ON JUNE 7, 2017, Labor Secretary Alexander Acosta withdrew the Department of Labor’s (DOL) Obama-era “Economic Realities” guidance. That guidance set forth factors the federal government would review to determine if a worker was appropriately classified as an independent contractor or an employee. The National Club Association had been working since that guidance was first introduced to have it removed and with the change in administrations in Washington, our hard work paid o .
With the removal of this guidance in June 2017, the prospects of a DOL misclassification audit and investigation have largely been removed. However, clubs still need to be aware that the federal government is not the only entity that can pursue action against an employer for misclassifying a worker. State governments can do so (though their resources are limited) and private lawsuits can be filed claiming misclassification.
In any such private lawsuit, the claim will be that by misclassifying the worker, the club failed to comply with the Fair Labor Standards Act (FLSA). Specifically, the lawsuit will allege that by classifying the worker as an independent contractor rather than an employee the club failed to pay minimum wage or overtime to the worker. Should this misclassification be proven, the employer will have to pay the back wages as well as sti penalties, fines and the attorney’s fees of the aggrieved worker.
While the federal government may not be as interested in pursuing misclassification claims under the FLSA, the concern for most clubs that utilize independent contractors should be private lawsuits. Indeed, there have been two such cases involving golf facilities and the misclassification of workers that should cause all clubs to take notice, especially if your club uses caddies.
The two cases are Richard Stapleton v. Kemper Sports Management, Inc. and the Mosaic Company d/b/a Streamsong Resort (Streamsong case), and Robert Lee Wiggins v. The Garden City Golf Club (Garden City case). Both lawsuits were filed in federal court last year.
The Streamsong case involved caddies working for a public, high-end golf resort located about 60 miles southeast of Tampa. The case was filed in the U.S. District Court for the Middle District of Florida. The Garden City case involves one of the more prestigious private clubs in the United States. That case was filed in the U.S. District Court for the Eastern District of New York.
Not only did the caddies in each case claim they were misclassified as independent contractors, but they also filed their lawsuits as class action cases. Thus, the caddies sued each facility for violating the FLSA when the golf course failed to pay minimum wage and overtime, and they compounded the potential liability by drawing in a large plaintiff’s class.
In each case, the allegations of misclassification were extremely similar. Both lawsuits first claimed that the facility exerted significant control over them such that they were really employees rather than independent contractors.
The Allegations
The plaintiffs claimed that their weekly schedules were made for them by the caddie master, and that the caddie master paired them with their golfers. The caddie master also required them to do additional work around the facility when not on the course and they were required to attend regular meetings led by the caddie master. During peak seasons, the caddies were required to ask for days o and could not be absent on weekends.
Throughout their time at the facilities, the caddies alleged they were required to wear uniforms adorned with the Streamsong Resort or Garden City Golf Club logo. In addition, they claimed each facility set the specific pay schedule golfers were to follow when compensating the caddies.
In an effort to bolster their misclassification argument, these plaintiffs alleged that, unlike other independent contractors might have, they did not have special skillsets that made the services they provided unique. Furthermore, unlike other independent contractors, they did not invest in specific equipment or participate in special educational or training programs to help them to do their job as a caddie. Simply put, they were regular workers doing a job that anyone could do.
In addition, both cases claimed that the caddies were an integral part of the golf operation at each facility. Indeed, caddies are required at Streamsong and strongly encouraged at Garden City. Finally, the plaintiffs’ attorneys focused on the length of service some caddies had with each facility to suggest that these were not independent contractors doing a piecemeal job but long-time staffers who depended on the resort or club for their livelihoods—like any employee would.
The allegations presented in these cases mirrored the factors that were outlined in the DOL’s now withdrawn “Economic Realities” guidance, which was the intent when the lawsuits were drafted. Going forward, any claim of misclassification will likely follow this pattern.
The Outcomes and Impact on Caddie Classification
In the end, the Streamsong lawsuit was settled less than two months after the case was filed. At press time, the Garden City case is still pending. Recently, the club’s attorneys asked the court to dismiss the case because the plaintiffs failed to state a valid claim upon which relief could be granted. Regrettably, the court felt the plaintiffs had alleged enough to allow the misclassification and FLSA claims to go forward.
With the “Economic Realities” guidance removed, private clubs no longer have to fear the Department of Labor pursuing misclassification and FLSA claims. Unfortunately, that does not mean club leaders can simply disregard the factors raised in the withdrawn guidance. The bigger concern now is that a plaintiff’s attorney may try to revisit these factors in a private lawsuit against a club.
The facts alleged in these two cases should cause all private club leaders to take a long, hard look at how they classify their caddies (or fitness instructors, massage therapists, tennis instructors or golf pros), and re-evaluate those workers’ classifications to avoid possible liability. The article, “Are you Properly Classifying your Caddie?” on page 21 by Tom Lenz, Esq., provides sound advice on the best practices to follow when dealing with independent contractors. It should remind all who hire such workers that while we may call them independent contractors, the law might not.