Hampton Creek to settle worker classification lawsuit

31-Oct-2016 - Last updated on 28-Oct-2016 at 23:04 GMT

Hampton Creek was accused of incorrectly classifying people recruited to do instore demos and other activities as independent contractors, rather than employees

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Just Mayo maker Hampton Creek – one of a growing number of food companies sued for allegedly misclassifying workers as independent contractors as opposed to employees – is settling its case in order to avoid the hassle and expense of protracted litigation, court documents show.

In a joint filing on October 17, defendant Hampton Creek and the plaintiffs asked a US district court in New York to approve a settlement in which Hampton Creek would pay $70,000 to selected people it recruited to conduct instore demos and other activities.

“After exchanging and analyzing thousands of pages of documents, as well as payroll records, Plaintiffs’ counsel created a spreadsheet to determine the value of Plaintiffs’ claims, and based on the spreadsheet, as well as Your Honor’s input as to the strengths and weaknesses of the claim, the parties agreed to an arms-length settlement in the aggregate amount of $70,000,” says the filing.

“Defendant is willing to enter this settlement and forego litigation over disputed issues of law and fact in order to bring an early and cost-effective resolution to this matter. Defendant benefits from avoiding continued litigation costs.

"On the other hand, Plaintiffs [Lisa Castagna, Anthony Pennington, Chelsea Conlin, Karen V. James, Nanette Nuvolone, Robinson Vought, Anandini Maharaj, Laila Slot, Rebecca Gement and Andrew Sirico] are willing to resolve their claims because they will receive immediate payment, and will avoid the uncertainty of summary judgment motion practice, and possibly a trial.”

What's the difference between an employee and an independent contractor?

Hampton Creek was accused of violating the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL) by classifying its 'relationship specialists' - people recruited to do instore demos and other activities - as independent contractors, rather than employees (Castagna et al v. Hampton Creek, Inc 2:16-cv-00760).

The distinction matters because employees can hold their employers accountable for violations of wage and hour laws, such as those requiring employers to pay their employees for all hours worked, pay additional compensation for overtime, provide meal and rest breaks, and reimburse employees for work-related expenses. Independent contractors, by contrast, enjoy fewer rights.

While this is not a new issue in employment-related litigation, high-profile cases against firms including Uber and FedEx have raised awareness of the issue, and a series of food companies including Pepperidge Farm (Campbell Soup), Flowers Foods, GrubHub, InstaCart, DoorDash, Caviar, Bimbo Bakeries and Albertsons have all been sued for allegedly misclassifying 'sales development associates,' drivers, delivery people, and instore demo providers in recent years.

San Francisco-based Hampton Creek - which made its name by launching an egg-free spread called Just Mayo - has since expanded its portfolio to include cookies, dressings, cake mixes and other products, which are sold to retail and foodservice customers in the US and overseas.

Attorney: Worker classification lawsuits fertile ground for plaintiff's attorneys

In a recent interview, Rachel Atterberry, partner in the litigation practice group at Freeborn & Peters LLP, told FoodNavigator-USA that the practice of classifying workers as ‘independent contractors' rather than full-blown employees, was increasingly under attack by courts and government agencies.

Exploring the line between the two classifications, she explained, was fertile ground for plaintiffs’ attorneys "given the statutory penalties involved, the numbers of workers that can be joined in the lawsuit (thus increasing damages and, potentially, fees) and the prevalence of violations across industries.”

Campbell Soup subsidiary Pepperidge Farm, which has also recently been targeted in one such case (16-CV-02199, Mulhern vs Pepperidge Farm), is vigorously contesting the allegations.

Is there a clear line between independent contractors and employees?

Writing on legal site Lexology , Toni Y. Long, founder of The Long Law Group, PC in Pasadena, CA, notes that a good starting point is the six-factor ‘economic realities’ test which focuses on whether a worker is economically dependent on an employer (thus, an employee) or in business for him or herself (thus, an independent contractor) under the Fair Labor Standards Act (FLSA), although there are different tests to determine if a worker is an employee at the state level. The six tests explore:

Whether the work performed is an integral part of the employer’s business.
The worker’s opportunity for profit or loss depending on her managerial skill.
The worker’s investment in equipment and materials versus that of the employer.
The special skills and initiative required to perform the work.
The degree of permanence of the working relationship.
The degree of control exercised or retained by an employer.

To avoid misclassifying workers, The Long Law Group, PC in Pasadena, CA, recommends taking the following steps:

Audit your use of independent contractors.
Analyze your hires using the FLSA’s economic realities test, the right of control test under the Internal Revenue Code, and any test developed by your state’s labor board.
Have an attorney review and update your independent contractor agreements.

Read more about worker misclassification at the Department of Labor website HERE and HERE