Pepperidge Farm accused of misclassifying employees as independent contractors

By Elaine Watson contact

- Last updated on GMT

Are Pepperidge Farm's sales development associates independent contractors or employees?
Are Pepperidge Farm's sales development associates independent contractors or employees?

Related tags: Employment, Pepperidge farm

Pepperidge Farm – the latest food company to find itself in legal hot water over allegedly misclassifying employees as independent contractors – says it will vigorously defend itself after being hit with a class action lawsuit filed by its sales development associates in Illinois.

The Campbell Soup subsidiary – which told FoodNavigator-USA that it is “confident that it has properly classified the independent distributors as independent contractors and is defending the case vigorously​” – joins a raft of food companies to be targeted in such litigation, including Hampton Creek​, Flowers Foods, GrubHub, InstaCart, DoorDash, Caviar, Bimbo Bakeries and Albertsons.

The distinction matters because employees can hold their employers accountable for violations of wage and hour laws, such as those requiring employers to pay employees for all hours worked, pay additional compensation for overtime, and reimburse employees for work-related expenses. Independent contractors, by contrast, enjoy fewer rights and are not eligible for benefits such as health insurance and retirement plans.

Plaintiff routinely worked 55-70 hours a week for Pepperidge Farm

In a lawsuit filed on February 12 in Chicago, plaintiff Daniel Mulhern – who worked as a sales development associate (SDA) for the baked goods specialist for 19 years - said SDAs played an integral role at Pepperidge Farm by delivering, displaying, merchandising and promoting its products in stores.

Pepperidge Farm in turn exercised “a substantial degree of control and direction”​ over its SDAs, claims Mulhern, who said he and other SDAs would routinely work 55-70 hours a week for Pepperidge Farm in order to complete his tasks, making it impossible for him to contract with other clients.

Such “work hours alone establish that Pepperidge Farm misclassified Plaintiff and other SDAs as independent contractors instead of employees in violation of Illinois law​”, argued Mulhern – who alleges Pepperidge Farm violated the Illinois Wage Payment and Collection Act and the Illinois Minimum Wage Law.

How to avoid misclassifying workers

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.

Is there a clear line between independent contractors and employees?

So what do such cases hinge upon, and is there a very 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, noted 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:

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

Why does worker misclassification matter?

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Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as the minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces. Employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It hurts taxpayers and undermines the economy. US Dept of Labor

Is your company vulnerable?

Speaking to FoodNavigator-USA earlier this week after Hampton Creek was targeted in one such lawsuit, Rachel Atterberry, partner at Freeborn & Peters LLP, said this kind of litigation was increasingly 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"​.  

Hampton Creek dressings
Hampton Creek was recently accused of misclassifying people it hired to organize and conduct in-store demos as independent contractors rather than employees

The emerging 'sharing' economy (think Uber, Lyft, Homejoy) has also brought this issue to the fore, she added.

In Hampton Creek’s case, said Atterberry, the ‘relationship specialists' it recruited to do instore demos and other activities argued that their “duties were extensive, intertwined with the operations of the company, and subject to extensive supervision and requirements – all important factors that a court considers in determining whether a worker is an employee or a true independent contractor”.

Muhern – who seeks to represent a class of 150+ Pepperidge Farm SDAs – is represented by law firms Freed Kanner London & Millen, of Bannockburn; Shapiro Haber & Urmy, of Boston; and Rudolph Friedmann LLP, of Boston.

The case is 16-CV-02199, Mulhern vs Pepperidge Farm, filed in the U.S. District Court for the Northern District of Illinois.

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

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