Monday, June 22, 2009

A "Preposterous" Case Of Worker Misclassification

The prevalence of worker misclassification by employers continues to run rampant. While there are many legitimate cases where an individual is a true independent contractor, numerous instances exist where an employer misclassifies a person as an independent contractor rather than as an employee. The issue of whether the misclassification was intentional is left properly to the trier of fact. I leave it to you, dear reader, to speculate as to any underlying motivation.

In Hui Lin v. Great Rose Fashion Inc. (U.S. District Court, E.D.N.Y. - Decided: June 2, 2009), the Plaintiffs were garment workers who alleged that Defendants violated the Fair Labor Standards Act (the "FLSA") by failing to pay minimum wages and overtime. Plaintiffs further alleged that they were discharged ultimately from their employment in retaliation for pursuing their rights to such compensation. Defendants asserted that Plaintiffs were independent contractors since packing and trimming work was subcontracted out to other individuals who then employed Plaintiffs. Defendants further asserted that Plaintiffs lacked standing to maintain the action and that Plaintiffs were dismissed solely because economic conditions forced the garment factory to cease business. The Court denied both Defendants’ Motion to Dismiss and Plaintiffs' Motion for a preliminary injunction seeking reinstatement.

In a well-reasoned opinion, Judge Garaufis relies on the holding in Brock v. Superior Care, Inc., 840 F.2d 1054, 1058-59 (2d Cir. 1988) to detail the criteria used historically to distinguish an independent contractor from an employee. Typically, the inquiry is based upon: (1) the degree of control exercised by the employer over the workers; (2) the workers' opportunity for profit or loss and their investment in the business; (3) the degree of skill and independent initiative required to perform the work; (4) the permanence or duration of the working relationship; and (5) the extent to which the work is an integral part of the employer's business.

In denying Defendants’ Motion to Dismiss, the Court held that the workers were employees, not independent contractors and that they had standing to maintain the action. The Court used particularly harsh language in discrediting the defenses raised by Defendants and found the evidence presented by Defendants at Hearing to be "patently false." Indeed, the Court opined that Defendants’ independent contractor theory was “preposterous” given that the evidence showed that Plaintiffs were not in business for themselves, and were interviewed, hired, fired, assigned work and hours, supervised and managed by Defendants or others under their control.

Most interestingly, the Court chastised the Defendants severely by stating: “Defendants' contrived efforts to distance themselves from their workers and treat them as 'subcontractors' have failed. The Defendants' argument is nothing more than a transparent attempt to use a legal fiction to escape liability for their alleged labor abuses. The notion that these Plaintiffs acted as independent contractors outside the protection of the FLSA is so thoroughly without merit that it borders on an affront to the dignity of this court.”

WOW! Talk about a big time reprimand. Do you think the Court was ticked off just a little?

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