Dive Brief:

• Flowers Foods — a baked goods producer that owns brands such as Wonder Bread, Nature's Own and Dave's Killer Bread — has agreed to pay $8.3 million to settle claims it violated the Fair Labor Standards Act (FLSA) by misclassifying distributors as independent contractors, depriving them of overtime pay  (Rosinbaum, et al v. Flowers Foods, Inc. and Franklin Baking Co., LLC., No. 7:16-cv-00233 (E.D. N.C. May 12, 2020)).
• The plaintiffs alleged in the 2015 class action lawsuit that the control Flowers Foods exerted over their job responsibilities showed they were employees entitled to overtime for hours worked beyond 40 in a workweek. The plaintiffs said they were required to arrive at warehouses at times determined by the employer to stock their delivery vehicles. They said Flowers Foods required them to deliver the products to customers at specific times and places and that they had no "ownership or entrepreneurial influence over their day-to-day activities."
• The proposed settlement also includes non-monetary concessions; among other things, the company must add a distributor advocate to oversee an internal, alternative dispute resolution process for independent distributors and a review panel to provide for resolution of contract-related disputes.

Dive Insight:

Employment experts say employers should tread carefully when deciding to classify workers as independent contractors. While enforcement agencies and other entities such as states and courts use disparate tests to determine worker classification, most tests center on the amount of control the employer exercises over the worker. The more control the employer exercises, the tougher it is to successfully argue that the worker is an independent contractor.

Employers should note that the parties' intent when entering into a work arrangement has little impact on the classification and that even a signed agreement indicating that the worker is an independent contractor may not suffice. The 9th U.S. Circuit Court of Appeals ruled last year, for example, that a trial court should have looked to the actual amount of control 7-Eleven exerted over workers, rather than a written agreement. In a similar case, an Alabama federal court concluded that a delivery driver was actually an employee, even though he had signed a form stating that he was an independent contractor.

Missing the mark can be expensive for employers. The 3rd Circuit ruled last year that a class of exotic dancers at a Philadelphia club were employees, not independent contractors, and upheld a jury's award of $4.5 million for unpaid minimum wages and unjust enrichment. The court said the club exerted "overwhelming control" over the dancers, including setting shift times, fining dancers for showing up late and giving instructions on their physical appearance.