Three industries suffered setbacks last month in independent contractor misclassification cases, while another targeted industry targeted scored a success. As we have reported in many prior blog posts, class action lawyers who regularly pursue IC misclassification cases have had in their crosshairs, for over a decade, a number of industries including home health care, franchise, and food manufacturing and distribution businesses. One of the cases reported below involves a court decision granting summary judgment against a Florida home health care company and in favor of a home health aide / companion where the court found that the company misclassified the aide as an independent contractor. Another case relates to a franchisor of tool distributorships that settled with California franchisees for $15 million. A third case pertains to a $23 million settlement between a large baked goods manufacturer and those who distribute its products to grocery stores in Maine. A logistics company serving as a freight forwarder broker, however, was successful in decertifying a class action by drivers in New York. Prudent companies in each of those and other industries can and should take steps to minimize their exposure to these types of lawsuits by using a process to restructure (even if only modestly), re-document, and re-implement their independent contractor and franchisee relationships in a manner that not only substantially minimizes the likelihood of such lawsuits but also, if sued, reduces considerably the amounts for which such lawsuits are oftentimes settled. One process used by many companies is IC Diagnostics (TM). That process includes the use of state-of-the-art arbitration clauses with class action waivers, which may not have been deployed by some or all of the companies in the four cases below.
In the Courts (4 cases)
FLORIDA HOME HEALTH COMPANY MISCLASSIFIED CAREGIVER / COMPANION AS INDEPENDENT CONTRACTOR. A Florida federal court found that Pathfinders for Independence, Inc., a home healthcare agency, violated the overtime provisions of the federal Fair Labor Standards Act by misclassifying a caregiver as an independent contractor and not an employee. The agency contracts with Florida’s Agency for Persons with Disabilities to offer in-home healthcare and companion services to elderly individuals and adults with disabilities. The plaintiff worker in the case was both a live-in companion and support living coach for the agency’s clients. In granting the caregiver’s motion for summary judgment, the court applied the economic realities test and concluded that the agency exercised significant control over the caregiver’s work, including the requirement to follow a company policy handbook; there was no opportunity for the worker to realize a profit or loss where the caregiver could not bid for particular engagements or set her own rates; the plaintiff’s work as an unlicensed caregiver was not regarded as a specialty job; there was permanency in her three and one-half year relationship with the agency; and the caregiver’s services were an integral part of the agency’s business. The court also granted summary judgment on the issues of liquidated damages and the agency’s willful violation of the FLSA. Mason v. Pathfinders for Independence, Inc., No. 8:19-cv-307 (M.D. Fla. Apr. 12, 2022).
TOOL FRANCHISOR TO PAY OVER $15 MILLION TO SETTLE FRANCHISEES’ IC MISCLASSIFICATION CLASS ACTION. Matco Tools Corporation supplies professional mechanics and automobile enthusiasts with premium tools and equipment through franchised distributorships that sell, deliver, and service tools through mobile tool stores. Matco was sued in 2019 in a class action lawsuit alleging that the distributor franchisees were employees of Matco and not independent contractors. The plaintiff alleged on behalf of himself and other similarly situated distributor franchisees that they were denied overtime compensation, meal and rest breaks, reimbursement of expenses, and other benefits in violation of state law. According to the class action complaint, the distributors, among other things, were not permitted to engage in any businesses that were the same or similar to the company’s; were not permitted to sell products that competed with the company’s merchandise; and were required to sign a Distributor’s Agreement that required them to work in accordance with the company’s standards and specifications, including requirements for weekly sales calls and minimum inventory and sales levels. A federal district court in California approved a $15.8 million settlement of the class action between Matco and a class of 273 franchisee distributors. The settlement includes a monetary relief component of $13.5 million that includes $4 million for attorneys’ fees and costs, as well as a debt forgiveness portion of $2.3 million whereby the company will forgive the debts owed by class members who terminated their company distributorships before a certain date. Additionally, the settlement earmarks $250,000 to resolve plaintiff’s Private Attorneys General Act claim. Each class member is expected to receive an average of approximately $42,000 in cash and debt relief. Fleming v. Matco Tools Corp., No. 3:19-cv-00463 (N.D. Cal. Apr. 29, 2022).
BAKING COMPANY PAYS $23 MILLION TO SETTLE IC MISCLASSIFICATION CLASS ACTIONS WITH DISTRIBUTORS. Flowers Foods, Inc. and two other companies have settled three related independent contractor misclassification cases with distributors of its baked goods products for $23 million. In the lawsuits against Flowers Foods, which makes Wonder Bread, Tastykake, and other brands of baked goods, Lepage Bakeries Park Street LLC, and CK Sales Co. LLC, which distributes Lepage products, the distributors claimed they were misclassified as independent contractors under the FLSA and Maine’s wage payment laws. They alleged they were denied overtime compensation for hours worked over 40 in a workweek and were not reimbursed for their business-related expenses, such as administrative and warehouse fees, insurance premiums, and truck purchase and lease payments. According to the complaint in one of the three related cases, the company allegedly required the distributors to follow strictly its instructions and retained the exclusive right to control the manner and means by which the distributors performed their work including the order and sequence of deliveries. The company denied the allegations and contended that the distributors were responsible for controlling the manner, method, and means of performance of their services.
After six years of litigation, the parties reached a settlement that provides for $9 million in direct payments to members of a certified class of workers; injunctive relief in the form of the company’s agreement to repurchase, for about $6.6 million, the distribution rights of distributors that wish to provide services as employed route sales representatives; and $7.5 million to cover class counsel fees and costs. The agreement includes a non-admission clause and does not require Flowers Foods to eliminate its IC relationships with those distributors that wish to remain ICs. Noll v. Flowers Foods Inc., No. 1:15-cv-00493, Aucoin et al. v. Flowers Foods Inc., No. 1:20-cv-00411, and Bowen v. Flowers Foods Inc., No. 1:20-cv-00410 (D. Maine Apr. 26, 2022).
NEW YORK COURT DECERTIFIES DRIVERS’ CLASS ACTION AGAINST NEW YORK LOGISTICS PROVIDER. A New York federal court has decertified a class of delivery drivers in an independent contractor misclassification class action against a logistics provider, HomeDeliveryLink, Inc. HDL operates as a freight-forward broker for Innovel Solutions, Inc., a company that warehouses merchandise for large retailers. Two drivers filed a class action on behalf of themselves and other drivers who delivered merchandise to customers’ homes throughout New York State, alleging that HDL had violated wage and hour provisions of the New York Labor Law due to its alleged misclassification of the drivers as ICs and not employees. In June 2020, the court initially certified the drivers as a class. Subsequent class discovery revealed conflicting testimony regarding wearing of uniforms, exclusivity, HDL’s role in hiring, and HDL’s overall direction and control. HDL then filed a motion for decertification. In granting the motion, the court agreed there were sufficient differences in drivers’ experiences with HDL such that plaintiffs could not establish on a class-wide basis that all drivers were “employees” of HDL. It further stated that “[t]he discrepancies among at least some of the Plaintiffs’ testimony shows that the central question in this case – whether Plaintiffs were employees or independent contractors – would require an intensive review of each Plaintiff’s relationship with HDL.” Wilson v. HomeDeliveryLink, Inc., No. 17-CV-6296 (W.D.N.Y. Apr. 25, 2022).
Other Noteworthy Matters
STUDY SHOWS WOMEN AND PERSONS OF COLOR ATTRACTED TO CONTINGENT WORK. A March 2022 survey entitled, “What Drives a Diverse Extended Workforce: Fostering feelings of inclusion for diverse contingent talent,” identifies key workplace motivators that attract women and people of color to the contingent workforce: equity, opportunity to transfer to permanent employment, and holistic support. The study, conducted by Werklabs, the research and insights division of The Mom Project, included 943 contingent workers from diverse backgrounds and had the twin goals of highlighting unique differences among critical segments of the contingent workforce, as well as understanding the experiences of mothers and women of color who “often see contingent work as a viable next-step in their careers as they look to pivot industries and refine newly learned skills.” The research results showed that, of the “surveyed demographic segments, Hispanic/Latino (65.4%), Black (64.9%), and female (60.8%) professionals would recommend contingent work to others the most.”
Written by Richard Reibstein