On June 16, 2010, a federal court in New York held that a group of newspaper delivery drivers who claimed they were wrongfully misclassified as independent contractors under New York law could not pursue their claims as a class action. Edwards v. Publishers Circulation Fulfillment Inc., No. 09 Civ. 4968 (S.D.N.Y. 6/16/10). In an effort to show that the proposed class was susceptible to class wide proof, the plaintiffs heavily relied on a form Independent Contractor Agreement (“ICA”) they all signed as well as various training materials produced by PCF.
The court first found that the critical determination as to whether an employment relationship exists “is the degree to which the purported employer exercises control in fact over the results produced or the means to obtain them.” The court then noted that form agreements or other such standardized company documents, while relevant, are not necessarily dispositive of what “is ultimately an individualized determination of the degree of control PCF actually exercised over each class member.” Therefore, plaintiffs’ reliance on the form ICA and training materials was insufficient to demonstrate the requisite class wide proof. Finally, the court held that the plaintiffs would not have been able to establish the necessary Rule 23 elements even if, contrary to New York law, it would have been sufficient to show that PCF had reserved a right of control over the deliverers with respect to the manner in which the work was to be done.
The bottom line: Due to an increase in private lawsuits, investigations by state and federal agencies and proposed legislation such as the Employee Misclassification Prevention Act, employers are increasingly forced to defend their classification of workers as independent contractors. For employers facing class allegations of contractor misclassification – particularly under New York law – the court’s finding that the existence of an employment relationship requires an individualized factual determination should be extremely valuable in opposing certification.