Employee Misclassification

May 22, 2015

The Distinction Between an “Employee” and an “Independent Contractor” is Critical in New Jersey Employment Law Claims

Numerous laws at the federal, state, and city levels protect employees from a wide range of adverse acts by employers, including discrimination, harassment, withholding of pay, and unreasonable or excessive work hours. Whether the remedies offered by a particular law are available to you depends on two factors: whether your employer is an “employer” within the meaning of this specific law, and whether you are considered an “employee” or an “independent contractor.” The definitions of “employee” and “independent contractor” vary from one state to another, but they are critically important to assessing a potential employment law claim. Many laws are limited to employers with a minimum number of employees. The definition of “employee” in a given situation, by determining how many employees an employer has, could also determine whether or not it is subject to certain employment statutes. As more and more employers seem to be trying to classify workers as independent contractors, and more and more workers are fighting back in court, understanding the distinction between “employee” and “independent contractor” is extremely important.

Some employment laws limit their application based on a minimum number of employees or other factors. The federal Family and Medical Leave Act (FMLA), for example, only applies to employers with 50 full-time employees or more. 29 U.S.C. § 2611(4)(A)(i). New Jersey’s employment statutes have broader applicability within the state. The Wage and Hour Law, which covers the minimum wage and other matters, does not limit its application based on the employer. Certain provisions, however, do not apply to minors and workers in certain specific occupations. N.J. Rev. Stat. § 34:11-56a30.

Employment statutes do not offer particularly helpful definitions of “employee,” as opposed to “independent contractor.” The New Jersey Wage Payment Law, for example, simply defines an employee as “any person suffered or permitted to work by an employer” who is not an independent contractor or subcontractor. N.J. Rev. Stat. § 34:11-4.1(b). The U.S. Supreme Court noted that a federal statute’s definition of “employee” was “completely circular and explain[ed] nothing.” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992). It held that “traditional agency principles” should apply and used a multi-part test to determine whether the plaintiff was an “employee” that primarily looked at “the hiring party’s right to control the manner and means by which the product is accomplished.” Id., quoting Commun. for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989).
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April 22, 2015

New Jersey Supreme Court Applies Broad Definition of “Employee,” Including Many Normally Classified as Independent Contractors

by Resnick Law Group, P.C.

A key question in many wage and hour claims is whether the complainant is an “employee,” and therefore protected by said laws, or an “independent contractor,” who is not covered. The New Jersey Supreme Court, in response to a certified question from the Third Circuit Court of Appeals, applied a very broad definition of “employee” for the purposes of state wage and hour laws. Hargrove, et al v. Sleepy’s, LLC (“Hargrove III“), Nos. A-70 Sept. Term 2012, 072742, slip op. (N.J., Jan. 14, 2015). It applied the definition used in state unemployment law, which is much more favorable to employees than state wage and hour laws have been.

The plaintiffs work as delivery drivers for the defendant, a mattress company. They contend that they are employees, while the defendant argues that they are independent contractors. They signed an “Independent Driver Agreement” (IDA) when they began working for the defendant, which they claim was “a ruse to avoid payment of employee benefits.” Id. at 3. They filed suit in federal court in 2010, alleging that the defendant was wrongfully denying them employment benefits under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and the Family and Medical Leave Act (FMLA), 29 U.S.C. § 2601 et seq.

The U.S. district court granted summary judgment for the defendant, finding that the plaintiffs did not meet the definition of an “employee” under ERISA. Hargrove, et al v. Sleepy’s, LLC (“Hargrove I“), No. 3:10-cv-01138, mem. and order (D.N.J., Mar. 29, 2012), citing Nationwide Mutual v. Darden, 503 U.S. 318 (1992). While the court acknowledged that the defendant had “extensive control of deliverer’s activities,” Hargrove I at 10, it noted other factors that led to its conclusion, including the IDAs and the facts that each plaintiff had set up their own business entities, kept their own business records, had relationships with the IRS as business entities, and purchased and maintained their own delivery trucks.
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March 5, 2015

$2.3 Million Settlement Resolves Misclassification, Overtime Dispute Between Exotic Dancers and Clubs, Leaves Question of Whether They Were Employees or Independent Contractors Unanswered

by Resnick Law Group, P.C.

The plaintiffs in a putative collective action under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., have settled their dispute with the defendants, which included allegations of misclassification and failure to pay overtime wages. A federal magistrate recommended approval of a settlement in which the defendants agreed to pay $2.3 million to the plaintiffs. Jones, et al v. JGC Dallas LLC, et al, No. 3:11-cv-02743, findings, conclusions, and recommendation (N.D. Tex., Nov, 12, 2014). The district court approved the settlement, with some adjustments, on December 24, 2014.

The initial plaintiffs in Jones worked for clubs owned and operated by the defendant throughout Texas and in Phoenix, Arizona. They added additional club owners in several amended complaints. They alleged that their primary job duties were to dance on stage and to perform individual dances for customers. They received no payment from the defendants, but instead had to pay a fee to the defendants for each shift. The defendants also allegedly required them to share the money they received from customers with other employees, such as managers and DJs. The defendants set the rates for all of the services expected of the plaintiffs.

The lawsuit was one of many brought by people, mostly women, who work or have worked as exotic dancers at clubs around the country, claiming that the clubs misclassified them as independent contractors instead of employees in violation of the FLSA. Employees are subject to the FLSA’s protections regarding wages and hours of work, while independent contractors are not. Courts around the country have reached different conclusions regarding whether exotic dancers are independent contractors or employees, although the trend seems to be in favor of considering them employees.
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September 9, 2014

Current and Former NFL Cheerleaders Sue Teams for Wage Violations

by Resnick Law Group, P.C.

Former cheerleaders for the National Football League (NFL) have filed multiple lawsuits in New Jersey, New York, California, Ohio, and Florida for alleged violations of state and federal wage laws. Allegations include unpaid work, misclassification as independent contractors, and minimum wage violations. A report by Amanda Hess in Slate notes that cheerleading for professional football began as a volunteer activity, at a time when no one made much money from the sport. While players and coaches have significantly increased their income, cheerleaders are still paid almost as though they were volunteers.

A former Oakland Raiders cheerleader, who goes by Lacy T. in her complaint, filed the first lawsuit, Lacy T. v. The Oakland Raiders, et al, No. RG14710815, complaint (Cal. Super. Ct., Alameda Co., Jan. 22, 2014). She worked as a “Raiderette” during the 2013-14 football season and allegedly received $125 per game no matter how many hours she worked. She also claimed that cheerleaders do not receive any pay until the end of the Raiders’ season in January. Her lawsuit identified a class of cheerleaders employed as Raiderettes from January 22, 2010 to the present, and asserted causes of action for violations of minimum wage, overtime, and other provisions of the California Labor Code.

The U.S. Department of Labor found in March that the team is a “seasonal” employer, and therefore is exempt from federal minimum wage laws. California labor law, however, does not have this exemption. A second lawsuit against the team, Caitlin Y., et al v. The National Football League, et al, No. RG14727746, complaint (Cal. Super. Ct., Alameda Co., Jun. 4, 2014), makes similar wage-related allegations, but also claims sexual harassment and other unlawful practices.
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November 5, 2013

Strippers Win Employee Misclassification Case in New York

by Resnick Law Group, P.C.

A federal judge in New York has ruled that dancers at Rick’s Cabaret are hourly workers who must be paid minimum wage. According to a class-action lawsuit filed on behalf of nearly 2,000 dancers in 2009, the company improperly classified strippers as independent contractors. By categorizing dancers in this way, Rick’s Cabaret avoided paying employment taxes, benefits, and hourly wages to strippers at the company’s 23 clubs located across the nation. Additionally, independent contractors are not entitled to the same legal protections under state and federal labor laws that employees receive. In effect, dancers at the New York club were being paid solely in tips and subject to fees and fines imposed by management without legal protections.

Judge Paul Engelmayer determined the dancers were employees after analyzing the degree of control company management exerted over the women. According to the judge, the long list of entertainer guidelines and fees demonstrated that the company “exerted significant control over its dancers’ behavior.” At this time, no award for back pay has been determined. Rick’s Cabaret CEO Eric Langan stated the company plans to appeal the judge’s decision.

Although classifying strippers as independent contractors has apparently become an industry-wide practice, a number of dancers have won judgments against strip clubs in a variety of states across the country in recent years. Unfortunately, many dancers continue to work despite an erroneous employee status because they are simply unaware of their rights.
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