“Class action waivers may be one of the most important issues facing workers today.”
The Supreme Court announced on Friday that it will review whether or not class action waivers violate national labor laws. Companies frequently include these waivers in arbitration agreements to prohibit employees from forming class action lawsuits. For years though, district and appellate courts have disagreed on whether or not the practice is legal.
“Class action waivers may be one of the most important issues facing workers today, and many are unaware it is such an issue,” said attorney C. Ryan Morgan, co-chair of Morgan & Morgan’s Employee Rights Group. “Class action waivers are detrimental to the vast, vast majority of workers and hinder workers from having knowledge of their rights.”
40% of Employers Use Class Action Waivers
“Most workers would be shocked if they knew that many employers force workers to sign these agreements.”
Arbitration agreements and class action waivers—which are usually buried deep within an employer’s contract—require employees to handle their legal disputes in private arbitration, without a judge or jury. Employers prefer arbitration because proceedings are faster and are less costly than typical lawsuits. And, companies are more likely to win.
In arbitration, companies set the rules of proceedings and hire the arbitrator. A Cornell University study found that out of nearly 4,000 workplace arbitration cases filed between 2003 and 2007, only 21% were awarded in favor of employees. And, on average, employee litigation awards were 5 to 10 times greater than arbitration awards.
Employees are usually unable to opt out, and some courts, like the Sixth Circuit, have ruled that by simply showing up to work, an employee has agreed to the arbitration terms.
“Most workers would be shocked if they knew that many employers force workers to sign these agreements and certain courts enforce the agreements,” said Carlos Leach, an employee rights attorney for Morgan & Morgan.
Class Action Waivers May Violate the National Labor Relations Act
Stephanie Sutherland was told that pursuing her case in arbitration would cost her $200,000.
Agencies like the National Labor Relations Board (NLRB) argue that class action waivers violate the National Labor Relations Act (NLRA) because they strip away employees’ rights to collective action. Employers, however, often argue that the Federal Arbitration Act, which permits class action waivers, trumps the NLRA.
The Supreme Court will decide whether or not the NLRB’s interpretation is correct by reviewing three cases involving Murphy Oil, Epic Systems, and Ernst & Young.
Epic Systems and Ernst & Young are appealing decisions made by the Seventh and Ninth Circuits respectively that declared their class action waivers were illegal. The Chicago and San Francisco-based appellate courts were the first to rule against class action waivers in 2016.
For smaller disputes, a class action lawsuit is usually the most cost-effective legal method since plaintiffs can share legal costs. Stephen Morris and Kelly McDaniel are fighting for their right to form a class action lawsuit against Ernst & Young, whom they allege withheld overtime pay from employees.
In a similar case filed by another former Ernst & Young employee, Stephanie Sutherland was told that pursuing her case in arbitration would cost her $200,000. Though a New York federal court overrode the class action waiver since arbitration fees would prevent her access to the courts, it was later reversed by the Second Circuit Court of Appeals.
Employee Rights Advocates Are “Cautiously Optimistic”
“I am cautiously optimistic that the [Supreme Court] will do the right thing and side with the NLRB.”
Experts caution that the possibility of a 4-4 split and the looming justice vacancy far from guarantees a decision in favor of class action rights.
However, the Supreme Court announcement comes on the heels of President Obama’s Fair Pay and Safe Workplaces executive order, which rules that companies with federal contracts of $1 million or greater cannot require employees to sign arbitration agreements. And, last year, the Senate introduced the Restoring Statutory Rights Act, which would prohibit arbitration agreements that violate employee discrimination laws.
“As an attorney who constantly fights against these agreements on behalf of employees, I am cautiously optimistic that the [Supreme Court] will do the right thing and side with the NLRB’s position that class action waivers violate workers’ fundamental rights to join together versus their employer,” said Carlos Leach.
Opening briefs are scheduled to begin in February; a decision will likely be made sometime this summer.
In 2016, Uber unleashed a host of innovations: self-driving cars, UberFreight, and more. But with innovation comes new regulations—something Uber consistently demonstrates it doesn’t have the patience for.
Some cities and states believe that by siding with Uber, they are standing for innovation, while others are taking a more cautious approach and are trying to rein in the company. It has created a complicated legal landscape that is still trying to catch up with the new technology.
Here are some of the major legal issues we think Uber will wrestle with in 2017.
State Battles Over Self-Driving Legislation
In November 2016, the Department of Transportation created the first Federal Automated Vehicles Policy, leaving the manufacturing of self-driving cars to companies, and the development of laws and regulations to the states.
Though the document warns against states creating inconsistent legislation, it also says that “states may wish to experiment with different policies and approaches.”
These “experiments” have already been tested during Uber’s self-driving car pilots. In Pittsburgh, the pilot has been relatively uneventful, compared to San Francisco, where the company received a cease-and-desist letter from the Attorney General within two days of the pilot’s launch.
Uber refused to obtain an autonomous vehicle testing permit from the state—which only costs $150.
Uber refused to obtain an autonomous vehicle testing permit from the state—which only costs $150—arguing that their vehicles still required human drivers and therefore did not fit within California’s definition of self-driving. Making matters worse, cameras captured their autonomous cars running red lights and making unsafe turns in bike lanes.
Though Uber dismissed traffic violations as human error from their operators, in the end they shipped their cars to Arizona.
Arizona Governor Doug Ducey welcomed the company, saying, “While California puts the brakes on innovation and change with more bureaucracy and more regulation, Arizona is paving the way for new technology and new businesses.”
In addition to Arizona, Uber may also test their autonomous vehicle technology in Michigan this year. Though there haven’t been any announcements, the state just legalized self-driving cars without licensed drivers, steering wheels or brakes.
Without clear, consistent oversight, though, the legal skirmishes and unsafe driving that we saw in California will likely continue. Increased federal regulation is likely to come, but it may favor Uber and other autonomous vehicle manufacturers: Uber CEO Travis Kalanick and Elon Musk are both on the President-elect’s Strategic and Policy Forum.
Transit Partnerships Demand Greater Transparency
In 2016, some city officials cut back on public transit spending and began offering residents vouchers for Uber rides instead. These programs are often referred to as “First Mile Last Mile” since they replace the first and last few stops of a route where there are the fewest passengers.
Is it wise to give Uber even more power?
For a city’s budget, it often makes financial sense to replace low-traffic bus routes with subsidized Uber rides. Florida cities like Pinellas Park and Altamonte Springs (which pays 20% for all Uber rides within city limits) have done this and claim it’s a success.
It’s a worrisome trend, though, and may negatively affect citizens who rely on public transportation the most. Citizens who don’t own smartphones or credit cards can’t order a ride. And the disabled would likely have a harder time getting around, as it’s still difficult for passengers to find Uber drivers who can accommodate wheelchairs and guide dogs.
Swapping out bus routes for Uber rides also shifts the power away from local authorities to a private company. In addition to replacing public sector jobs with poor contract jobs (see below), it also limits government access to ridership data, which Uber considers confidential information.
New York City is currently battling this issue. The city requires drivers to report pick-up locations and times, but they want to extend this to include drop-off locations and times. Officials argue the data would be used to identify incidents of driver fatigue, but Uber thinks it’s an invasion of privacy.
“At the moment Uber and Lyft are subsidizing U.S. ridership, and one day they’re going to start profiting from it.”
While New York City’s argument certainly has some holes, Uber hasn’t proven to be the best privacy protector: Former employees revealed last year that workers tracked the locations of ex-partners and celebrities.
More importantly, is it wise to give Uber even more power? What happens if Uber decides to end these partnerships and local cities are left without efficient bus or train routes?
And, as Slate author Henry Grabar points out, “At the moment Uber and Lyft are subsidizing U.S. ridership, and one day they’re going to start profiting from it.”
Drivers Push to Be Employees, Not Contractors
Will 2017 finally settle Uber’s longest fight, over whether drivers are employees or contractors?
The company has maintained that by classifying drivers as contractors they are providing them with the flexibility drivers desire. “Flexibility” is a common term the company uses to defend why they deny drivers basic employee rights, like informing them when fares are reduced or ensuring that drivers are paid at least the minimum wage.
Two pending class action lawsuits representing drivers in California and Massachusetts will lend weight to the classification debate.
U.S. District Judge Edward Chen rejected the $100 million settlement, saying that it was unfair to drivers.
In April 2016, Uber proposed a $100 million settlement that, if accepted, would have maintained drivers’ contractor status. But U.S. District Judge Edward Chen rejected the settlement, saying that it was unfair to drivers. (The two parties have since resumed negotiations.)
A new thorn for drivers is the Ninth Circuit Court of Appeal’s decision to uphold Uber’s arbitration agreements—an agreement that Judge Chen declared was “unconscionable.” The September 2016 decision ruled that drivers who joined Uber in 2013 and 2014 must settle their disputes in private arbitration, rather than class action lawsuits. This decision will likely disqualify thousands of drivers who were originally in Massachusetts and California’s employee misclassification suit.
ClassAction.com will continue to follow this debate to provide Uber drivers with the latest information on their worker classification and legal rights. If you are an Uber driver, contact us today with your legal questions.
On-call scheduling results in inconsistent work hours and pay. In some states, employers are required to pay employees for last-minute shift changes.
Last week, six major retailers, including Disney and Aeropostale, announced they were banning on-call scheduling.
When employees are on-call, they are expected to keep their schedules open in case they are needed. They call or text before their shift to see if they have to come in, or in some cases, go to work only to be dismissed.
The Economic Policy Institute estimates that 17% of the workforce has on-call or irregular work schedules. This group also represents the lowest-paid workers.
On-call scheduling is commonly seen in retail and fast food industries: The New York Times reports that 66% of food service workers and 52% of retail workers have irregular schedules, only receiving one week’s notice at most about their hours.
While it makes sense to employers to have workers at the ready in case of emergencies or a flood of unexpected business, the practice has been abused—ultimately at the expense of low-paid workers.
Employees Become “Interchangeable Parts”
Since the recession, part-time work has soared—that is, involuntary part-time work. Employers save money by hiring fewer full-time workers and relying on more part-time workers whom they can slot in where necessary.
Companies know that they lose money if they over or under-staff: They don’t want idle employees, but they also don’t want customers frustrated with slow service. Employers schedule around their typical busy and slow times, but this doesn’t account for every variable that affects foot traffic, leaving many absorbing high labor costs.
For more reliable scheduling, more companies are using software like Kronos. The software analyzes everything from customer traffic to weather conditions to schedule employees in 15-minute increments when they are needed most. Because these factors are in real time, schedules often change frequently—sometimes canceling shifts hours before or sending home employees early.
This makes sense for a company’s bottom line, but it leaves employees in the dark about whether or not they are working the next day or even that night. Parent-teacher conferences, birthday parties, and night classes become impossible to commit to; childcare becomes a nightmare to arrange.
This type of scheduling treats employees as interchangeable parts, explains MIT professor Zeynop Tan in the video below.
“When you see labor as just as a cost to be minimized, the outcome of that is high employee turnover, absenteeism, bad morale, bad customer service, operational problems, low sales, and low profits. When sales are low, then labor budgets are reduced and this vicious cycle continues.”
This cycle, Professor Tan says, “is downright brutal for employees.”
Inconsistent Schedules Mean Inconsistent Pay
Workers could be spending their free time in school or earning additional income, but instead they are shackled to the whims of their employers.
More than just an inconvenience, this irregularity is a huge drain on society productivity and advancement. On-call workers could be spending their free time in school or earning additional income, but instead they are shackled to the whims of their employers.
Employees also take a financial hit when shifts are canceled. When workers are on-call, many employees must arrange for childcare and cancel classes and other work shifts to ensure they are available. These arrangements are worth it if an employee can log a few hours in, but if they aren’t needed, it often means time and money wasted.
In some cases, employees show up to work only to be sent home, resulting in money spent on a wasted commute. Some states (like California, New York, and New Jersey) have passed measures that ensure on-call employees are paid at least a few hours for their time.
And, budgeting? Fluctuating hours makes it seem laughable. With 40 hours one week and maybe eight the next, employees can’t know for certain whether or not they’ll be able to pay the bills from week to week.
Reporting to Work Is More than Just Physically Showing Up
In today’s digital age, the definitions of “on-call” and “reporting to work” can be complicated.
Uber drivers have filed a class action lawsuit in Pennsylvania arguing that Uber should pay drivers minimum wage for the time they are logged into the app. Often, drivers experience long waits between passengers that they aren’t compensated for. When they are logged into the app, Uber drivers must adhere to the company’s policies—including a particular dress code and accepting every fare—that they argue is equivalent to being “on-call.”
In California, class action lawsuits are defining what “reporting” for work means. Multiple retailers, including Forever 21 and Urban Outfitters, are under fire for not compensating employees for canceled shifts. The California Fair Scheduling Act requires employers to pay one hour of wages for shifts canceled within less than one week, and half of a shift’s pay for shifts canceled with less than 24 hours’ notice.
In a lawsuit against Victoria’s Secret, the company argues that calling or texting ahead does not count as reporting since an employee can be engaged in a non-work related activity. Employees, however, argue that having to call ahead to see if they are needed prevents them from making other plans.
Eric Schneiderman, New York attorney general, agrees. His office has called out major retailers for these unfair scheduling practices, warning them that they are at risk of violating a New York labor law that requires employers to pay for at least four hours of work if employees report for a scheduled shift. Having to call or text ahead, the state argues, is considered reporting for work.
“On-call shifts are not a business necessity and should be a thing of the past,” said Schneiderman in a public statement. “People should not have to keep the day open, arrange for child care, and give up other opportunities without being compensated for their time.”
Does Your Employer Owe You Money?
Employees are required under federal and state laws to pay employees minimum wages, overtime pay, and in some cases, modification pay for canceled shifts. If an employer has denied you your pay, you may be entitled to compensation. Contact ClassAction.com today for a free case review.
Arbitration clauses are buried deep within consumer and employer contracts, causing many Americans to unknowingly sign away their rights to a trial by jury.
Arbitration is changing the legal landscape, popping up everywhere from employer agreements to your favorite app’s terms of service. But what is it?
Arbitration agreements require that legal disputes are resolved in private arbitration, rather than in court. Arbitration does not involve a jury; instead, decisions are made by a third-party arbitrator or tribunal. The intent is that if decided outside of court, disputes will be resolved more efficiently.
Initially, arbitration was used between companies. But when employees and consumers were first presented with these agreements, an important shift happened: No longer were the terms agreed to voluntarily and knowingly, but often, without the knowledge of the other party.
These clauses are often buried deep within a contract and use confusing and dense terminology. As a result, many employees and consumers agree to them without understanding that they are signing away their rights to a trial by jury, including class action lawsuits. (Remember that “terms of service” box you clicked in a rush?)
A Timeline of Arbitration’s Rise in Popularity
Arbitration agreements have been around since the 1920’s. But, between 1985 and 2015, 14 Supreme Court decisions made arbitration an industry standard. Here are some key moments in its history.
1925:Federal Arbitration Act
Legalizes arbitration. Initially created to offer an alternative legal procedure for disputes between companies.
1991:Gilmerv. Interstate / Johnson Lane Corp.
Ruled that a non-union employee who was under an arbitration agreement couldn’t settle their workplace discrimination complaint in court. More employers begin to use arbitration agreements.
1999:Meeting of the “Arbitration Coalition”
Corporate attorney Alan Kaplinsky gathers major banks and financial institutions to discuss arbitration clauses. Arbitration becomes increasingly common in the financial sector.
2011:AT&T Mobility v. Concepcion
Plaintiffs fight to file a class action lawsuit against AT&T. The Court rules in favor of AT&T’s class action waiver, causing other companies to adopt similar waivers.
2013:Italian Colors v. American Express
Plaintiff uses the Sherman Act—which allows citizens to take on monopolistic entities—to argue their right to form a class action lawsuit against American Express. Court rules in favor of American Express.
The Problems With Arbitration
Arbitration Agreements Are Everywhere
In most cases, you are unable to opt out of arbitration agreements. You either agree to the terms and work for the company or purchase the particular product, or you do not.
They’re even more common in the financial sector: In 2016, PEW discovered that 70% of major banks had mandatory arbitration agreements, and 73% used class action waivers.
Though banks argue that their customers willingly signed their rights away, PEW found that 95% of respondents wanted the right to a trial in the event of a dispute with their bank.
James Young, an attorney for ClassAction.com, shared with us just how widespread arbitration has become.
“These clauses have enabled big businesses to force both customers and employees into a seemingly rigged arbitration system for almost every type of legal dispute: consumer fraud, unsafe products, employment discrimination, nonpayment of wages, and countless other state and federal laws intended to protect citizens against corporate wrongdoing.”
Even if You Don’t Sign an Agreement, You Can Still Be Bound by Its Terms
In some cases when individuals have refused to sign arbitration agreements, they were still prohibited from going to court.
This interpretation is found in consumer agreements as well. By purchasing a product, for example, you have agreed to a company’s terms—whether or not you know what those terms are. In one extremely farfetched incident, General Mills argued that if you “liked” the company on Facebook, you accepted their arbitration agreement.
“By inserting such clauses in every possible contract, businesses effectively moot the judicial system.”
“Mandatory arbitration is a limitation on your right to seek relief,” said James Young. “By inserting such clauses in every possible contract, businesses effectively moot the judicial system. The result is anathema to the founding fathers’ intentions as outlined in our Constitution.”
Explaining the verdict, U.S. District Judge Jed Rakoff said that a trial by jury “can be waived only if the waiver is knowing and voluntary.”
The importance of knowingly signing away your rights is currently playing out in many nursing homes. Facilities argue their patients consented to arbitration terms upon their arrival, but families argue their loved ones did not understand what they were signing. When families try to sue nursing homes for neglect or mistreatment, they find their legal rights barred.
The Centers for Medicare and Medicaid tried to stop this by passing a rule restricting arbitration agreements in nursing homes. However, this was blocked in November 2016 (within days of the rule taking effect) by a Mississippi federal judge.
Mandatory Arbitration Violates National Labor Laws
By prohibiting class action lawsuits, employers are also at risk of violating labor laws. In particular, the National Labor Relations Act (NLRA) permits employees to organize against employers by forming unions or through collective action.
Employers often argue that the Federal Arbitration Act trumps the NLRA—an idea that many courts have sadly supported. As it stands, the legality of mandatory employee arbitration agreements depends on which judicial district is reviewing the case.
This inconsistency has necessitated Supreme Court review. Among the many cases awaiting trial is a case between the National Labor Relations Board (NLRB) and Murphy Oil USA.
The NLRB, which enforces labor laws, is appealing the Fifth Circuit Court of Appeals’ ruling that Murphy Oil can use mandatory arbitration agreements to prohibit their workers from filing class action lawsuits. They argue it violates the NLRA.
The cancer-causing side effects of asbestos exposure are well known, but less known is that the mineral is still used and imported in the U.S.
Asbestos is a carcinogenic mineral that was commonly used in building materials (insulation, roof shingles, cement, etc.) for its durability and fire retardant properties. Cosmetic companies also used asbestos-laced talcum for its powder-like consistency.
Once research showed that asbestos caused cancer in the 1970s, its use sharply declined and it was restricted. However, the U.S. is still allowed to import asbestos and some products that have historically used the chemical are allowed to continue to do so.
Despite 10,000 pages of evidence showing the hazardous effects of the chemical, the asbestos industry shot down the proposed ban.
In 1989, the EPA attempted to ban asbestos. Despite 10,000 pages of evidence showing the hazardous effects of the chemical, the asbestos industry shot down the proposed ban in a federal appeals court.
Congress Pressures EPA to Review Asbestos
The failed ban is a symptom of an overly complex system that leaves the EPA at times powerless. Since the agency’s creation 40 years ago, only five chemicals have been banned and just a small percentage of the 62,000 chemicals on the market have been reviewed.
“The system was so complex, it was so burdensome, that our country hasn’t even been able to uphold a ban on asbestos, a known carcinogen.”
Said President Obama upon signing the amendment, “The system was so complex, it was so burdensome, that our country hasn’t even been able to uphold a ban on asbestos, a known carcinogen. I think a lot of Americans would be shocked by all of that.”
The EPA is scheduled to announce the first 10 chemicals for review in December. Since Congress singled out asbestos when creating this act, many hope it will be the EPA’s priority.
Senator Barbara Boxer (D.-Calif.) wrote to EPA Administrator Gina McCarthy to consider asbestos as a priority chemical: “To build confidence in the agency’s ability to deliver meaningful results for our children and families, EPA must consider all forms of asbestos in this initial list of chemicals it acts on.”
Asbestos Exposure Can Lead to Mesothelioma Decades Later
Asbestos inhalation can severely damage the lungs, resulting in diseases like mesothelioma—a fatal form of cancer—years or even decades after exposure.
Mesothelioma is an extremely aggressive form of cancer. 10,000 Americans die from the disease every year. Though asbestos exposure can result in a host of medical conditions, mesothelioma is only caused by exposure to asbestos.
When asbestos fibers are inhaled, they stick inside the lungs for years. With each inhalation and exhalation, these fibers create abrasions that can eventually develop into cancerous tumors.
Who is at Risk?
Anyone who is exposed to asbestos is at risk of developing mesothelioma. However, those who were regularly in direct contact with asbestos materials are even more at risk. These groups include:
Veterans (especially from the U.S. Navy)
9/11 Rescue Workers Are Twice As Likely to Develop Mesothelioma
When the twin towers collapsed on September 11, 2001, the building materials released 2,000 tons of asbestos fibers into the air, creating a toxic dust that coated the Financial District.
While cleaning up the disaster zone and searching for bodies, first responders inhaled lethal amounts of asbestos, often with inadequate protection. It is estimated that 41,000 people in total were exposed to asbestos after the disaster.
Between the 1930s and 1970s, virtually every U.S. Naval ship contained several tons of asbestos, mostly in the ships’ insulation, pipes, and doors.
Now, veterans and Naval shipyard workers are paying the price. Though veterans only make up 8% of the U.S. population, they make up 30% of mesothelioma deaths.
In April of this year, a federal jury in Arizona awarded $17 million in damages to the family of the late George Coulbourn. Mr. Coulbourn worked at the Norfolk Naval Shipyard in Virginia, where he contracted mesothelioma.
In December of 2014, the family of a former Naval shipfitter received a similar verdict in their favor, totaling $20 million. The family sued the U.S. Navy’s boiler manufacturers for using asbestos in their materials.
Talcum-Based Products Used Asbestos Until the 1970s
Asbestos was also commonly found in Talcum-based products, like baby powder, shave talc, etc. prior to the 1970s. However, many mesothelioma diagnoses are just now being discovered.
If you or a loved one were diagnosed with mesothelioma, you may be entitled to compensation. Many companies knew for decades that any exposure to asbestos was dangerous, yet they continued to endanger the health of workers and consumers.
Contact ClassAction.com today for a free, no-obligation legal review. Our attorneys have recovered millions of dollars for hundreds of mesothelioma victims across the United States.
Tyson Foods has never had a saintly reputation, but that hasn’t stopped it from growing into a poultry powerhouse and America’s largest producer of meats. In 2015, Tyson Foods raked in $41 billion in sales.
But several major scandals, a slew of class action lawsuits, one damning report from Pivotal Research, and another from Oxfam have left investors scattering.
Since September 22, Tyson’s share price has dropped from $76.76 to $70.67 (as of this writing), at times bottoming out at $67.75—its largest dip in six years. Meanwhile, the Supreme Court and a U.S. District Court in Iowa recently upheld a $6 million award for Tyson employees who hadn’t received full pay for their labor.
If the new antitrust charges stick, those financial blows could be just the beginning.
On September 2, 2016, New York-based Maplevale Farms filed an antitrust lawsuit in Illinois alleging that the $30 billion poultry industry had hatched a scheme in 2007 to inflate and fix chicken prices. That class action has since spawned five others, which will likely be consolidated into a multi-district litigation (MDL) later this year.
Of course, if the Justice Department deems this a legitimate antitrust case, they could take the reins of the lawsuit.
Among the 14 defendants are Tyson, Perdue Farms, Pilgrim’s Pride, Sanderson Farms, and Simmons Foods. The lawsuit claims that Big Chicken jointly agreed to limit production (in some cases by simply killing off chickens early) and raise prices on chicken.
The complaint says this was a coordinated, industry-wide effort facilitated in part through a data service called Agri Stats, which allows these companies to track each other’s propriety information.
Since 2007, chicken prices—which historically fluctuate over time—have risen steadily.
Peter Carstensen, a former antitrust lawyer for the Justice Department, tells Bloomberg, “It makes sense to cut back production if, and only if, your competitors cut back, too.”
Mr. Carstensen seems bullish on the antitrust lawsuit, saying, “You’re asking the court to infer collusion. With Agri Stats, those meetings, and then, if you can line up the conduct to show reasonable uniformity, that would pretty much do it.”
Pivotal Report Reverberates on Wall Street
Like Peter Carstensen, Tim Ramey—a stock analyst for the Pivotal Research Group—feels that “the narrative of this suit fits the fact-pattern of poultry pricing and margins over the past seven years.”
“The narrative of this suit fits the fact-pattern of poultry pricing and margins over the past seven years.”
Mr. Ramey called the lawsuits “powerfully convincing” and wrote, “If [the allegations are] true, it explains a lot. It explains why Tyson can offer EPS guidelines with remarkable precision; boasting of margins at record levels well into the future.”
Unfortunately for Tyson, these antitrust suits are not the only class actions threatening its business.
In March the Supreme Court voted 6-2 to uphold a $5.8 million award for Tyson workers in Storm Lake, Iowa who had not been paid for the time spent at work donning and removing protective gear: a clear violation of the Fair Labor Standards Act (FLSA).
Tyson wanted the case thrown out, claiming there was not enough evidence to determine the damages owed each worker. According to Mother Jones, the company also wanted
the court to issue a broad ruling that would effectively immunize it against future class actions for wage and hour theft, and make it much harder for workers everywhere to join together to bring such claims. If it wins this case, Tyson could have it both ways: It could effectively continue to violate the FLSA and escape liability for it in court.
Thankfully the Supreme Court did not let that happen. But Tyson didn’t stop there: in June, the company asked the U.S. District Court in Sioux City, Iowa for a retrial. Judge John Jarvey denied that appeal.
It looks like Tyson will just have to pay its workers what they’re owed—which is the least it can do, given how the company allegedly treats them.
The report alleges that poultry workers “earn low wages, suffer elevated rates of injury and illness, toil in difficult conditions, and have little voice in the workplace.”
Incredibly, Oxfam also writes that, due to long hours and a lack of adequate bathroom breaks,
Workers urinate and defecate while standing on the line; they wear diapers to work; they restrict intake of liquids and fluids to dangerous degrees; they endure pain and discomfort while they worry about their health and job security. And they are in danger of serious health problems.
“The vast majority of workers report a lack of adequate bathroom breaks,” the report says.
Tyson denied Oxfam’s claims, while the National Chicken Council questioned their validity given the workers’ anonymity.
But if the “No Relief” report is true, Tyson could soon have yet another class action lawsuit on its hands.
Wells Fargo must pay $185 million in fines for secretly opening unauthorized debit and credit card accounts for customers in a scheme engineered to boost stock prices and executive pay.
The money will go to the Consumer Financial Protection Bureau, the City and County of Los Angeles, and the Office of the Comptroller of the Currency. Also in line to receive restitution are the victims of the scheme, who had accounts unwittingly opened in their names.
But while governments and consumers have scored a victory in the scandal’s resolution, there has been no financial relief for Wells Fargo employees claiming they were fired or demoted for playing by the rules and not opening secret accounts to meet sales quotas.
“Cross-Selling” Goes Back to at Least 2002
Federal regulators say Wells Fargo employees opened 1.5 million bank accounts and applied for 565,000 credit cards without customers’ permission. The bank has fired more than 5,000 employees involved in the scheme.
During a Senate Banking Committee hearing, Wells Fargo CEO John Stumpf defended the bank’s publicly stated goal of opening eight accounts per customer, whch it calls “cross-selling.” Wells Fargo set the goal of eight accounts as early as 2002, according to a Public Citizen report.
Stumpf earned $19.3 million in 2015 as the company’s stock became a Wall Street favorite. Wells Fargo is currently the most valuable bank in the world.
“Cross-selling is shorthand for deepening relationships,” he told the Committee.
Stumpf said Wells Fargo fired workers between 2011 and 2015 for the sales practices in question, but also said the issue didn’t reach the board level until 2013. He claims he wasn’t personally aware of the extent of the problem until 2015.
He maintained there was no orchestrated deception by Wells Fargo, and that the 5,300 employees it fired for creating false accounts were acting independently.
But this explanation does not square with the claim made by regulators and former workers that Wells Fargo employees were encouraged to open the unauthorized accounts through a compensation scheme that awarded them for increasing their cross-sale numbers.
Former Wells Fargo Workers Sound Off
Dennis Russell, a telephone banker with Wells Fargo in Orange County, California for five years, said he was fired in 2010 for not meeting sales quotas. He told the New York Times that he couldn’t legitimately offer banking products to the customers he spoke with because many of them were already behind on their mortgages, credit cards, and cars.
“They established the culture that made this happen—it comes down from the top.”
Russell lost his home after losing his job with Wells Fargo. He scoffs at John Stumpf’s claim that the bank did not encourage fraudulence in the pursuit of cross-sale quotas.
“It’s a crock,” Russell said. “They established the culture that made this happen—it comes down from the top.”
Christopher Johnson told the Times he was fired from Wells Fargo in 2008 after a five-month stint as a business banker for refusing to go along with pressure from his manager to open accounts for his friends and family, even if he didn’t have their permission to do so. He reported his concerns to the company’s ethics hotline and was fired three days later for “not meeting expectations.”
Johnson lost his home and possessions and spent the better part of a year living out of his truck.
Hold Wells Fargo Accountable
The Wells Fargo scandal is just the latest example of executives at major companies concocting schemes that benefit them at the expense of low-level employees.
If Wells Fargo will not do the right thing and compensate the real victims of its fraud—the employees that were fired for not engaging in unethical business practices—it is up to the workers themselves to demand justice.
If you are a former Wells Fargo employee who refused to set up accounts without customers’ knowledge and were punished for it, we would like to hear from you. Contact us for a free, confidential case review.
From January to June, the company recorded losses of $1.2 billion. (In 2015, Uber lost $2 billion.)
In July, after two years and two billion dollars lost in China, Uber bowed out of the country, selling its operations there to hated rival Didi Chuxing.
On August 18, a judge rejected the $100 million settlement Uber had reached with drivers in California and Massachusetts over their independent contractor misclassification. Two weeks later, The Wall Street Journal reported that Google would launch its own ride-sharing service via popular route-finding app Waze.
From January to June, Uber recorded losses of $1.2 billion.
Finally, in October, New York’s Department of Labor ruled that Uber drivers are employees—a ruling echoed later that month by three London judges.
Oof. Even for The Most Valuable Startup in the World, that has to hurt.
It would be hyperbole to say that Uber is in danger of failing. (A $62 billion valuation affords at least a little security.) But, unlike a year or even six months ago, one can now conceive of a world in which Uber falters.
Here are the three greatest threats to the ubiquitous ride-sharing service.
Uber faced 50 federal lawsuits in 2015: more than Lyft, Instacart, Handy, and Airbnb combined. They outpaced these other gig economy companies in 2014, 2013, and 2012 as well.
They have fought more legal battles than billion-dollar startups Snapchat, Pinterest, WeWork, Dropbox, SpaceX, and Palantir (whatever that is). And the end is nowhere in sight.
In April 2016, a $100 million settlement was reached in two class action Uber lawsuits representing 385,000 drivers in California and Massachusetts.
Scores of drivers filed objections to the deal, which they considered unfair. The lead plaintiff, driver Doug O’Connor, fired his attorney. In a formal objection filed with the court, Mr. O’Connor said that the deal “is not in my interest or in the interest of any Uber driver.”
U.S. District Judge Edward Chen agreed. On August 18, 2016, he rejected the Uber settlement, saying it was not “fair, adequate, and reasonable” for drivers. (These cases will now go to arbitration.)
Judge Chen noted that the amount offered to drivers was just ten percent of what the Uber lawsuit claimed drivers were owed: $1 billion.
Dozens of Uber lawsuits are still pending in courts nationwide. In addition to monetary losses, Uber should dread the potential of a judge ruling that Uber misclassifies its employees as contractors.
In his decision, Judge Chen also emphasized that under the terms of the settlement Uber would pay just $1 million in state penalties—which could otherwise total more than $1 billion.
Two weeks later in Pennsylvania, a state regulator reinstated an $11.4 million fine against Uber for exactly these kinds of penalties. This fine arrived about six months after California’s Public Utilities Commission (CPUC) hammered Uber with a $7.6 million fine for shirking state regulations.
The Pennsylvania Public Utility Commission (PUC) says that Uber operated illegally in the state from February to August 2014, providing almost 123,000 rides without state approval. According to the PUC, Uber also obstructed the state’s investigation into its dealings.
Two judges originally set the fine at $49.9 million, but the PUC reduced the total to $11.4 million—against the wishes of state officials.
Uber vowed to appeal, calling the fine “absurd.” But decisions like the PUC’s and CPUC’s often establish a precedent. What is to stop the other 48 states from issuing similar (or even higher) fines?
Moreover, as Uber knows all too well, global expansion is expensive. The startup has met resistance in Australia, Belgium, Brazil, Denmark, France, and countless other countries. Adapting to each nation’s unique laws, waging lengthy legal sieges, and fighting taxi unions costs a lot of money.
In China, Uber tried for two years to make it work. After $2 billion in losses, they threw in the towel.
In May, Google launched an exclusive carpooling service in the Bay Area. Now, through the Waze app, Google is expanding that soft opening so that anyone in San Francisco or Oakland with Waze can request a ride.
The service costs a maximum of just 54 cents per mile, far cheaper than Uber or Lyft. Though it is currently just a carpooling service, presumably Waze will broaden its offerings to include the kinds of on-demand rides made famous by Uber and Lyft.
And like Uber, Waze may not need drivers to do so.
Google’s Self-Driving Car Project (developed by Google X) has been in the works for a decade, with the aim of releasing these cars into the wild in 2020.
It is easy to envision, then, a scenario in which Google/Waze spends the next four years building a ridesharing infrastructure and customer base across the country, and then replaces at least some of its drivers with driverless cars—which would save it a bundle.
In the meantime, Google can learn from Uber’s mistakes and either classify its (human) drivers as employees or offer them similar reimbursements, tips, and other employee rights that Uber has failed to deliver. Because Uber has already waded through so much thorny legal territory (and continues to do so), Waze’s path should be much clearer and smoother.
Uber is the most valuable startup in the world, but Google’s parent company Alphabet Inc. is The Most Valuable Company in the World, with a market value of $546.50 billion: nine times that of Uber.
Uber is a giant, but Google is a god. It has several advantages over Uber (money, branding, experience) and could very well take the startup down—or, more likely, over—in the long run.
July’s jobs report appeared to be great news for the U.S. economy. It showed that 255,000 new jobs were added—well above economist expectations—while the unemployment rate remains unchanged at 4.9 percent, the lowest it’s been since 2008.
To hear the White House and mainstream media tell it, the jobs report is evidence of America’s continuing strong recovery from the Great Recession. America has added roughly 200,000 new jobs a month for about two years and regained all of the 8.7 million jobs that were lost in the Great Recession (and then some), essentially putting us back at what economists consider to be full employment.
A big part of the jobs story–and one that often goes untold–is job quality, not just job quantity.
Yet the economic view on the ground tells a different story. According to a July 2016 Pew Research Center survey, only 30% of Americans believe that economic conditions in this country are “excellent/good,” while just 1/3 believe that economic conditions will improve in a year. A recent CNN poll found that 56% of Americans think their kids will be worse off financially than them. Shockingly, 47% of Americans responded to a Federal Reserve survey saying they didn’t have $400 in savings to cover an emergency.
This economic unease has fueled anti-establishment presidential candidates Donald Trump and Bernie Sanders, both of whom placed messages of economic unfairness at the center of their campaigns. Polls consistently show that the economy is the most important issue of the 2016 campaign, ahead of terrorism, health care, and education.
So what is fueling Americans’ concerns about the economy? Why are so many living paycheck to paycheck in the midst of supposedly improved economic times?
A big part of the story is job quality, not just job quantity. We are seeing the rise of the so-called “contingent worker,” a group that includes contractors and non-traditional workers who aren’t tethered to a single employer—and who also aren’t provided the benefits, legal protections, and security that come with full-time employment. By one estimate, all of the net economic growth of the last decade occurred in contingent work arrangements.
The shift to a contingent workforce is in some respects the result of a changing economy. But companies have also unfairly eliminated labor costs by shifting employment to other parties and misclassifying employees as independent contractors.
The Department of Labor considers employee misclassification a serious problem that harms the entire economy and is cracking down on the practice. Recent court rulings may also make it more difficult for companies that depend heavily on independent contractors to avoid responsibilities to workers through outsourcing. Additional challenges to harmful employer practices such as misclassification makes it incumbent upon workers to know the law and understand their rights.
David Weil literally wrote the book on how companies’ outsourcing of work has changed not only the economy, but the nature of employment.
“The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It” landed Weil, a former economics professor at Boston University, a job as head of the Wage and Hour Division at the Department of Labor.
“Our basic mission at Wage and Hour is pretty simple: making sure people get a fair day’s wage for a hard day’s work,” said Weil. “The difficulty is the workplace has changed dramatically in the last 20 years.”
In Weil’s view the workplace has “fissured” as companies, responding to changing market pressures, cut labor costs as part of a broader strategy to become leaner and more agile, in the process shedding their role as direct employers of workers.
Throughout most of the 20th century market changes were slow and incremental, and consumer tastes were relatively simple. Production was based on a “push” strategy of forecasted demand. This allowed companies to focus on economies of scale, or gaining a cost advantage via increased output.
Work, reflecting these trends, was repetitive but stable. Workplace technology changed slowly, with workers provided ample time to learn new skills. The main employment relationship was between large businesses—such as General Motors, US Steel, IBM, and Xerox—and the workers that made their products. Direct, long-term employment with a single company was the norm.
All of this began to change in the late 1980s and early 1990s as globalization and technology reshaped the economy. Operating in tandem, these forces expanded the competitive landscape and created virtually endless new market opportunities.
More sophisticated consumers began a shift to a “push” economy. Change became fast, dynamic, and constant. Facing increasing pressures to adapt to market changes, businesses began to shed activities considered peripheral to their core business models, shifting their focus to product differentiation and market niches. Maintaining brand integrity (and thus loyal patrons) and driving down costs emerged as the pillars of success in this new economy.
Unfortunately for workers, they are viewed as low hanging fruit when it comes to cost cutting. Keeping a full-time workforce is expensive. Employee expenses such as federal (FICA) payroll taxes, unemployment and workers’ compensation insurance contributions, health and retirement benefits, and paid time off add 25% – 30% to payroll costs. Only employees are required to be paid the minimum wage and overtime, and employees have much more robust legal protections for things like workplace accidents, discrimination, exploitation, and wrongful termination.
Businesses realized they could farm out to a network of providers jobs that were once handled internally. In so doing they created competitive markets for services that allowed them to eliminate direct employment costs.
In short, businesses still receive the benefit of workers’ labor without serving as their employer of record and assuming additional financial liabilities. Using business models such as subcontracting, temp agencies, labor brokers, franchising, and third party management, companies push apart the longtime bedrock of the U.S. economy—the employer-employee relationship—leading to what Weil calls the “fissured” workplace.
Weil admits that fissuring does not always result from companies’ desire to avoid payroll costs. As markets have changed, so have the role of workers. A static workforce doesn’t make as much sense in a business environment requiring continual reflection and reorganization. The rigid, 9-5 enterprise structure of employment is becoming obsolete. In today’s leaner enterprise, teams are formed around projects that make use of contingent labor and independent experts. Once a project is completed, teams can be disbanded and new ones formed on an ad hoc basis.
From this perspective, contingent workers increase business efficiency, agility, and flexibility. They not only cost less than employees, but also turn employment expenses into variable costs for services, rather than fixed labor costs.
Weil believes, however, that this model allows companies to have their cake and eat it too. By calling some workers “independent contractors” and hiring others through agencies, companies are able to avoid some of the burdens—but not the benefits—of having employees. Contingent workers contribute to building a brand that reaps great profits for the lead company, but don’t receive job-based health and retirement benefits or the minimum wage, overtime, and other labor law protections.
Rise of the Contingent Worker
To illustrate the workplace that has cracked and split apart, Weil uses the example of a hotel operating under a well-known international brand. The workers who greet guests, clean rooms, landscape, and prepare food are likely not hotel employees, or even employees of the hotel brand. They are more likely employed by another business offering hotel management services.
“All of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements.”
Such blurred lines of employment are not limited to the hospitality industry. Awareness has grown of the reliance on contract labor in the so-called “gig economy” comprised of tech industry startups companies such as Uber, Lyft, Handy, and Taskrabbit. But it’s also the workers who deliver packages, install cable and internet, drive taxis, provide security, perform construction work who have an arm’s length relationship with those companies that appear to employ them. In fact, even professionals such as doctors, lawyers, financial advisers, and education and health service providers are falling through the employment cracks.
Identifying the size of the contingent workforce is tricky due a lack of standardized terminology. Depending on the definition used, contingent workers make up less than 5% to as much as 40% of the total labor force. Estimates are also difficult in the absence of comprehensive, nationally representative data.
From 1995 to 2005 the Bureau of Labor Statistics (BLS) administered a survey known as the Contingent Work Supplement (CWS), a supplement to its monthly Current Population Survey (CPS). BLS administered the CWS in 1995, 1996, 1999, 2001, and 2005. Since 2005 BLS has not received funding to administer the supplement.
In the absence of the CWS public and private organizations have attempted to fill in data gaps. The RAND Corporation, for example, conducted a version of the CWS that counted workers engaged in “alternative work arrangements,” defined as temporary help agency workers, on-call workers, contract company workers, and independent contractors (freelancers). The Government Accountability Office (GAO), relying on data from the CWS and other government surveys, uses these same categories of alternative work arrangements but adds to them self-employed workers and part-time workers.
Using GAO’s definition of alternative work arrangements, contingent workers comprised 30.6 percent of the labor force in 2005 and 40.4 percent in 2010. Contract company workers, on-call workers, and agency temps—what GAO calls “core contingent arrangements”—made up 5.6% of the workforce in 2005 and 7.9% in 2010.
RAND, comparing BLS CWS data to figures derived from its 2015 RAND-Princeton Contingent Worker Survey (RPCWS), found a rise in the incidence of alternative work arrangements from 10.1% in 2005 to 17.2% in 2015—an increase of more than 50 percent. Using combined CWS/RPCWS data shows that from 1995 to 2015 the proportion of workers in alternative work arrangements increased by nearly 85% (9.3% to 17.2%).
The Great Recession appears to have accelerated the trend towards companies hiring more contingent workers. According to RAND, from 2005 to 2015 total U.S. employment increased by 9.1 million (6.5%), but traditional full-time employment actually declined by 0.4 million (0.3%). These estimates caused RAND to speculate that “all of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements.”
And the growth continues. Enterprise software company Intuit says that more than 80% of large corporations plan to substantially increase their use of flexible workers in coming years. Intuit predicted in 2011 that by 2020, contingent workers will exceed 40% of the workforce—an estimate that is already outdated. Many now expect that at the turn of the next decade contingent workers will make up 50% of the workforce.
Independent Contractors in Focus
The most common form of alternative work arrangement is independent contracting. Definitions of independent contractors (ICs) vary depending on context. The BLS, GAO, and RAND generally agree that ICs “obtain customers on their own to provide a product or service.” Business consulting services group Navigant specifies that ICs:
Work at multiple projects simultaneously
Move frequently from project to project
Exercise significant autonomy relative to their “client”
Often bring their own tools or equipment to the project
Independent contractors are considered to be “self-employed,” but not all self-employed workers (such as restaurant owners) consider themselves to be independent contractors. ICs may also be referred to as “independent consultants” and “freelancers.”
Insofar as ICs are differentiated from employees, the surest means of identification is how income is reported. Unlike employees, who report income on an Internal Revenue Service (IRS) Form W-2, independent contractors report income on Form 1099-MISC.
Approximately 1 out of 10 U.S. workers is considered to be an independent contractor. Varying definitions and data sources make it tough to pin down the precise number, however. GAO data puts the number of ICs as high as 15-16% of the labor force, while RAND data has the number of ICs at 9.6% of the labor force (as of 2015).
The total percentage of ICs in the workforce increased by about 50% from 1995 to 2015. IC characteristics have also changed, most notably in relation to gender and occupation. Although the number of male ICs has remained stable at around 8-9% of all workers, the number of female ICs has nearly doubled over the last 20 years. Industries that have shown the largest shifts in IC workers include Construction (down 5%), Manufacturing (up 4.8%), Education and Health Services (up 8.8%), and Agriculture, Forestry, Fishing, and Hunting (up 26.8%).
Employees or Independent Contractors?
The use—and misuse—of independent contractors is a topic of considerable controversy.
On the one hand, surveys show that many workers prefer independent contractor relationships to employment relationships. The BLS reports that 82.3% of ICs prefer working independently to being an employee. A Pew Research Center survey found that 39% self-employed workers are “completely satisfied” with their jobs compared to 28% of employees. Flexibility, autonomy, and a path to entrepreneurship are cited as the top reasons why workers prefer independent contracting.
Compared to employees, contingent workers earn less and receive fewer benefits, have less economic security, and are more likely to require public assistance.
For skilled workers who reap the benefits of selling their services to businesses while maintaining autonomy, self-employment can indeed be a profitable career path. Yet other workers are caught in a grey area between employee and independent contractor. They may be economically dependent on and have their work controlled by a single company that appears to be an employer, but that company might consider them a contractor, not an employee. An estimated 10-30% of employers misclassify their employees as independent contractors.
The intentional misclassification of employees as independent contractors is a problem for workers, governments—and if they’re caught breaking the law—employers. While the practice allows employers to save 25-30% on payroll costs, it denies misclassified employees access to benefits and protections. Research shows that, compared to employees, independent contractors and other contingent workers earn less and receive fewer benefits, have less economic security, and are more likely to require public assistance. Misclassification also results in lower tax revenues and losses to state unemployment and workers’ compensation funds.
Governments Crack Down
Lax enforcement of independent contractor laws prevailed throughout the 1990s and the early 2000s, but since 2007 federal and state regulators have been cracking down on misclassification.
The Department of Labor has been hiring more investigators to “detect and deter” misclassification, prosecuting more companies believed to be misclassifying workers in order to avoid paying overtime and the minimum wage, and providing grants to state workforce agencies to increase enforcement efforts.
DOL refers to these efforts as a “Misclassification Initiative.” From 2009 to 2015 the agency estimates it has recovered nearly $1.6 billion in back wages for 1.7 million workers. The IRS, through its Questionable Employment Tax Practices program, Voluntary Classification Settlement Program, and regular audit processes has likewise sought to crack down on employee misclassification. Many state workforce agencies, particularly in left-leaning California, Massachusetts, and New York, have also been diligent in pursuing businesses believed to be misclassifying employees as independent contractors.
Independent Contractor Misclassification Lawsuits
Workers are increasingly taking matters into their own hands and challenging their status as independent contractors in class action lawsuits.
Misclassification lawsuits have been on the rise in recent years, with high-profile cases filed by couriers, exotic dancers, and drivers for on-demand ride companies Uber and Lyft, among others.
In 2016 alone, FedEx, Uber, and Lyft have reached settlements with workers worth $240 million, $100 million, and $27 million, respectively.
These cases reveal a common thread used to determine whether a worker is an employee or a contractor: the degree of employer control over the manner in which work is performed.
FedEx ground workers argued that they were employees because FedEx assigned them specific routes, required them to check in with managers at the start of the day, and regulated their appearance and equipment. Uber and Lyft drivers similarly argued that they were subjected to a litany of detailed requirements that, if not followed, could result in their termination. Even exotic dancers have used these arguments to win misclassification cases, saying that they were denied flexibility in their choice of working schedule, told how to dress, and made to perform a certain number of dances.
But settlements, although they can provide compensation for workers in the form of back wages and expense reimbursement, usually don’t provide clarity on worker status because companies often agree to a settlement only if they are allowed to continue treating workers like independent contractors. As part of the Uber and Lyft settlements, for instance, drivers remain independent contractors. In contrast, when a case is decided at trial, the court is allowed to rule on whether a worker is an employee or a contractor, which can lead to a worker receiving significantly more protections moving forward.
Misclassification lawsuits are typically filed in federal court under the Fair Labor Standards Act (FLSA), a federal law that guarantees employees the federal minimum wage and overtime pay for more than 40 hours worked in a week. Because many states have minimum wage and overtime laws that are more generous than federal laws, workers may also bring state-level misclassification lawsuits. In most wage and hour cases plaintiffs file in federal court under both federal and state claims.
Since wage and hour laws only apply to employees (and not contractors), the key determination in these cases is whether a worker is an employee or an independent contractor. The FLSA uses a six-factor “economic realities” test to determine whether an “employment relationship” exists. This interpretation centers on the degree to which a worker is economically dependent on the business of the employer. All of the factors are considered in each case, and no single factor is determinative by itself.
Some states have their own labor laws and tests that are used to determine employment status. California begins with the presumption that the worker is an employee and uses an 11-factor economics reality test adopted by the California Supreme Court. Massachusetts has adopted an independent contractor law with a stringent 3-factor test that requires businesses to overcome a “presumption” of employee status.
New laws may ultimately be needed to address employee misclassification and other worker issues in the fissured economy.
Most worker protection laws were drafted decades ago, when the economy was starkly different than it is today. The FLSA was passed in 1938, a time when the U.S. economy was manufacturing-based, children were working long hours in factories, and the minimum wage was 10 cents per hour.
Legal experts have noted how the FLSA—which only applies to “employees” working for companies with a minimum business volume of $500,000—has contributed to misclassification and the farming out of labor to smaller companies. These provisions create incentives for businesses to shed employees, designate others as independent contractors, and hire temps. They additionally have led employers to use holding companies, shell operations, franchises, and other creative structures to avoid wage and hour laws on the grounds that each entity is an independent employer that does not reach the $500,000 threshold. These same entities might argue that they don’t meet the requisite number of employees needed to comply with the Family Leave and Medical Act (FMLA).
A recent National Labor Relations Board (NLRB) decision on contract labor could make it more difficult for companies to avoid legal responsibilities through outsourcing. NLRB voted in August 2015 to adopt a more expansive definition of what it means to be a “joint employer,” which should make it easier for contingent workers to organize their labor under the National Labor Relations Act (NLRA), which applies only to employees.
The case arose when a Teamsters local union argued that bargaining wouldn’t be effective unless it was able to negotiate with both a recycling company and the temporary staffing agency that provides its workers. NLRB agreed with the union’s assertion that the larger company determined working conditions and therefore should be considered a joint employer, saying that “its previous joint employer standard has failed to keep pace with changes in the workplace and economic circumstances.”
Since 2007 more than a dozen federal bills addressing independent contractor misclassification have been proposed and dozens have passed at the state level
On the misclassification front, since 2007 more than a dozen federal bills addressing independent contractor misclassification have been proposed and dozens have passed at the state level, from the Northeast to the Mountain West to the Deep South.
The Payroll Fraud Prevention Act, proposed in 2013 and again in 2014, sought to make the intentional misclassification of employees a federal offense, amend the FLSA to include a new category of workers (“non-employees”), and require every employer to inform employees and non-employees of their legal rights. In 2015 Congress introduced the Independent Contractor Tax Fairness and Simplification Act, a bill that acknowledges the important role legitimates ICs play in the economy but limits the definition of IC under the safe harbor provision of the Internal Revenue Code.
Congressional paralysis makes IC legislation unlikely before the 2016 elections. States, on the other hand, have proven to be much more successful at passing laws designed to curtail employee misclassification.
Modernizing regulatory policies and laws is necessary in a new economy that in many respects bears no resemblance to the old economy. As the nature of work changes, government has to change, too.
However, the question must be asked: can governments keep pace with the rapid changes that technology and globalization have made possible…or are they destined to remain one step behind?
David Weil of the Department of Labor believes that, despite the complications a changing workplace poses, government still has an important role to play in establishing norms of fair treatment. Fairness, he says, is a basic human idea. When a business creates value but the people who do the work don’t share equally in the profits, as occurs in the fissured workplace, income inequality and a general sense of unfairness results, often with wider political and social implications.
But in an economy that is pushing people towards ever-greater autonomy, it’s equally important for workers to know their rights and be their own best advocate. It is workers who have lost the most from workplace fissuring. And it is workers who have the most to gain from ensuring they receive a fair day’s pay for a hard day’s work.
1. DOZENS OF WRESTLERS HAVE SUED THE WWE OVER CONCUSSIONS AND UNFAIR CONTRACTS.
In July 2016, more than 50 wrestlers filed a lawsuit against World Wrestling Entertainment, Inc. (WWE) alleging that the company had recklessly endangered its performers, concealed the dangers of head injuries, misclassified wrestlers as “independent contractors,” and neglected its own Talent Wellness Program (including neurological testing/the concussion protocol).
The plaintiffs included Jimmy “Superfly” Snuka, Road Warrior Animal, “Mr. Wonderful” Paul Orndorff, Chavo Guerrero Sr., Chavo Guerrero Jr., King Kong Bundy, Marty Jannetty, Sabu, Mark Jindrak, and referees Dave and Earl Hebner.
This isn’t the first time wrestlers have sought redress from the WWE, of course. In 2008, a trio of former wrestlers—Scott Levy (aka Raven), Chris Klucsarits (aka Kanyon), and Mike Sanders—filed a lawsuit against the WWE over their independent contractor statuses. (You can read the full complaint here.) Given their fulltime (and then some) hours and the exclusivity of their WWE contracts, they felt—justifiably—that they were owed basic insurance and retirement benefits.
But the following year, the judge threw the case out due to the statute of limitations. The WWE has proved somewhat Teflon in court, save Jesse Ventura winning $800,000 in 1991 for owed royalties (more on him later).
In April 2016, the NFL settled a $1 billion lawsuit with 20,000 retired football players who—like the 50 wrestlers who sued the WWE over concussions—felt their employer had misled them about the risks of repeated head trauma. The key difference is that those players were fulltime employees of the NFL, not independent contractors, and they had proof that the NFL had masked and downplayed the risks.
Still, the 2016 WWE suit was modeled after the NFL one (as was the NHL concussion lawsuit), and if the judge determines that the statute of limitations does not apply, as the plaintiffs argue, it could net the wrestlers some small measure of justice for their myriad health issues and titanic medical bills.
Regardless of how this case and others play out, the way the WWE treats its performers has to change. Their lives depend on it.
2. CHRIS BENOIT AND ANDREW “TEST” MARTIN HAD CTE.
Many chalked up WWE star Chris Benoit’s horrific double-murder/suicide to “roid rage”—a steroid-induced belligerence that is most likely a myth, as suggested by a 2014 study in the medical journal Addiction and the acclaimed 2008 documentary Bigger, Stronger, Faster*.
Dr. Julian Bailes—co-director of the Brain Injury Research Institute—told ABC News, “There’s no consensus in the medical community that this issue of ‘roid rage… even exists.”
Dr. Bennet Omalu is the world’s foremost expert on CTE (chronic traumatic encephalopathy), and co-director of the BIRI with Dr. Bailes. (He was the subject of the 2015 Will Smith film Concussion, in which Dr. Bailes was played by Alec Baldwin.) Dr. Omalu says that Chris Benoit’s unspeakable actions were driven not by steroids but by the untold blows to the head he received over his 22-year wrestling career.
One of Benoit’s signature moves was a diving headbutt off the top rope. He once told Chris Nowinski, a former wrestler and medical doctor whose own career was cut short by head injuries (among others like Daniel Bryan, Corey Graves, and Christian), that he had suffered “more concussions than he could count.”
Nowinski, too, recalls wrestling “with bad headaches, and in a fog every night.” After retiring from the sport, he founded the Concussion Legacy Foundation, through which he has collaborated with Dr. Omalu.
Dr. Omalu examined Benoit’s brain after his suicide and said it resembled that of an 85-year-old man with Alzheimer’s. Benoit was 40.
He also conducted an analysis of the brain of Andrew “Test” Martin, a former WWE wrestler who died at age 33 from an oxycodone overdose. Martin, too, showed signs of CTE.
3. THEY AREN’T THE ONLY ONES.
In a 2009 Outside the Lines story, Dr. Bailes said, “With Andrew Martin as the second case, the WWE and the sport in general have to ask themselves, ‘Is this a trend?’ The science tells us that jumping off 10-foot ladders and slamming people with tables and chairs is simply bad for the brain.”
In response, the WWE doubted the “veracity” of the tests, adding:
Dr. Omalu claims that Mr. Benoit had a brain that resembled an 85-year-old with Alzheimer’s, which would lead one to ponder how Mr. Benoit would have found his way to an airport, let alone been able to remember all the moves and information that is required to perform in the ring.
The dense denial of those remarks is astounding. The WWE seemed to suggest that Benoit was of sound mind when he murdered his wife and son and then hanged himself on a weight machine, with Bibles laid out next to his loved ones’ bodies.
At least 20 wrestlers have killed themselves, including Benoit, Chris Kanyon, Mike Awesome, Sean O’Haire, Crash Holly, Tojo Yamamoto, Yukon Eric, “The Renegade” Rick Wilson, and Kerry Von Erich. Many suffered from depression and other mental disorders symptomatic of CTE. Kanyon reached out to Chris Nowinski before he died, saying he’d had at least 12 concussions and felt they had impacted his mental health. Nowinski “would not be surprised if Chris [Kanyon] was suffering from CTE when he passed away.”
Kanyon and the other names above belong in the same category as former football players like Junior Seau, Andre Waters, and Terry Long—all of whom showed signs of CTE and its resulting mental disorders, and all of whom committed suicide.
In 2015, Jimmy “Superfly” Snuka, one of the plaintiffs in the concussion lawsuit, was charged with the 1983 murder of his girlfriend Nancy Argentino. But in June 2016, a judge ruled Snuka mentally unfit to stand trial. Snuka did not know what year it was, and could not name the current President. (He would be reevaluated later that year.)
Given the state of Snuka’s, Benoit’s, and Martin’s minds, and the never-ending rash of industry deaths and suicides, it’s no wonder that wrestlers like Mick Foley, Kevin Nash, Rob Van Dam, and Chyna (R.I.P.) have all pledged to donate their brains to science after they pass.
4. DANIEL BRYAN RETIRED BECAUSE OF CONCUSSIONS.
Over the past several years, the WWE (like the NFL) has overhauled its concussion policy. It has banned dangerous maneuvers like Tombstone Piledrivers and chairshots to the head. Wrestlers who experience concussion symptoms must pass an ImPACT test and be cleared by doctors before returning to the ring. (For example, in May 2016, “Certified G” Enzo Amore missed three weeks after suffering a concussion at the Extreme Rules pay-per-view.)
One superstar whom WWE doctors would not clear was underdog-turned-top dog Daniel Bryan. In February 2016, the 34-year-old Bryan shocked the world by retiring at the peak of his powers. He did so with tears soaking his beard, telling the crowd:
Within the first five months of my wrestling career, I’d already had three concussions. For years after that, I would get a concussion here and there… and it gets to the point when you’ve been wrestling for 16 years that it adds up to a lot of concussions.
Bryan, who has reportedly suffered seizures from his numerous head injuries, added, “Maybe my brain isn’t as okay as I thought.”
The WWE deserves credit for telling Daniel Bryan “No,” and for instituting a concussion protocol a la the NFL’s (if only for PR reasons). But questions remain about the aim and efficacy of that protocol, and the quality of company doctors.
5. THE WWE’S MEDICAL DIRECTOR DOESN’T THINK CTE IS A BIG DEAL.
The WWE’s Medical Director, Dr. Joseph Maroon, is infamous for downplaying the prevalence and gravity of CTE. (He is played by Arliss Howard in the film Concussion; it is not a flattering portrait.) He calls the issue “over-exaggerated” and says that riding a bike or a skateboard is more dangerous than playing football. Though Dr. Maroon made the right call with Daniel Bryan, in general it’s hard to believe that he will take concussions and CTE as seriously as he should.
In a jaw-dropping interview on The Art of Wrestling podcast, former WWE Champion CM Punk—who, like Daniel Bryan, retired early for his health—said that the WWE medical staff allowed him to wrestle with concussions and other serious injuries despite his pleas for treatment. Punk said that post-concussion syndrome brought him to his knees after many matches, “and I’m either puking for real or I’m just dry heaving because I don’t have anything in my stomach. I have no appetite. I don’t know what is up and what is down. I can’t sleep. I can’t f***ing train.”
During the 2014 Royal Rumble—not coincidentally, his last match in the WWE—Punk claims that he rolled into the corner of the ring and told the doctor he was concussed, and that the doctor essentially replied:
(The doctor in question, Chris Amann, sued Punk and podcast host Colt Cabana for defamation, seeking $1 million in damages. That case was scheduled to go to trial in June 2016 and presumably has been settled.)
Punk also said (in stronger/bluer terms) that the WWE’s concussion test is a joke, that he passed it when everyone knew he was concussed. He believes that the WWE’s and NFL’s much-hyped concussion protocols are simply PR moves: “WWE doesn’t do anything to protect the wrestlers; they do things to protect themselves.”