Wrestlers file lawsuit against WWE over independant contractor/employee BS

[Bix]

From WWE's latest 10-Q filing w/ the SEC...

 

Levy et al.

 

On July 24, 2008, we were served with a summons from three of our former talent purporting to be on behalf of themselves and a class of similarly situated persons. The lawsuit alleges breach of contract and unjust enrichment arising from our treating them as independent contractors rather than employees, which the plaintiffs allege is an erroneous classification. We have not formally responded to the suit but intend to deny any liability for claims asserted against us and to defend vigorously against the suit

Levy is presumably Raven. This could end up being a very interesting story.

[Guest Iron Chad]

Very interesting. I wonder where the suit was filed, because it's not showing up in a federal district court search for Connecticut or otherwise. I guess he filed it in wherever he lives, which I think is Georgia, or maybe in Connecticut state court. IIRC, Georgia has a really liberal definition of employee compared to other states (I think that's why WCW kept getting nailed in court there in the wrestler suits, or Time Warner just had attorneys with deep settlement pockets, I was amazed at the money people like Sonny Onoo and Hardwork Walker got), so I bet WWE tries to remove it to federal court pronto.

 

I did find a hilarous pro se suit filed against WWE by against a couple of disabled Native Americans in Florida against WWE, Vicki Guerrero and Chairman "Vincent McMann" for violations of the Americans with Disability Act. Their cause of action? Mocking disabled people for having Vicki roll around in a wheelchair and pretend to be disabled. They also listed "using a wheelchair for profit" as one of their causes of action, which to my knowledge is not against any civil or criminal law. Wouldn't that put any medical supply company that works for profit selling wheelchairs in trouble? The suit was dismissed about a month after it was filed on the court's own volition (sua sponte).

 

Anyway, I'd love to know where the suit is, so I could peek at the complaint and find out who the other three plaintiffs are. I'm assuming they'd be Georgia residents, likely former WCW and WWE guys.

 

-Chad

(edited to add resolution of pro se suit)

[kjh]

I'd imagine the other plaintiffs are wrestlers like Raven who have a snowball's chance in hell of getting rehired by WWE, so have got nothing to lose by filing the suit. I wish them luck, they'll need it facing the corporate giant and their Rottweiler lawyers.

[Bob Morris]

What will really be interesting to see how the suit itself develops and whatever rulings are made prior to whatever conclusion comes about.

 

And while some might think going against the WWE's lawyers is not a good proposition, that legal team has been known to stumble over its own feet, or WWE's own employees end up doing it as well, thus losing ground in a suit. Brock Lesnar, anyone?

 

EDIT: Also, Bryan Alvarez confirmed in the F4W update today that Levy is Scott Levy (Raven). He didn't mention the others involved.

[sek69]

Hasn't it been stated before that WWE contracts are laughably illegal and the only reason they get away with them is that wrestlers are basically afraid to upset the status quo and risk getting blackballed?

[Bix]

Yes. Shane Douglas has said that his lawyer told him that it would be malpractice to tell him to sign his contract.

[floyd]

Yes. Shane Douglas has said that his lawyer told him that it would be malpractice to tell him to sign his contract.

Wow that's crazy.

 

I don't know anything about the specifics of the contracts or independent contract laws, but hopefully this one won't be swept under the rug easily and actually may make some positive changes.

[Guest KyleWilder]

What about TNA and ROH contracts? Could people raise questions with them as well?

[Bix]

Eric Bischoff posted this on his blog:

 

BLOG 8/11/2008

"Losen Up"

How much control is too much?

 

That is a question that executives within, and shareholders of WWE, my soon be thinking about as they try to get to sleep at night.

 

Before I go too far into my perspective on the recent revelation that a number of former WWE contracted performers have filed suit challenging their previous status as independent contractors, allow me to share my thoughts regarding litigation in general:

 

I despise it.

 

As I have stated in a previous blog (“Never Say Never”), Shakespeare may have been on to something when he suggested in Henry VI that we “kill all the lawyers”. Don’t get me wrong, I don’t think all lawyers are scumbags, and I don’t believe that all lawsuits are frivolous and without merit.

 

But unfortunately all too many lawsuits and the tactics of the lawyers/’firms and clients involved, create collateral damage to righteous claims. This damage can range from negative public opinion (and tainted jury pools), to low-rent law firms that troll for potential class action litigants on late night local cable television like hookers on a street corner, to a clogged up judicial system that forces legitimate claims to be dragged into protracted legal battles and are determined not by case law or a jury, but by a plaintiffs or a defendants financial ability to run a legal marathon.

 

Case in point: The recent lawsuit challenging WWE's independent contractor vs employee designation.

 

This is a complex issue and it is going to be a very interesting situation to watch un-fold as it may have profound impact on WWE and TNA.

 

Back in 1998, when the full impact of the Turner/Time Warner merger began to manifest itself as a power grabbing corporate orgy of gamesmanship, one of the issues raised by some executives that tried previously (and unsuccessfully thanks to Ted’s vision and the performance of WCW at the time) to divest the Turner Broadcasting portfolio of the WCW division, was the concern over the independent contractor/employee status of WCW’s talent. The argument as I remember hearing it (I wasn’t invited to the meetings) was that the exposure to Turner/Time Warner due to a potential adverse IRS determination regarding this issue could have resulted in fines, increased cost of business going forward, and a hit to TWX stock as a result.

 

Fast-forward 10 years later. WWE is now a publicly traded company. It is responsible to its shareholders, and therefore must react to market conditions and influences much differently than when it was a privately held company. While the Chairman can stack the deck with a Board of Directors and executive management team that looks more like a friends and family reunion than anything else, should the IRS determine that WWE’s contracted talent are employees and not independent contractors, there is the potential for significant fines, expenses and cost of doing business on a go-forward basis that could have a serious negative impact on WWE stock.

 

How bad you ask? I am not an attorney or an employment tax expert, but I did get my ass kicked once by the IRS back in the late 80’s/early 90’s and I do know that they lack anything that resembles a sense of humor.

 

When the IRS determines that one didn’t pay what one should have paid in taxes, they tend to grab a calculator that has it’s own unique decimal system, a calendar, and a team of lawyers looking for press and attention.

 

Example?

 

If, as a result of this recent lawsuit, the IRS determines that WWE’s contract talent are employees and NOT independent contractors, that means that in addition to many other expenses relating to the cost of accounting changes, WWE will be required to contribute approximately 7.5% of the salaries paid to its newly minted talent/employees to OASDI (Old Age and Survivors Disability Insurance).

 

My guess is that this increased cost of doing business going forward could be easily absorbed.

 

But what if, the IRS grabs their calculators, calendars, and teams of lawyers looking for press and attention and decides to go back 3, 5, 10 years or whatever the statute of limitations is and calculates monies due plus penalties and interest on the fees paid to former employees?

 

Scary.

 

I attempt to write my blogs in such a way that the end hangs on the beginning so I will close with these thoughts:

 

On one hand, every talent that performed with WWE knew exactly what they were getting into when they signed on. Its not as if there was some master plan that was designed to take advantage of them. My guess is that they are in a desperate financial situation and found some equally desperate lawyer to take a run at this issue in the hopes of collecting a payday.

 

But on the other, Vince McMahon’s mandate for absolute control of everything from, finishes, the words that he puts in the mouths of his announcers and performers, to dress codes for talent flying to and from an event may come back to haunt him.

 

I predict that any number of previously contracted talent and scum swilling lawyers will attempt to jump on the bandwagon in the hopes of augmenting their incomes in some way either real or imagined.

 

And if there is enough free publicity involved, look for Jesse Ventura to lead the charge!

 

 

For the sake of discussion, and as a frame of reference, here is an example of a list of guidelines that the IRS uses to attempt to determine employee/independent contractor status:

 

 

1. Instructions

 

Employees comply with instructions about when, where, and how work is to be performed.

Contractors set their own hours and do the job in their own way.

 

2. Training

 

Employees are trained to perform services in a particular way. They are required to take correspondence courses and attend meetings. Other methods also indicate that the employer wants the services performed in a particular way.

Contractors use their own methods and receive no training from the purchaser of their services

.

3. Integration

 

Services of an employee are merged into the business. Success and continuation of the business depends upon these services. The employer coordinates work with that of others.

The success and continuation of the business aren’t dependent on services provided by a contractor.

4. Services Rendered Personally

 

Services must be rendered personally. An employee does not engage other people to do the work.

Contractors are able to assign their own workers to do the job.

5. Hiring, Supervising, Paying

 

An employee hires, supervises and pays workers at the direction of the employer (i.e.: acts as foreman or representative of the employer).

Contractors hire, supervise and pay the other workers as the result of a contract. A contractor agrees to provide materials and labor and is responsible for the results.

 

6. Continuing Relationship

 

An employee continues to work for the same person year after year.

Contractors are hired to do one job. There is no continuous relationship

.

7. Set Hours of Work

 

The employer sets an employee’s hours and days.

Contractors are masters of their own time.

 

8. Full Time Required

 

An employee normally works full time for an employer.

Contractors are free to work when and for whom they choose.

 

9. Doing Work on Employer’s Premises

 

Employees work on the premises of an employer; or on a route, or at a site, designated by the employer.

Contractors work off an employer’s premises and use their own offices, desks, and telephones.

10. Order or Sequence Set

 

An employee performs services in the order or sequence set by the employer. Salespersons report to the office at specified times, follow-up on leads, and perform certain tasks at certain times.

 

 

Services are performed at a contractor’s own pace. Salespersons work their own schedules and usually have their own offices.

11. Oral or Written Reports

 

Employees are required to submit regular oral or written reports to the employer.

Contractors submit no reports.

 

12. Payment by Hour, Week, Month

 

Employees are paid by the employer in regular amounts at stated intervals.

A contractor is paid by the job on a straight commission.

 

13. Payment of Business and/or Travel Expenses

 

The employer pays employees’ business and/or travel expenses.

Contractors take care of their own expenses and are accountable only to themselves for expenses.

 

14. Furnishing of Tools, Materials

 

An employer furnishes tools, materials, etc.

Contractors furnish their own tools, etc.

 

15. Significant Investment

 

An employee has no significant investment in the facilities used to perform services.

A contractor has a real, essential and significant investment.

 

16. Realization of Profit or Loss

 

An employee cannot realize a profit or loss by making good or bad decisions.

Contractors can realize a profit or suffer a loss as a result of their services or decisions.

 

17. Working for More than One Firm at a Time

 

An employee usually works for one employer at a time.

An independent contractor works for a number of persons or firms at the same time.

 

18. Making Services Available to the General Public

 

An employee does not make services available to the general public.

Contractors have their own offices and assistants. The hold businesses licenses are listed in business directories, maintain business telephones, and otherwise generally make their services available to the public.

19. Right to Fire

 

 

An employee can be discharged at any time.

Contractors cannot be fired so long as product results meet contract specifications.

 

20. Right to Quit

Employees can quit their jobs at any time without incurring liability.

Contractors agree to complete a specific job and are responsible for satisfactory completion; or they are legally obligated to make good for any failure.

 

 

Above Summary is reprinted from IRS Tax Facts, January 1992

 

As you can see, its not a cut and dry issue on all points, and it is possible that this list has been amended since published. Either way, there are more than enough fine lines to be interpreted and argued that I would be surprised if this does not become a major issue.

[Loss]

I don't know enough about the accuracy of what Eric is saying to agree or disagree with him, but I do think it's interesting that someone who once used litigation for no reason other than to attempt to bankrupt Ric Flair is upset about frivolous lawsuits.

[Boondocks Kernoodle]

As I have stated in a previous blog (“Never Say Never”), Shakespeare may have been on to something when he suggested in Henry VI that we “kill all the lawyers”. Don’t get me wrong, I don’t think all lawyers are scumbags, and I don’t believe that all lawsuits are frivolous and without merit.

Like suing an employee (sorry, contracted talent) for skipping an inconsequential TV taping to watch his son compete in an important wrestling tournament while letting other guys act like complete dickholes all the time simply because they came from the WWF. Those kinds of lawsuits are OK.

[Boondocks Kernoodle]

DAMMIT LOSS

[goodhelmet]

If there is one thing we should have learned by now, the wrestling world is littered with hypocrites.

[Bix]

Don't forget that Flair had originally been told he could miss the show.

[Bob Morris]

OK, let's take a look at each of these points and how it would apply to WWE wrestlers given how their relationship typically works with the WWE.

 

1. Instructions

Employees comply with instructions about when, where, and how work is to be performed.

Contractors set their own hours and do the job in their own way.

 

WWE would have a difficult time saying the wrestlers aren't employees.

 

2. Training

Employees are trained to perform services in a particular way. They are required to take correspondence courses and attend meetings. Other methods also indicate that the employer wants the services performed in a particular way.

Contractors use their own methods and receive no training from the purchaser of their services.

 

Might be considered debatable, but the sentence "other methods also indicate that the employer wants the services performed in a particular way" would lean more toward the wrestlers being employees.

 

3. Integration

Services of an employee are merged into the business. Success and continuation of the business depends upon these services. The employer coordinates work with that of others.

The success and continuation of the business aren’t dependent on services provided by a contractor.

 

Wrestlers in WWE would definitely be considered employees here.

 

4. Services Rendered Personally

Services must be rendered personally. An employee does not engage other people to do the work.

Contractors are able to assign their own workers to do the job.

 

Again, employees.

 

5. Hiring, Supervising, Paying

An employee hires, supervises and pays workers at the direction of the employer (i.e.: acts as foreman or representative of the employer).

Contractors hire, supervise and pay the other workers as the result of a contract. A contractor agrees to provide materials and labor and is responsible for the results.

 

Once again, employees.

 

6. Continuing Relationship

An employee continues to work for the same person year after year.

Contractors are hired to do one job. There is no continuous relationship.

 

It would be a stretch to not call the wrestlers "employees" given that they are required to sign long-term contracts. Before those came into play, it was easier to argue the "contractor" definition applies.

 

7. Set Hours of Work

The employer sets an employee’s hours and days.

Contractors are masters of their own time.

 

Absolutely "employee" applies here.

 

8. Full Time Required

An employee normally works full time for an employer.

Contractors are free to work when and for whom they choose.

 

Again, employees. And no, working for indies doesn't count because the wrestler has to clear it with WWE first.

 

9. Doing Work on Employer’s Premises

Employees work on the premises of an employer; or on a route, or at a site, designated by the employer.

Contractors work off an employer’s premises and use their own offices, desks, and telephones.

 

"On a route, at a site designated by the employer." That's what WWE does with its wrestlers.

 

10. Order or Sequence Set

An employee performs services in the order or sequence set by the employer. Salespersons report to the office at specified times, follow-up on leads, and perform certain tasks at certain times.

Services are performed at a contractor’s own pace. Salespersons work their own schedules and usually have their own offices.

 

This might be argued as "doesn't apply" to pro wrestling as it currently stands. However, the wrestlers don't set theri own schedules.

 

11. Oral or Written Reports

Employees are required to submit regular oral or written reports to the employer.

Contractors submit no reports.

 

Doesn't apply to WWE wrestlers.

 

12. Payment by Hour, Week, Month

Employees are paid by the employer in regular amounts at stated intervals.

A contractor is paid by the job on a straight commission.

 

The way WWE contracts are set up in terms of pay, it's closer to "contractor" form.

 

13. Payment of Business and/or Travel Expenses

The employer pays employees’ business and/or travel expenses.

Contractors take care of their own expenses and are accountable only to themselves for expenses.

 

Again, the way things are set up, it's a "contractor" relationship.

 

14. Furnishing of Tools, Materials

An employer furnishes tools, materials, etc.

Contractors furnish their own tools, etc.

 

This varies... some WWE wrestlers get their own wrestling attire and outfits, others are designed by WWE for the wrestler. And I believe some wrestlers who get their own attire do it by their own choice, not via WWE's direction.

 

15. Significant Investment

An employee has no significant investment in the facilities used to perform services.

A contractor has a real, essential and significant investment.

 

The "employee" definition fits better.

 

16. Realization of Profit or Loss

An employee cannot realize a profit or loss by making good or bad decisions.

Contractors can realize a profit or suffer a loss as a result of their services or decisions.

 

One could argue that "contractor" fits better given the way WWE contracts are currently set up.

 

17. Working for More than One Firm at a Time

An employee usually works for one employer at a time.

An independent contractor works for a number of persons or firms at the same time.

 

Absolutely does WWE consider them "employees" here (and again, working for somebody else requires permission).

 

18. Making Services Available to the General Public

An employee does not make services available to the general public.

Contractors have their own offices and assistants. The hold businesses licenses are listed in business directories, maintain business telephones, and otherwise generally make their services available to the public.

 

"Employee" is the only way to define a WWE wrestler here.

 

19. Right to Fire

An employee can be discharged at any time.

Contractors cannot be fired so long as product results meet contract specifications.

 

Again, employees.

 

20. Right to Quit

Employees can quit their jobs at any time without incurring liability.

Contractors agree to complete a specific job and are responsible for satisfactory completion; or they are legally obligated to make good for any failure.

 

Only this one is more like a "contractor." Usually when a wrestler quits outright, WWE tries to hold him up with a lengthy no-compete clause, thus implying the wrestler owes them something.

 

Given so many of these points cause WWE wrestlers to fall under "employees" more than "contractors," it's easy to see why it's been previously argued that the current relationship WWE has with its wrestlers would never hold up in court, and the only reason it hasn't changed is because nobody tried to challenge it... until now, that is.

[Bix]

Wrestlers are generally responsible for their gear, to the point that Honkey Tonk Man was basically told "we're making your character an Elvis impersonator with an $8,000 jumpsuit, pay up" (there was zero Elvis influence in Calgary & Vancouver aside from the haircut, with Farris saying that he modeled the character after "Schneider" from "One Day At A Time").

[kjh]

2. Training

Employees are trained to perform services in a particular way. They are required to take correspondence courses and attend meetings. Other methods also indicate that the employer wants the services performed in a particular way.

Contractors use their own methods and receive no training from the purchaser of their services.

 

Might be considered debatable, but the sentence "other methods also indicate that the employer wants the services performed in a particular way" would lean more toward the wrestlers being employees.

Given that most of the present WWE roster spent time in their developmental territories being trained or receive on the job training from road agents like Fit Finlay, this point probably isn't that debatable.

 

12. Payment by Hour, Week, Month

Employees are paid by the employer in regular amounts at stated intervals.

A contractor is paid by the job on a straight commission.

 

The way WWE contracts are set up in terms of pay, it's closer to "contractor" form.

I wouldn't say that, given that when wrestlers are injured they still receive pay cheques every week for a specific amount. I'd say it's closer to employee than "contractor", though WWE's bonus system is a bit of a grey area.

 

13. Payment of Business and/or Travel Expenses

The employer pays employees’ business and/or travel expenses.

Contractors take care of their own expenses and are accountable only to themselves for expenses.

 

Again, the way things are set up, it's a "contractor" relationship.

I'd say it's more of a grey area, than a clear cut "contractor" relationship, as WWE does pay for some of their talent's business expenses. In particular, WWE pays for all of their talent's air travel.

[sek69]

I wonder how much money that Levy, et al are devoting to this since it seems WWE is playing its usual strategy of trying to run the clock out on a case they know they'll get demolished over in court.

[Guest Iron Chad]

I wonder how much money that Levy, et al are devoting to this since it seems WWE is playing its usual strategy of trying to run the clock out on a case they know they'll get demolished over in court.

They may have been able to find an attorney to take this case on a contingency since the award potential is huge and often in cases like this, the attorneys can get their fees paid by the defendant if they are successful (especially if this is a federal suit, though I haven't been able to find it yet). Since it looks like a class action, they may have had to pony up a few thousand for fees since class actions are expensive to maintain because you're required to pay to notify all members of the class. That may be jumping the gun a bit since a class action has to be certified by the court before it can proceed as such.

 

Since WWE just got served on 7/24, we're very early in the litigation process.

 

-Chad

[Jingus]

IIRC, aren't both of Raven's parents wealthy lawyers? Could certainly make a difference here.

[kjh]

Here are links to the lawsuit by Levy et al. and WWE's notice of removing the action to federal court:

 

http://www.ctemploymentlawblog.com/uploads/file/wwe.pdf

 

http://www.ctemploymentlawblog.com/uploads.../wweremoval.pdf

 

The other plaintiffs are Chris Kanyon and Mike Sanders.

[Guest Iron Chad]

WWE is SOL. . . and you know what that means

 

I'm glad Above Average is still alive, er, around. It would be cool if he and Raven could be the ones to bring down the horrible WWE "independent contract", though I've got this feeling McDevitt will find a way to win this one too. Too bad Raven and Co. couldn't bring this lawsuit in England.

 

-Chad

[S.L.L.]

Wouldn't it be something if this ends up being how Raven finally backs up all the talk about him being one of the sharpest minds in wrestling?

[Bob Morris]

Considering the last major lawsuit involved Brock Lesnar, that's a definite loss for McDevitt, even if he apparently get him out of TNA. But when you considered what Lesnar really wanted was to participate in MMA, it's a stretch to say McDevitt won anything in settling that out of court.

 

Nicole Bass was definiitely a win, but Bass picked all the wrong people to testify as witness in her favor.

 

I suppose you could call Martha Hart's lawsuit a win, but WWE can thank certain Hart family members who were desperate for work for their husbands or themselves. Only helped Diana Hart, though, but once Davey Boy was released and then died, there went any WWE benefit for Diana.

 

But here, you have three guys who likely have zero interest in working for WWE again, and guys who WWE would never likely consider bringing back, so the only way I can see this is a win for McDevitt is if he gives them a big enough settlement to get them to shut up or Raven, Kanyon and Sanders can't find reliable witnesses to represent their side.

 

Just remember, McDevitt jobbed to both Jesse Ventura and Chad Austin, so it's no given he'll triumph here.

[S.L.L.]

Realistically, McDevitt isn't a particularly gifted lawyer (to put it mildly), he just happens to have the good fortune of working in a profession where a lot of the people he's defending against are untrustworthy, unlikable, or just plain crazy enough that courts won't side with them. Unless it's a case where he can drag things out a while before settling out of court, his success seems to rely primarily on whether or not the opposition fucks up. He seems to bring about as much to the table as a bag of flour.

 

The guy to keep your eye on here is Chris Kanyon. If anyone has the chance to fuck up what should be a slam dunk win and hand it to McDevitt, it's Kanyon and his comically transparent "Look at me, I'm gay!" routine.