A California superior court entered an $8.4 million jury verdict against Baby Trend Inc. and its owner for the company’s misclassification and wrongful termination of a single, top-earning sales representative.  The verdict is a warning to employers and owners everywhere of the dangers of improper classification of employees as independent contractors.

After seventeen years with Baby Trend, plaintiff Robert Gardner complained to Company representatives that Baby Trend was withholding a portion of his commission payments.  In response, the Company ordered Gardner to attend a mandatory meeting that conflicted with his schedule.  When Gardner failed to attend the meeting, the Company terminated him.  Gardner brought suit, arguing that he was wrongfully terminated for raising concerns about what he believed were improper commission withholdings.  Baby Trend contended that Gardner’s status as an independent contractor, and not an employee, permitted it to make whatever deductions from his commission payments the Company desired.

A California jury disagreed, finding not only that Baby Trend had misclassified Gardner as an independent contractor instead of an employee, but also that the Company terminated Gardner for complaining about the improper withholdings in violation of public policy.  The jury awarded Gardner $6.9 million in damages against Baby Trend and its owner jointly and another $1.5 million against Baby Trend individually.  Because a successful verdict includes attorney’s fees as part of the award under California law, the total judgment against Baby Trend and its owner may exceed $10 million.

Employers risk violating state and federal law by misclassifying employees.  Misclassification mistakes frequently result in class and/or collective action litigation that can stretch nationwide because the misclassification typically affects every employee in the misclassified position throughout the company.  Whenever questions or concerns about wage and hour issues arise, employers are well-served to consult with counsel prior to taking action of any kind, particularly termination.  If you have questions about wage and hour laws or would like to discuss wage and hour audits, please contact your Kilpatrick Stockton attorney.