Large Distributor of Baked Goods Settles Worker Misclassification Suit for Over $900,000.00

On March 5, 2014, the parties in a Pennsylvania class action lawsuit against Bimbo Bakeries USA filed a Stipulated Settlement granting $12,500.00 to each of 5 named Plaintiffs, $900.00 to each of 272 current distributors, and $450.00 to each of 414 former distributors, along with $375,000.00 for attorneys’ fees and $22,000.00 to the settlement administrator. The Plaintiffs argued that the company knowingly misclassified employees as “independent contractors” or “independent operators,” since Defendant was “fully aware that the extent of direction and control over the manner and means by which Plaintiffs performed their work for Defendant was inconsistent with the legal definition of “independent contractors.”

According to the Plaintiffs, the company’s reasons for misclassifying its drivers are obvious and typical. First, a condition of class members’ employment at Bimbo was that they purchase “distribution rights” and sign the company’s “Distribution Agreement,” granting control of most business decisions to the company. Plaintiffs were also required to purchase and agree to maintain their own delivery trucks, agree to have various business expenses deducted from their compensation by the company, and absorb the cost of the company’s unilateral decisions about product pricing and distribution rules. In effect, Plaintiffs alleged, the misclassification scheme allowed Bimbo Bakeries to avoid its biggest operating expenses by passing them off to employees. By misclassifying employees the company enabled itself to avoid various legal obligations of employers under the Fair Labor Standards Act (FLSA) and the Pennsylvania Wage Collection and Payment Law (PMWA). For example, independent contractors need not be provided lunch breaks or holiday pay, they need not be paid the federal minumum wage, and they need not receive time and a half for hours worked in excess of forty. (Plaintiffs argue that the company did in fact, “either regularly or from time to time,” pay less than the minumum wage, or require employees to work uncompensated overtime.) Employers are prohibited from making unauthorized deductions from employees’ wages, but Bimbo Bakeries often made such deductions “including, but not limited to, deductions for servicing Plaintiffs’ routes without Plaintiffs’ permission, deductions for Defendant’s operating expenses, deductions for products purchased but not sold or accepted for return, and penalties charged by retail outlets…” By classifying workers as “independent contractors,” Bilbo also avoided the burdens of making Federal Insurance Compensation Act (FICA) contributions on employees’ behalf, maintaining for unemployment insurance, and paying any state and federal employment taxes.

One thing that is noticeably missing from the proposed settlement agreement is any change to the company’s ability to classify its delivery drivers as independent contractors or to require that they enter into the distributions agreements that the Plaintiffs criticize in their complaint. Bimbo Bakeries USA seems poised to go on doing business the same way as before. It remains to be seen whether other, similar legal action will be taken against them in the future.

If you are an employee and you believe your rights have been breached under the FLSA or you have been misclassified, please contact The Harman Firm LLP