind of people who should be deemed independent contractors, because that is what they want.  But the law works against the entities that retain their services by imposing an onerous burden of proof on the putative employer.

Get your Sherpas and keep climbing…

When hit with a wage hour suit, class action or single, employers are well advised to look for a preemption argument, whether from a union contract (e.g. National Labor Relations Act) or a statutory construct.  If the preemption argument is successful, the entire suit goes away.  Therefore, such an argument can become the proverbial “magic bullet” that defense practitioners (i.e. myself) yearn for.  The Third Circuit has just ruled that a federal law that confines state regulation of the trucking industry does not preempt the Illinois Wage Payment and Collection Act.  Thus, the claims of a class of drivers asserting that illegal deductions were made stays alive.  The case is entitled Lupian et al. v. Joseph Cory Holdings LLC, and issued from the Third Circuit Court of Appeals.

Trucking and the motor carrier exemption
Copyright: vitpho / 123RF Stock Photo

The appellate court affirmed the lower court ruling, where Judge Martini found that the state law was not preempted by the Federal Aviation Administration Authorization Act, a law that preempts any state law “relating to a price, route or service of any motor carrier.”  The Court stated that “the IWPCA claims here are too far removed from the [FAAAA’s] purpose to warrant preemption.  With no record to demonstrate otherwise, we hold that the impact of the IWPCA is too tenuous, remote and peripheral to fall within the scope of the FAAAA preemption clause.”

The plaintiffs sued in August 2016 on a theory that they were not independent contractors and had suffered illegal wage deductions.  They charged that the Company violated the section of the Wage Payment Act that required a written authorization in order to deduct from their compensation.  The lower federal court rejected the preemption defense, asserting that the state law’s “effect on motor carriers does not warrant preemption.”

The Third Circuit agreed and was guided by similar cases from the Seventh and Ninth Circuits.  The Court stated that these kinds of laws (e.g. Wage Payment laws) are “a prime example of an area of traditional state regulation.”  The Court observed that “while the fact that the IWPCA does not regulate affairs between employers and customers is not dispositive, it does demonstrate that the operation of the IWPCA is steps away from the type of regulation the FAAAA’s preemption clause sought to prohibit.  We cannot say, particularly at this procedural juncture, that the IWPCA has a significant impact on carrier rates, routes or services of a motor carrier or that it frustrates the FAAAA’s deregulatory objectives.”

The Takeaway

Well, sometimes the magic works and sometimes it doesn’t…