Schmidt Baking Distributors Misclassification Maryland Class Action

When are workers independent contractors and when do they qualify as employees? The line is not hard and fast, but the complaint for this class action alleges that distributors for Schmidt Baking Company, Inc. and Schmidt Baking Distribution, LLC misclassify the workers who distribute Schmidt’s products to the stores where they are sold, in violation of the Fair Labor Standards Act (FLSA). Also named as defendants in this case are Exeter Financial Services, LLC, Distribution Consultants, Inc., and Distribution Services of America, Inc. (DSA).

The class for this action is all those who are performing or have performed work as distributors for Schmidt Baking Company or Schmidt Baking Distribution in Maryland under a distribution agreement, between February 24, 2018 and the present.

According to the complaint, a number of work conditions indicate that the distributors are employees rather than independent contractors. The following is a partial list of these allegations:

• They all have virtually the same relationship with Schmidt, and Schmidt controls the manner and means of their work.
• The complaint says they “must strictly follow Schmidt’s instructions and adhere to the pricing, policies, and procedures negotiated between Schmidt and its retailer-customers.”
• They must process all transactions through handheld devices provided by Schmidt.
• The distributor stocks the shelves, removes old product, and constructs promotional displays for special sales or promotions.
• The distributors do not have discretion to do things like negotiating shelf space or retail prices for Schmidt’s items with the retailers.
• Schmidt requires deliveries to be made in a certain order and maintains the right to discipline distributors.
• Schmidt “us[es] Distributors’ pay to compensate specified expenses[.]”
• Schmidt has the right to change “standards, guidelines, and operating procedures” for the distributors work with the retailers, and the distributors must accept them.
• The work does not require specialized skills.
• The complaint alleges that Schmidt makes arrangements with the retailers that does not allow distributors to control the profitability of their work.

Distributors must supply a small truck for their work, the complaint alleges, but Schmidt supplies everything else, including arranging insurance and financing for the distributors, which it subtracts from their wages.

Among other things, the financing arrangements include the “purchase” of the distributors’ routes, arranged by Schmidt with Exeter and DSA, although the distributors never meet with Exeter or DSA.

All these signs, the complaint alleges, indicate that the distributors are employees, rather than independent contractors. Misclassifying them as independent contractors, the complaint alleges, deprives them of benefits and obliges them to bear costs that it claims Schmidt ought to bear, such as for equipment, insurance, product loss, and product returns.

The counts include racketeer influenced and corrupt organizations (RICO) violations and violations of Maryland Wage Laws, among other things.

Article Type: Lawsuit
Topic: Employment
Tags: Employment Violations, Misclassifying Employees as Independent Contractors