It doesn’t take much to see that FLSA claims, including lawsuits and Department of Labor audits/enforcement, are on the rise. All you have to do is turn on your TV, open a newspaper or visit the Internet. In fact, if you use Uber to get around or follow the NFL or the NBA, you already see several major examples. The Oakland Raiders cheerleading squad filed a lawsuit against the team in early 2014 alleging that they were employees entitled to minimum wage and overtime. While both the NFL and the Department of Labor alleged that the cheerleaders, the Raiderettes, should or could be exempt from FLSA coverage because of the seasonal and recreational nature of the team, the cheerleaders and the team ultimately settled for $1.25 million dollars. After the lawsuit, the State of California passed a law classifying professional cheerleaders and dancers as non-exempt employees under California state law.
After the Raiderettes filed suit, the Tampa Bay Buccaneers cheerleaders, Buffalo Bills cheerleaders, Cincinnati Bengals cheerleaders and New York Jets cheerleaders all filed FLSA lawsuits. The Tampa Bay Buccaneers lawsuit and Cincinnati Bengals lawsuits both settled. In a ruling just last week, a court held that the Buffalo Bills cheerleaders could proceed as a collective action, which includes “all Buffalo Bills cheerleaders and ambassadors since April 2008.” On top of that ruling, the New York state legislature is in the process of creating and passing legislation similar to California, which would make professional cheerleaders non-exempt employees under New York state law.
The NFL is not alone in the sports world. Recently, a former Milwaukee Bucks dancer filed a lawsuit against the NBA team. She alleged FLSA violations and violations under Wisconsin state law. The increase in FLSA enforcement does not end with sports. A judge in California recently set a June 2016 trial date for a lawsuit filed by Uber drivers against the company, in which they allege they are not independent contractors but rather employees entitled to minimum wage and overtime. This follows a September 2015 ruling in which the judge approved the lawsuit to proceed as a class action. The plaintiffs argue that Uber controls their fares and performance standards, among other things, and they should, therefore, be classified as employees. Uber argues that the drivers choose when and where they want to work and that there is no typical driver. Uber also points to taxi drivers as a comparison, 90% of which are estimated to be independent contractors. The trial and result could have far-reaching effects for Uber and other similar companies, such as Lyft, Postmates and Door Dash. Classifying all the drivers as employees could bring an end to these services as we know them. In addition to the California lawsuit, a Washington state Uber driver recently filed a $44 million lawsuit (proposed to be a class action) against Uber.
These are just a few of the more prominent and high-profile examples of increased FLSA lawsuits and enforcement. We have also seen a dramatic increase in random FLSA audits conducted by the DOL against our clients and other companies. The FLSA utilizes an “economic realities” test to determine employee versus independent contractor status. That test considers six different factors, which are: (1) the extent to which the work performed is an integral part of the employer’s business, (2) whether the worker’s managerial skills affect his or her opportunity for profit and loss, (3) the relative investment in facilities and equipment by the worker and the employer, (4) the worker’s skill an initiative, (5) the permanency of the worker’s relationship with the employer, and (6) the nature and degree of the control by the employer. Last summer, the DOL clarified that it believes the majority of U.S. workers are employees under this test. Once this preliminary step is complete and a worker is deemed an employee, you must determine if the employee is exempt from overtime (or minimum wage) coverage. There are numerous specific exemptions, as well as the more general white collar exemptions (i.e. executive, administrative and professional). Discussion of these exemptions is for another post but keep in mind that exemptions are very fact specific and should be determined on a case-by-case basis. Furthermore, the white collar exemptions will be changing some time this year.
With all this in mind, it is important to be informed and up to date with respect to your independent contractors and employees. An improper classification (either as an independent contractor or as an exempt employee) could be extremely costly, especially in light of all the increased lawsuits and administrative enforcement actions.
