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A Legal Smackdown

Wrestlers, WWE square off over independent contractor status

By DOUGLAS S. MALAN

Like a flying elbow delivered from the top rope, a federal lawsuit is taking a vicious swipe at World Wrestling Entertainment, claiming that the Stamford company has long misclassified its performers as independent contractors and denied them benefits.

Meanwhile, the WWE plans to counter the suit filed by three former wrestlers with a motion to dismiss to be filed later this month in federal court in New Haven.

Say what you will about the faux violence and soap opera-like plot lines of professional wrestling, it is a highly lucrative business, with the WWE reportedly raking in revenues of nearly $500 million last year. With so much at stake, it's no wonder that the case involves a couple of Connecticut's heavyweight law firms – Day Pitney of Hartford and Silver, Golub & Teitell of Stamford.

Connecticut-based counsel for Day Pitney — including Felix J. Springer, Stanley A. Twardy Jr. and Douglas W. Bartinik — referred questions to the WWE's longtime counsel, Jerry McDevitt of K&L Gates in Pittsburgh.

While McDevitt said this is the first lawsuit against the WWE alleging worker misclassification, he acknowledged that the private contractor/employee question is being raised more frequently in courtrooms throughout the country. "My sense is that it's been a kind of en vogue lawsuit for the class-action bar," McDevitt said.

He declined to discuss details of the case prior to his filing at the end of the month, but he noted that classifying and paying wrestlers as independent contractors is "the way it's always been." All wrestlers, including those in the current lawsuit, have signed contracts acknowledging their status as independent contractors, McDevitt noted.

The three former WWE wrestlers named in the lawsuit are Scott "Raven" Levy, Christopher "Kanyon" Kluscartis and "Above Average" Michael Sanders, all of whom were released from WWE contracts after a few years on the circuit between 2000 and 2004. Their attorney is seeking class-action status, with the class consisting of anyone who was under WWE contract at any time between July 16, 2002, and July 16, 2008, which is when the lawsuit was initially filed in Stamford/Norwalk Superior Court.

The WWE recruits and trains wrestlers and also assigns them to events all over the country and around the globe. The company's control over the wrestlers is so complete that classifying them as independent contractors is a "sham," plaintiffs' attorney David Golub argued in the lawsuit.

Golub alleges that, because the wrestlers should be categorized as employees, the WWE breached its contract by not withholding federal taxes from paychecks. There's also a matter of Social Security and Medicare taxes not being paid. The federal tax questions are the reason why the case was moved to federal court.

Golub also claims unjust enrichment because the WWE didn't provide wrestlers with the benefits that come with being classified as an employee. These include such benefits as health care, paid sick time and vacation.

In seeking class-action status, Golub is asking for compensatory damages for benefits denied the wrestlers. If victorious, he said, the lawsuit could change the way the company does business.

"An employer can't avoid its obligation to employees by calling the employee something else," Golub said. "No matter what you call people in the contract, these guys were employees."

Employer Control

Generally speaking, wrestlers negotiate separate contracts with each professional wrestling association, of which the WWE is by far the largest.

The entry-level guaranteed contract in the WWE is worth about $25,000 annually, according to Richard Gray, publisher of Wrestling News World. There are bonuses for television appearances, pay-per-view events and promotional merchandise sales. Some high-profile wrestlers have their travel expenses paid for, but most wrestlers must pay for their own transportation and hotel costs, Gray said.

"Salaries in WWE range from…$25,000 a year to several hundreds of thousands if not millions of dollars per year," Gray wrote in May. "The more popular that a superstar is, the more money that he or she makes."

The legal question of employee versus independent contractor comes down to the amount of control an employer has over the worker, employment lawyers say.

The IRS provides guidance to employers regarding classification of workers, including how to determine how much control is in the hands of employers from behavioral and financial standpoints.

Golub's lawsuit focuses on the WWE's control over everything from the wrestlers' physical training regimen to their costumes and hairstyles, from where they perform to what storylines they follow. The latter includes mandating the "specific dialogue of the requisite pre- and post-match boasting and badmouthing of the wrestlers' opponent(s)," Golub states.

Further, Golub alleges, the wrestlers' contract "explicitly forbids plaintiffs and other wrestlers from having a separate or distinct occupation or business."

And at all times, WWE "unilaterally determines how the wrestlers are compensated," Golub states.

Profit-Driven Issue

The issue of workers' classification was a hot topic in the late 1990s when Microsoft was found to have misclassified some workers as independent contractors and temporary employees and denied them the same benefits as regular employees.

The motivation for employers to classify workers as independent contractors is to cut employee benefit costs and reduce the amount of liability insurance an employer needs to carry.

The legal wrangling over the issue "has been prevalent even before the Microsoft case," said Pullman & Comley shareholder Joshua A. Hawks-Ladds, longtime author of the Connecticut Bar Association's treatise on labor and employment law. "It's a very busy area of the law. It's constantly being challenged."

Hawks-Ladds said some employers believe a signed contract is "iron-clad" proof that they're worker classification system is righteous. But when it comes to litigation, a signed contract is "just one factor of many that a court considers," he said. "A contract sometimes is not worth the paper it's printed on based on the facts of the story."

Hawks-Ladds said other important elements include determining where services are rendered and whose equipment is used to render those services.

FedEx Suit

Employee-side attorney Richard Hayber of Hartford is involved in multiple cases where the question of independent contractors' status has been raised. Thirty-five class action lawsuits in various states have been filed by workers labeled as contractors by FedEx Ground. Hayber served as local counsel in a nationwide network of lawyers by filing suit in Connecticut; the case is now on the Multidistrict Litigation docket in Indianapolis.

The allegations are that FedEx Ground drivers, who must purchase their own trucks, do not enjoy the freedoms of an independent contractor nor do they receive the benefits afforded to FedEx employees.

The lawsuits seek "a broad spectrum of damages," Hayber said, including compensation for trucks and their maintenance as well as overtime pay, which independent contractors do not receive.

Hayber also has filed a federal lawsuit in Connecticut challenging a similar contract from Velocity Express Leasing, a delivery company based in Westport, on behalf of its drivers.

Hayber attributed the increase in independent contractor lawsuits to the widespread desire to "maximize shareholder profit of these publicly traded companies." The more corporate America becomes intensely profit-driven, he said, "the more they cut costs and find legal loopholes to not treat people as what they are — employees."¢

Click here for a related story about WWE legal matters.