18th Annual Workplace Class Action Report - 2022 Edition

258 Annual Workplace Class Action Litigation Report: 2022 Edition decision based upon an intervening change in controlling law. Id . at *7-8. For these reasons, the Court declined to reconsider its decision to apply the ABC test to Plaintiff’s wage order claims. Merrill, et al. v. Pathway Leasing LLC, 2021 U.S. Dist. LEXIS 135646 (D. Colo. July 21, 2021) . Plaintiffs, a group of truck drivers, filed a collective action alleging that Defendants misclassified drivers as independent contractors and thereby failed to pay them minimum wages and overtime compensation in violation of the FLSA. The Court made findings of fact and law regarding whether Plaintiffs were appropriately categorized as independent contractors. Plaintiffs specifically alleged that they leased trucks from Defendants "believing they could operate those trucks as independent contractors and improve their lives through the exercise of entrepreneurial spirit." Id . at *1. Plaintiffs, however, claimed that Defendants "controlled every aspect" of their work and willfully misclassified them as independent contractors instead of employees. Id . at *2. Plaintiffs asserted that Defendants were their "joint employers" along with certain former-party carrier companies for whom Plaintiffs used their trucks to deliver goods. Id . at *2-3. The Court used the economic realities test to analyze whether a person was an employee and therefore covered by the FLSA, which looks to: (i) the degree of control exerted by the alleged employer over the worker; (ii) the worker’s opportunity for profit or loss; (iii) the worker’s investment in the business; (iv) the permanence of the working relationship; (v) the degree of skill required to perform the work; and (vi) the extent to which the work is an integral part of the alleged employer’s business. Id . at *38. Regarding the first factor, i.e., the degree of control exerted by the alleged employer over the worker, the Court noted that this factor weighed heavily in favor of finding independent contractor status, as Plaintiffs had the option to sign either a single-person or a team lease, were not required to drive the leased trucks themselves, and could hire their own drivers or work as a team. Further, as owner-operators, Plaintiffs used their own business judgment to determine whether to accept or decline loads based on profitability considerations. Regarding the second factor, i.e. , the worker’s opportunity for profit or loss, the Court ruled that this factor weighed in favor of finding independent contractor status, as they could make the decision to obtain the trucks and profit additionally, or enter into several leases to grow their businesses. Regarding the third factor, i.e., the worker’s investment in the business, the Court held that this factor weighed in favor of finding independent contractor status, as Plaintiffs had to pay for the lease, maintenance and repairs, fuel costs, workers compensation and business liability insurance, and tax and accounting services. Id . at *44. Regarding the fourth factor, i.e. , the permanence of the working relationship, the Court opined that this factor weighted slightly in favor of a finding of independent contractor status, as owner-operators leased trucks from a number of different companies and the agreement allowed for termination of the agreement with notice. Regarding the fifth factor, i.e. , the degree of skill required to perform the work, the Court held that this factor weighed slightly in favor of a finding of independent contractor status, as Plaintiffs needed additional business acumen and financial proficiency to be profitable. Finally, regarding the sixth factor, i.e. , the extent to which the work is an integral part of the alleged employer’s business, the Court found the factor to be neutral. Accordingly, in evaluating all factors, the Court determined that Plaintiffs were not Defendants’ employees for purposes of the FLSA. Mujo, et al. v. Jani-King International, Inc., 2021 U.S. App. LEXIS 27083 (2d Cir. Sept. 9, 2021). Plaintiffs, a group of franchisees, brought a class action on behalf of other similarly- situated Connecticut-based franchisees, alleging that in their franchise agreement Defendant misclassified them as independent contractors rather than employees. In order to take on customers, a prospective franchisee was required to pay an initial franchise fee down payment and a finder’s fee for each customer. Plaintiffs were also required to pay additional fees over the course of the franchise relationship. Defendant collected these fees by deducting them from the revenue it received from customers. The deducted fees include accounting fees, royalty fees, advertising fees, and insurance fees. All of the deducted fees were prescribed in the franchise agreement. Plaintiffs’ complaint alleged violations of the Connecticut Minimum Wage Act (“CMWA”) as well as an unjust enrichment claim under the Connecticut anti-kickback statute. Plaintiffs argued that they were employees and therefore they maintained that Defendant’s collection of franchise fees violated the CMWA and the Connecticut anti-kickback statute. The District Court dismissed the CMWA claim and after discovery it granted a motion for summary judgment on the anti-kickback claim. In resolving both motions, the District Court concluded that even if Plaintiffs qualified as employees under Connecticut law, Defendant was permitted to collect the franchise fees required by the franchise agreement. On Plaintiffs’ appeal, the Second Circuit affirmed the District Court’s order dismissing the claims. The Second Circuit held that the District Court properly dismissed Plaintiffs’ claim that Defendant’s