San Francisco (March 4, 2020) — Juul Labs, Inc. was sued in federal court on Wednesday for unlawfully misclassifying over 400 campaign staffers working on its unsuccessful ballot measure to allow the sale of electronic cigarettes in San Francisco as independent contractors rather than employees.
The three named Plaintiffs also notified the California Labor Workforce Development Agency on Wednesday that they intend to bring additional claims for penalties on behalf of the state of California under the Private Attorney General Act, including penalties for willfully misclassifying these workers under Labor Code § 226.8. If the workers are successful, Juul and the other defendants could be required to pay penalties for willfully misclassifying these workers of up to $25,000 per misclassified worker—which could total over $10,000,000 for the 400 plus workers in the case—as well as additional damages and penalties for violating other provisions of San Francisco, California, and federal employment law.
“Misclassification is illegal, and it hurts our working class,” said Aaron Kaufmann, an attorney with Leonard Carder representing the campaign workers. “Misclassification also harms our state and federal governments, as well as law-abiding employers that have to compete against companies that reduce their costs by breaking the law.”
As alleged in the Complaint, because the Yes on C campaign workers were misclassified as independent contractors by Juul and other defendants, they were denied many protections guaranteed by San Francisco, California, and federal law. For example, Plaintiffs assert that many campaign workers for Juul and the other defendants had to travel between campaign offices during the day; however, these workers were not paid for this work time. The Complaint alleges that this practice violated these workers’ right to overtime, their right to be paid a minimum wage for all time worked, their right to take a 30-minute unpaid lunch break, and their right to be reimbursed for expenses incurred on the job. Additionally, none of the campaign workers received pay stubs from Long Ying or the Coalition showing the number of hours worked, as required by California law.
The Complaint further states that the Defendants repeatedly told campaign workers that they should expect to work until November 5, 2019—San Francisco’s election day. But then Juul laid off most campaign workers with no notice on September 30, 2019, just hours after Juul announced publicly that it would suspend its support for the Coalition for Reasonable Vaping. (The Complaint notes that a few campaign workers, including Plaintiff Luz Perez Bautista, worked an additional day on October 1, 2019 to help pack up the campaign before being terminated.) The Complaint alleges that Defendants failed to pay the campaign workers their final wages immediately upon separation, as required by California law. Instead, campaign workers had to wait until the end of the week to pick up their final paycheck.
“Misclassified employees often don’t realize that they have the right to access the same benefits as any other employee. In addition to wage and hour protections, employees are entitled to paid sick leave, unemployment insurance, paid disability leave, paid family leave, and workers’ compensation, among other protections,” said George Warner, an attorney at Legal Aid at Work representing the workers. “Also, when employers misclassify their employees, employers don’t withhold taxes on their behalf. Misclassified employees often pay unnecessary self-employment taxes when their employers don’t withhold payroll taxes, which amounts to a hidden pay cut. Indeed, it was precisely because California recognized the perils of misclassification and the importance of worker protections that it passed AB5 last year.”
Many employers also misclassify their employees to avoid paying taxes that help fund Social Security, Medicare, workers compensation, and unemployment insurance, and to avoid paying workers’ compensation insurance that protects workers injured on the job. By one estimate, the state of California loses out on $7 billion in tax revenue annually because of misclassification. Another estimate indicated that California loses out on around $3,000 in tax revenue for each employee that is unlawfully misclassified.
The named Plaintiffs, Maria Perez Bautista, Luz Perez Bautista, and Salvadora Correa, are seeking to represent a class of around 450 misclassified workers that were employed by Long Ying International, Inc.—a San Francisco-based political strategy firm owned and run by David Ho—and the Coalition for Reasonable Vaping Regulation—a non-profit Juul created, funded, and used to run its campaign in support of Proposition C. The Coalition for Reasonable Vaping Regulation, Long Ying International, Inc., and David Ho are also named in the Complaint as defendants.
“Juul may try to deny that it was involved in the Yes on C campaign,” said George Warner of Legal Aid at Work. “But the facts, as alleged in the Complaint, are clear: Juul lent the Coalition $15.5 million to run the Yes on C campaign. Juul’s Senior Director of Public Affairs is the CEO of the Coalition. And when Juul decided to stop supporting Proposition C, the Coalition packed up shop and closed its doors. As a legal matter, that makes Juul and the Coalition one and the same.”
The case was filed in the U.S. District Court for the Northern District of California. A copy of the Complaint can be found here.
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About Legal Aid at Work:
Legal Aid at Work is a nonprofit legal services organization that has been assisting low-income, working families for more than 100 years. Its programs conduct outreach, provide direct legal services to thousands of people each year, engage in litigation, and advocate for policies that strengthen the rights of low-income people. More information about Legal Aid at Work can be found at www.legalaidatwork.org.
About Leonard Carder LLP
As one of the oldest and most renowned law firms representing labor unions and employees, Leonard Carder’s focus is to provide top-flight legal representation to the labor movement and to advocate on behalf of employees through class actions, individual employee rights cases, and law reform litigation. https://www.leonardcarder.com/