The Abc's of Employment: Sports Industry Misclassification Issues in the Era of Dynamex

• Publication year: 2019
• Author: Adam F. Sloustcher, Esq. and Jason A. Fischbein, Esq.

The ABC's of Employment: Sports Industry Misclassification Issues in the Era of Dynamex

Adam F. Sloustcher, Esq. and Jason A. Fischbein, Esq.

Adam Sloustcher of Fisher & Phillips LLP represents local, regional, and national employers in a broad range of employment disputes, including single-plaintiff discrimination, harassment, retaliation, and wrongful termination matters and wage-and-hour class actions. Adam also specializes in counseling employers on how to prevent lawsuits altogether. Adam is based in San Diego, California, but also serves clients in Northern California—where he grew up and where he played professional soccer for the San Jose Earthquakes.

Jason Fischbein is an associate in Fisher & Phillips LLP's San Diego office. He represents and counsels employers in all aspects of labor and employment law, including employment discrimination, wrongful termination, harassment, retaliation, and wage-and-hour class action lawsuits. Jason is a native San Diegan who volunteers locally as a baseball coach in his spare time.

For years, employers in the sports industry have reaped the benefits of classifying workers as independent contractors. These advantages include massive savings on labor costs, unemployment insurance, workers' compensation, taxes, and benefits, as well as avoiding liability relating to most wage-and-hour and discrimination laws, and issues under Occupational Safety and Health Administration (OSHA) and immigration laws. Recently, however, the criteria for how an employer classifies its workers has become the subject of hotly-contested litigation.

For example, Vox Media—a leading digital media company that oversees the popular sports blogging network SB Nation—was sued in 2017 by Cheryl C. Bradley, a former website manager, for alleged violation of minimum wage and overtime laws.¹ Recently, plaintiff Bradley's motion to conditionally certify a class of current and former SB Nation site managers was granted by the United States District Court, District of Columbia.² The SB Nation network includes hundreds of individually curated websites covering college and professional sports teams.

Launched in 2005, SB Nation gained a rapid, substantial following by emphasizing team-oriented sports coverage produced in large part by local sports bloggers. SB Nation's business model was to contract with individual bloggers and local "site managers" to produce ad-generating content. Contributors were paid a flat monthly fee, with SB Nation classifying site managers as independent contractors (not employees).³ Under the Fair Labor Standards Act (FLSA), minimum wage and overtime laws apply only to employees.⁴ Consequently, independent contractors cannot prevail on minimum wage or overtime claims without first proving a misclassification has occurred.

Bradley argued SB Nation failed to pay minimum wage and overtime in violation of the FLSA.⁵ She alleged she was often compensated less than $1 per hour, and that SB Nation's management team constantly pressured her—under threat of termination—to reach page view quotas by generating more content.⁶ Additionally, she argued SB Nation controlled her work product to such a degree that an employer-employee relationship had been established.⁷

In contrast, SB Nation argued it appropriately classified site managers as independent contractors.⁸ The site managers signed independent contractor agreements and set their own schedules.⁹ Site managers also used their own equipment and had authority to delegate blog-related responsibilities to other contributors.¹⁰ SB Nation argued Bradley "blogged when she wanted, on the topics she wanted, using her own editorial voice."¹¹

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Though litigation is ongoing, the putative class action will turn on whether SB Nation appropriately classified site managers as independent contractors.

The Vox Media lawsuit serves as just one example of potential misclassification issues in the digital media and sports industries. What follows is a recap of Dynamex Operations West, Inc. v. Superior Court, a recent landmark California Supreme Court decision that formulated an "ABC Test" for determining whether employees should be classified as employees or as independent contractors.¹²

Dynamex and the "ABC Test"

In Dynamex, defendant was a nationwide courier and delivery service that initially treated its California drivers as employees. However, in 2004, the company began classifying all drivers as independent contractors to generate economic savings. The drivers sued on misclassification grounds, with the California Supreme Court ultimately declaring the drivers to be presumptive employees.¹³ The court then elucidated a three-part test for determining independent-contractor status.¹⁴

The California Supreme Court supported its analysis of whether a worker should be classified as an employee or as an independent contractor with a strong public policy rationale aimed toward protecting workers.¹⁵ Under the newly-imposed ABC Test, the burden now falls on hiring entities classifying individuals as independent contractors to justify that classification by proving each of the following three factors:

1. that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
2. that the worker performs work that is outside the usual course of the hiring entity's business; and
3. that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed by the worker for the hiring entity.¹⁶

The California Supreme Court determined the ABC Test should be broadly applied to claims brought under California's Wage Orders.¹⁷ Thus, because California's Wage Orders regulate employment conditions for all industries and occupations in California, the impact of this new ABC Test is robust.

With the ABC Test now in effect, many California employers are contemplating whether to reevaluate their independent contractor business models.

Sports Industry Misclassification—A Hypothetical

To illustrate how the line between independent contractors and employees is easily blurred in the digital media and sports industries, look no further than California's Employment Development Department (EDD), which, pre-Dynamex, created an Information Sheet to help one determine the appropriate classification for amateur athletic officials.¹⁸ The EDD's Information Sheet listed seventeen common law factors, including industry custom, method of payment, termination protocol, and dress code, to consider when making a classification determination.¹⁹

Even the most competitive sports leagues have been known to utilize independent contractors, with the New York Times reporting in March 2019 that the National Collegiate Athletic Association (NCAA) classifies all of its 851 Division I men's basketball officials as independent contractors (with each official earning roughly $1,350 to $3,800 per game based on their level of experience and the matchup being officiated).²⁰

On the flip side, the National Football League (NFL) made a public announcement last year when it hired twenty-four full-time officials for the 2018 season, up from twenty-one the prior season.²¹ The full-time officials were expected to work throughout the year, not just during the NFL season, in an effort to "improve the consistency, efficiency and accuracy of NFL officiating."²²

Simply put, independent contractor classification is and will continue to be a hot-button issue for the digital media and sports industries. To illustrate the far-reaching impact of the Dynamex ruling—and the potential dire consequences for employers engaging in misclassification—consider the following...