Employment Law Daily Modeling agency didn’t misclassify ‘fit’ model as contractor, advances breach of contract counterclaim
Monday, March 19, 2018

Modeling agency didn’t misclassify ‘fit’ model as contractor, advances breach of contract counterclaim

By Marjorie Johnson, J.D.

A “fit” model who had the freedom to choose which clients to work with and for what amount of pay was not misclassified as an independent contractor, a federal court in New York ruled in tossing her FLSA and New York wage law claims against the modeling agency with whom she had a “exclusive” three-year representation contract. Ruling on the parties’ cross-motions for summary judgment, the court further held that the agency could not advance its counterclaim for tortious interference—after she went to work for a fashion company without paying the agency the agreed-upon commission—but its breach of contract claim would go to trial. The court also ordered the agency to pay the model’s withheld earnings, concluding that she was entitled to at least $13,768 (Agerbrink v. Model Service LLC, March 14, 2018, Oetken, J.).

Modeling contract. Fit models are used by fashion designers and manufacturers to check the fit of clothes. Here, the plaintiff signed a three-year “exclusive” representation contract with the modeling agency, but left to work for a fashion company before the contract expired. The contract stated that she was an independent contractor and required her to use her “best efforts” to further her fit-modeling career and to perform her services in a professional and timely manner. It also provided that the agency would receive a 20-percent commission of her hourly rate and provide advice on the general practices of the modeling industry.

Takes permanent job elsewhere. During the first 15-months of the contract, the plaintiff booked two “standing jobs” with the agency’s clients. Because one of the clients offered her an hourly rate that was lower than her usual rate the agency agreed to lower its commission to 15 percent. However, she later decided that the rate was too low and stopped working for the company. Around 18 months before her contract was set to expire, she took a permanent job with a fashion company but did not notify the agency. Upon learning of the engagement, it advised her that it was entitled to 20 percent of her earnings and withheld $17,946 in client payments owed to her.

She subsequently brought this lawsuit seeking unpaid wages under the FLSA and New York Labor Law (NYLL) as well as asserting that the agency’s withholding of her earnings constituted unjust enrichment. The agency counterclaimed for breach of contract and tortious interference with a business relationship. Both parties moved for summary judgment on the employee-versus-independent-contractor issue; while the plaintiff also moved for summary judgment as to the agency’s counterclaims and withheld earnings.

Was she an employee? While this suit started off as a putative class action, just the plaintiff’s individual claims and the counterclaims remained. Since the thrust of her wage claims was that she was misclassified as an independent contractor, the key issue was whether she was an employee of the agency. Looking to the relevant factors, the court found that she was not.

Degree of control. Significantly, the degree of control that the agency exercised over her indicated that she was not an employee since she set her own work schedule, had the final word on which clients to work for, and could set her own rate. Indeed, this was demonstrated by the fact that she chose to stop working for a client that she felt didn’t pay her a high enough hourly rate. Additionally, the parties’ contract said that she was an independent contractor and the agency did not train her. And while she argued that the agency exerted control over her through its informal practices and alleged threats to “blacklist” her if she did not abide by its wishes, this was not enough to negate the other indicia showing lack of control.

Opportunity for profit or loss. Her “investment in the business” also pointed to independent contractor status since her flexibility in decided when to work and who to work for gave her significant entrepreneurial opportunities to maximize her profit if she wanted. She also negotiated financial terms with both clients and the agency and paid for her own travel expenses, a rental apartment, professional photographs, and to appear on the agency’s website.

Overall economic reality. The court also found that the degree of skill required to perform the work weighed in favor of employee status and that the extent to which her work was an integral part of the agency’s business was a “toss-up.” However, the “ultimate concern,” was whether she depended on the agency’s business or was in business for herself. To that end, no reasonable juror could find that she was an employee since, as a matter of economic reality, she was a self-employed fit model who hired MSA to manage her career. Therefore, because her actions were those of an “entrepreneurial businessperson” rather than a “passive employee, the agency was entitled to summary judgment on her FLSA and NYLL claims.

Breach of contract. The court also denied the plaintiff’s motion for summary judgment on the agency’s clam that she breached her contract by working for the fashion company without providing notice and failing to pay its 20-percent commission. Among other things, the court rejected her assertion that the contract was unconscionable since she owed a host of obligations while the agency’s only real obligation was to provide reasonable advice about the modeling industry. Though she argued that by neglecting to find work for its models, the agency left her with no option but to work for other companies and giving it a percentage cut for doing nothing, the issue of its efforts to find work for her was disputed.

No tortious interference. The agency couldn’t advance its claim that the plaintiff tortiously interfered with its business relationship with the fashion company, however, since there was no evidence that her conduct was an independent crime or tort, or that she acted solely with the purpose of inflicting emotional harm. Even if she intended to go behind the agency’s back, such conduct may amount to breach of contract, but not tortious interference.

Damages for unjust enrichment. The court previously held that the liquidated damages clause in the parties’ contract (which allowed it to withhold earnings if she breached the contract) was an unenforceable penalty under New York Law and thus the agency’s retention of her earnings constituted unjust enrichment. Since that ruling only addressed liability, the court now also held that she was owed at least $13,768 of her earnings, plus prejudgment interest, with the only issue for trial being whether the agency owed her more than that amount.

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