Rachel Lerner
Tue, 02/14/2023
According to a settlement notice filed on February 7, 2023, A Place for Rover (Rover) agreed to settle a 3-year old litigation for $18 million dollars. The lawsuit, which was initiated by Melanie Sportsman (represented by The Tidrick Law Firm LLP and Ariel Stiller-Shulman of the Stiller Law Firm), alleged that Rover misclassified her and other dog walkers as independent contractors.
Under California law, workers are considered employees unless they are free from outside control and operate independent firms in a distinct line of business, also known as the ABC test. However, referral agencies are exempt from the ABC test, and instead, are subject to an 11-factor test to determine whether workers are employees or independent contractors.
Sportsman argued that because Rover took a 20% cut of what dog walkers and pet sitters charged, that it was an active purveyor of pet services, and thus, they were employees rather than independent contractors. The Northern District of California ruled for Rover, finding that Rover acted as a middleman linking pet care workers and pet owners, rather than as a direct employer of dog walkers, and thus, properly classified the workers as independent contractors.
During oral argument on appeal to the Ninth Circuit, the panel of judges appeared to express doubt as to whether the district court’s ruling was correct, noting that, because the company screens dog walkers and pet sitters before it allows them to advertise their services, Rover may exert some control over the work. The panel also noted that the pay structure of the app also suggests some level of control, similar to the control Uber has over drivers.
After oral argument, Sportsman notified the Ninth Circuit that the parties had reached a settlement and asked the appellate court to remand the suit to the lower court for settlement approval proceedings. As part of the settlement agreement, Rover has agreed to change its fee structure and will no longer take the 20% cut from providers on its platform. That means that going forward, Rover will be expressly categorized as a referral agency and thus exempt from the ABC employment test.
Identifying employees as independent contractors is not the only way employers misclassify workers to avoid paying overtime under the Fair Labor Standards Act. A recent study by researchers at Harvard Business School and the University of Texas at Dallas concluded that between 2010-2018, employers illegally avoided paying an astonishing sum of $4 billion to 73,000 workers through the use of title inflation. For more information on the study, visit https://www.mselaborlaw.com/news/study-finds-rampant-practice-among-employers-wrongfully-claim-exemption-flsa.
MSE regularly represents employees who have been improperly classified as independent contractors or as FLSA-exempt. For more information, https://www.mselaborlaw.com/practice-areas/mi
