Sports Industry Continues To Be Target For Independent Contractor Misclassification Class ‎Actions: December 2022 IC Legal News Update

Independent Contractor Misclassification & Compliance Blog
January 12, 2023

Half of the court cases that we report on below from last month involve legal proceedings related to the sports industry: golf caddies, tennis pros, and sports editors.  Misclassification within the multi-faceted sports and athletics industry has been addressed by courts and administrative agencies in many of the cases about which we have reported over the years, including high school referees, security representatives for the NFL, tennis officials at the U.S. Open, lacrosse officials, pro football cheerleaders, and basketball arena crew members including camera, audiotape, and replay operators, to name just a few.  Sports and athletics businesses including golf courses, instructional firms, professional leagues, amateur athletic organizations, stadiums, tournaments, sports publishers, and a host of others that use independent contractors can minimize their IC misclassification exposure by using a process such as IC Diagnostics (TM) that many companies in other industries have used for years.  That type of process restructures, re-documents, and/or re-implements independent contractor relationships in a manner than maximizes compliance with federal and state IC laws and regulations in a customized and sustainable manner.

In the Courts (6 cases)

NEW YORK GOLF COURSE SUED IN IC MISCLASSIFICATION CLASS ACTION BY GOLF CADDIES.  A golf caddy classified as an IC has filed a class and collective action against the famed Wykagyl Country Club in a New York federal court on behalf of himself and approximately 100 other caddies.  He alleges violations of the Fair Labor Standards Act and New York Labor Law for unpaid minimum wage and overtime compensation due IC misclassification. According to the caddy’s complaint, the club requires the golf caddies to wear the same uniform, part of which is provided by the Club; the caddies are not free from control or direction of their performance and are “an intricate part” of the experience of playing a round of golf at the country club; the caddies often have an exclusive relationship with the Club for multiple, continuous years; and the “caddy master” who assigns caddies to golfers retains and exercises meaningful discretion in rewarding and punishing them and deciding how many rounds of golf a caddy may work in any given day. Additionally, the complaint asserts that the caddies typically work at least 54 hours per week; that they are not paid an hourly rate by the club; that the only compensation the caddies receive comes from golfers in the form of a fee per bag and any tips that golfers may provide to the caddies; and the club determines the fee per golf bag without any negotiation on the part of the caddies. Hopkins v. The Wykagyl Country Club, No. 7:22-cv-10399 (S.D.N.Y. Dec. 8, 2022).

REMOTE SPORTS EDITOR IN VIRGINIA SUES NEWSPAPER AND PUBLISHER IN IC MISCLASSIFICATION COLLECTIVE ACTION.  A site editor for the “Seahawks Wire” website has sued a news media group and its parent publishing company in a collective action complaint alleging overtime violations under the federal Fair Labor Standards Act and minimum wage violations under the Seattle Minimum Wage Ordinance as a result of allegedly being misclassified as independent contractors.  According to the complaint, site editors work remotely, regularly watch and analyze Seahawks’ NFL football games and other team news, write and publish five to six articles per day, manage other writers, edit and approve writers’ articles, and monitor search engine optimization. In support of her claim that site editors are employees and not ICs, the plaintiff alleges that the news company and publisher hire, fire and exercise control over the site editors; retain the right to and, on occasion, edit the work product produced by site editors; and regularly encourage site editors to meet and exceed the companies’ content posting goals and requirements. Additionally, the complaint asserts that the companies determine the site editors’ rate and method of pay; the site editors have minimal opportunity for profit and risk of loss; and their services are an integral part of the companies’ business.  Mathews v. USA Today Sports Media Group LLC, No. 22-cv-01407 (E.D.Va. Dec. 8, 2022).

PRIVATE TENNIS INSTRUCTIONAL FIRM AND GOLF CLUB SETTLE MISCLASSIFICATION LAWSUIT WITH TENNIS PRO IN GEORGIA.  A tennis pro working for a private tennis instructional company that provides tennis lessons at an Atlanta golf club has reached a proposed settlement of his misclassification lawsuit brought under the Fair Labor Standards Act for alleged failure to pay him minimum wage and overtime compensation.  JMG Tennis, Inc. and the Ansley Golf Club provide ‎tennis instruction and sponsor tennis leagues and tennis summer camps for the members of ‎the golf club.‎ The on-site tennis pro alleged that he provided services simultaneously to the golf club and tennis company, and was treated by the golf club as an exempt employee subject to an overtime exemption and by the tennis company as an independent contractor.  According to the complaint, the tennis pro alleged that as a result of these dual misclassifications, the companies deprived him of an overtime premium for time worked in excess of 40 hours in a week. Regarding his alleged misclassification as an IC, the tennis pro claimed that he did not solicit customers or advertise his services on his own behalf; was required to wear clothing bearing the gold club’s logo; did not make any significant investments into his work such that he shared any significant risk of loss; was economically dependent on JMG Tennis for his livelihood; was provided with all materials and equipment necessary to provide his services; was not permitted to subcontract his work or hire employees; performed services that were integral to JMG Tennis’ business; and had no role in negotiating contracts or pay arrangements with club members that he served. As to any purported overtime exemption, the tennis pro claimed that the learned profession, administrative, or executive exemptions did not apply because he did not perform work requiring advanced knowledge, did not have a primary duty that included the management of the golf club, and did not supervise two or more employees.  Taylor v. Ansley Golf Club Inc., No. 1:22-cv-03048 (N.D. Ga. Dec. 21, 2022).

TRANSPORT COMPANY SETTLES 10-YEAR IC MISCLASSIFICATION CLASS ACTION IN TENNESSEE BY DRIVERS FOR $4.75 MILLION.  A Tennessee federal district court has granted final approval to the settlement of an IC misclassification class action by transport drivers against intermodal transportation companies, ending a lawsuit that commenced ten years earlier. The drivers alleged that Comtrak Logistics, Inc. and the HUB Group misclassified them as independent contractors in violation of California law and, as a consequence, the companies owed the drivers compensation for unpaid wages, missed meal and rest breaks, unreimbursed business expenses, and other statutory penalties and damages. The settlement agreement defines two subclasses: one consisting of all class members who did not sign an individual settlement agreement (51 class members); and the other consisting of all class members who previously signed an individual settlement agreement (632 class members). $4.75 million will be awarded to class members: those in the first subclass will receive an average payment of $55,000 with a range of $3,000 to $237,000; those in the second subclass will receive an average of $1,100 with a range of $236 to $3,500. The members of the second subclass had already received payments totaling $9 million, with each member previously receiving an average payment of $14,000. Robles v. Comtrak Logistics, Inc., No. 2:15-cv-02228 (W.D. Tenn. Dec. 14, 2022).

NINTH CIRCUIT UPHOLDS DECISION THAT 7-ELEVEN STORE OWNER FRANCHISEES IN CALIFORNIA ARE INDEPENDENT CONTRACTORS.  The U.S. Court of Appeals for the Ninth Circuit has affirmed a California federal district court’s ruling that four 7-Eleven franchisee store owners are independent contractors. As discussed more fully in our blog post of September 8, 2021, a federal judge in California issued a decision in favor of 7-Eleven after a lengthy non-jury trial, concluding that the franchisee store owner had been properly classified as independent contractors and not employees under applicable California law.  Haitian v. 7-Eleven Inc., case No. 21-56144 (9th Cir. Dec. 9, 2022).

LAW FIRM SUED BY PARALEGAL FOR MISCLASSIFICATION AFTER IT CONVERTED HER TO AN INDEPENDENT CONTRACTOR.  A paralegal has sued an immigration law firm in a Georgia federal court seeking overtime compensation violations of the Fair Labor Standard Act due to her alleged misclassification as an IC. In her complaint, the paralegal claimed that from October 2016 until July 2020, the firm treated her as a W-2 employee. She alleged that when she began a second engagement as a paralegal at the firm from October 2020 until November 2022, she was misclassified as an IC – even though her responsibilities and hours of work did not differ from her previous role. The paralegal asserted in her complaint that she was always paid by the firm on a salary basis without overtime compensation for the hours worked in excess of 40 in a week; her work did not involve independent discretion; and the firm supervised her work and provided her with the work she performed.  Lozano v. Ibrahim & Rao LLP Immigration and Nationality Law, No. 1:22-cv-05024 (N.D. Ga. Dec. 21, 2022).                                                         ‎

Regulatory Initiatives (1 matter)

LABOR DEPARTMENT AND IRS RENEW THEIR MEMO OF UNDERSTANDING FOR EMPLOYMENT TAX REFERRALS.  The U.S. Department of Labor and the IRS have renewed their “Memorandum of Understanding for Employment Tax Referrals” on December 15, 2022 to continue to improve compliance with the laws and regulations administered by the DOL’s Wage and Hour Division (WHD) and the IRS’s Small Business/Self Employed Specialty Employment Tax Unit. A news release issued by the WHD that day reported that the MOU added a streamlined process for joint referrals and closer coordination in an effort to stop businesses from misclassifying and denying workers their full wages, benefits, and protections under the law. The WHD stated that the updated MOU also is designed to help the WHD share information and work in concert with the IRS to strengthen enforcement of federal and state laws that protect workers’ rights. In the news release, Principal Deputy Wage and Hour Administrator Jessica Looman stated: “We are determined to identify and resolve labor violations by employers who benefit by misclassifying employees as independent contractors and deprive them of the protections of the labor standards laws we enforce. Renewing our memorandum of understanding with the IRS strengthens our existing partnership by improving referral processes and information sharing to help us better serve the nation’s workers.”

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