Tuesday, November 12, 2013, by Ryan Niland
A group of customer reviewers (or “Yelpers”) from the popular crowdsourcing website Yelp has filed a class-action lawsuit seeking to be paid as employees of the company. The lawsuit, which Yelp characterizes as frivolous, alleges that Yelp violates state and federal law by paying certain writers within the company while encouraging external customer reviewers to work for “liquor, food, badges, trinkets, and titles.” In addition to violating federal labor laws, the Yelpers claim that Yelp has been unjustly enriched at the expense of its reviewers and should be liable for quantum meruit.
The Yelpers’ primary allegations relate to the federal Fair Labor Standards Act (“FLSA”), a New Deal-era law that, among other things, imposes a minimum wage, requires employers to pay extra wages for overtime hours, and prohibits child labor. The FLSA’s requirements apply to “employment relationships,” but the statute itself provides little guidance regarding how to distinguish between employment relationships and contractual relationships.
Courts applying different bodies of law have developed different tests to distinguish between employment relationships and other types of relationships, such as those between independent contractors. Common law courts applied a “direct and control” test to determine when employers could be held liable for torts committed by persons acting on the company’s behalf. Under the direct and control test, an employment relationship exists when a company has authority to tell a person when, where, and how to do a particular job. By contrast, courts seeking to define employment relationships for FLSA purposes have applied an “economic realities” test that considers multiple factors to assess the relationship between the company’s business and the type of work the individual performs.
By these standards, the Yelpers’ complaint appears to fit the common law test for employment relationships more than the FLSA test. Although the Yelpers assert that Yelp could not generate $220 million in annual revenues without the assistance of its consumer reviewers, the bulk of the complaint is devoted to exploring the various ways in which Yelp exercises control over the Yelpers’ activities. The complaint even explicitly cites the “right to control test,” alleging that Yelp pressures reviewers to alter their reviews and “fires” reviewers as it sees fit.
[T]he complaint describes Yelp as a “slave ship with pirates banging the drum to keep up the fast pace,” a system with “overhead that would shame an antebellum planation,” and a “cult” that offers members alcohol instead of Kool-Aid.
The Yelpers devote only a few paragraphs of their complaint to a “relative nature of the business” test—which the complaint dismisses as “secondary”—but the complaint pulls no punches in emphasizing the degree of control the company exercises over their activities. The complaint characterizes the Yelpers as a “vulnerable and disposable class of workers” responding to a “system of cult-like rewards and disciplines” designed to compel their participation. At various points, the complaint describes Yelp as a “slave ship with pirates banging the drum to keep up the fast pace,” a system with “overhead that would shame an antebellum planation,” and a cult that offers reviewers alcohol instead of Kool-Aid.
The Yelpers’ equating voluntary restaurant reviews with slavery has drawn justified criticism from popular news sources. But regardless of the merits of the reviewers’ case, the lawsuit appears to be part of a growing trend of challenges against the use of “volunteers,” “interns,” and other types of unpaid participants in revenue-generating enterprises. For example, individual and class action lawsuits have been used in the last few years to challenge unpaid “educational” internships in the for-profit film industry and the non-payment of student athletes in (nominally) non-profit college sports programs.
Yelp’s methods of soliciting reviews for its website are by no means unique; Amazon.com’s secretive Amazon Vine program also sends participants free merchandise and uses a complicated ratings system to encourage them to write reviews frequently. And as the success of websites like Amazon, Yelp and TripAdvisor indicates, online customer reviews have become big business. If successful, the Yelpers’ suit could have far-reaching implications for the online review industry’s long-term viability.