Dive Brief:

• Flowers Foods — the company that bakes for brands including Wonder Bread, Sunbeam and Tastykake — has struck an agreement to settle a Fair Labor Standards Act (FLSA) misclassification lawsuit for $9 million (Green, et al. v. Flowers Foods, et al., No. 19-cv-01021 (W.D. Tenn. Feb. 8, 2019)).
• The suit alleged Flowers misclassified its "distributors" as independent contractors. Although they were classified as contractors, the distributors said, Flowers Foods controlled all aspects of their relationships with the company and their customers. Therefore, they should have received time-and-a-half pay for the overtime they frequently worked, the workers alleged.
• As part of the agreement, the distributors consented to adding an arbitration agreement to their terms of employment, the settlement motion said.

Dive Insight:

Employers don't have one golden rule to follow when it comes to worker classification. The U.S. Department of Labor (DOL) maintains one test, while federal courts have devised their own. Employers also must consider state and local laws carefully and ensure sure they classify workers according to the tests applicable courts will use.

California's Supreme Court, for example, adopted a new test for independent contractors in the spring of 2018. It generally assumes workers are employees and only allows a worker to be classified as an independent contractor if the hiring entity satisfies categories A, B and C, thus dubbed the ABC test. The employer must establish: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity's business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

To avoid litigation, employers will need to remain vigilant of the evolving laws and litigation affecting independent contractor status. More generally speaking, the Flowers Foods settlement reminds employers to ensure proper overtime payment for workers. When workers don't qualify as independent contractors, the FLSA mandates that they be paid time-and-one-half their regular rate of pay for every hour worked beyond 40 in one week.

Notably, changes to the FLSA's "regular rate of pay" also may be in the works. DOL announced its intent to revisit that definition last year and, on Jan. 23, sent its proposal to the White House's Office of Management and Budget for review.