A California federal judge dismissed a putative employment collective action last week, brought by individuals who wrote reviews on Yelp, a popular online business rating website predicated on user-reviews, holding that an individual who acts for personal pleasure without a promise of pay does not have a claim for wages under federal labor law. Jeung, et al., v. Yelp, Inc., Case No. 15-cv-02228-RS, U.S.Dist. (N.D. Cal. 2015).

The Facts

The plaintiffs, individuals who had written Yelp reviews, filed the collective action in August 2014 under the Fair Labor Standards Act, 29 U.S.C. §§201 et seq., (“FLSA”), contending that Yelp had a legal duty to treat its unpaid review writers as employees and thus the writers were illegally denied pay and terminated without warning. The Complaint alleged that each reviewer was “hired” by Yelp as a writer and subsequently “fired” with “no warning [and] flimsy explanation.” In furtherance of their claims, plaintiffs alleged that in lieu of pay, Yelp incentivized individuals to write reviews by giving “awards” such as deeming prolific writers “elite,” or giving an arbitrary ruling title such as “Duke” or “Duchess.” Such titles appear on a reviewer’s profile and act as a status symbol among the Yelp community.

Yelp filed a motion to dismiss the plaintiffs’ claims for failure to state a claim upon which relief could be granted.

Applicable Law

The FLSA establishes minimum wage, overtime pay and recordkeeping standards affecting employees in the private sector and in federal, state, and local governments. The FLSA applies to “any individual employed by an employer” but not to independent contractors or volunteers because they are not considered “employees” under the FLSA. The U.S. Supreme Court has stated that an individual who, “without promise or expectation of compensation, but solely for his personal purpose or pleasure, worked in activities carried on by other persons either for their pleasure or profit” is a volunteer and not covered by the FLSA. Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 295 (1985). While some employers mislabel employees as volunteers (which can lead to costly litigation), courts look at the “economic reality” of the relationship between the putative employer and the individual to determine whether the individual is, in fact, an employee.

The Motion To Dismiss

In hearing Yelp’s motion to dismiss plaintiffs’ claims, the U.S. District Court for the Northern District of California cited, among other things, “common sense,” in determining that plaintiffs are in fact volunteers, and not employees of Yelp. While the pleadings were couched in terms that might suffice to plead the existence of an employer-employee relationship (i.e. “hired” and “fired”), the court focused on the reality of the situation to conclude no such relationship existed. Parsing out the nomenclature, the court determined that “hired” referred to the process by which any member of the public could sign up for a free Yelp account and begin submitting reviews, and that “fired” referred to having accounts involuntarily closed, presumably for conduct that violated Yelp’s terms of service agreement. Ultimately, the conclusory claims that plaintiffs were “hired” and “fired” by Yelp was found insufficient to state a plausible claim under the FLSA and therefore plaintiffs’ claims were dismissed.

Take Away

Classification of employment status under the FLSA is a potentially confusing concept which continues to be the subject of litigation in California. It is vital that employers classify workers correctly pursuant to state and federal law. Thankfully, the court in this case utilized common sense to determine that pure acts of volunteerism will not make individuals “employees” under the FLSA. If your company needs guidance regarding the classification of employees, independent contractors or volunteers, please feel free to reach out to a Jackson Lewis attorney.