As I’ve cross-posted over at Overlawyered.com today, three wrestlers have sued Connecticut-based World Wrestling Entertainment, Inc. (WWE) claiming that they have been improperly classified as "independent contractors" and not employees.
On Friday, WWE removed the lawsuit to federal court from state court claiming that federal questions are implicated in what would otherwise seem to be a "breach of contract" claim. (You can read the removal papers here.) What federal questions? Well, federal employment tax questions for one.
But the interesting part of the case is not the removal papers, but the underlying lawsuit itself. (You can download the complaint here.) The wrestlers — who are seeking class-action status — claim that they were required to sign a "booking contract" that specified the terms of their engagement such as their training regiment, costumes, and — to the surprise of no one — the "outcome of each match". They claim that they were akin to "employees" and should have been paid as such. WWE denied the allegations in a 10-Q filing late last month.
While the employees are seeking damages, typically, the penalty for employers is to pay the employment taxes of the employees with some penalties. It’s unclear here what else the wrestlers are actually seeking. The case has been assigned to Senior Judge Peter Dorsey.
The proper classification of workers has been a thorny issue for employers, going back to the days of the landmark Microsoft lawsuit from the late ’90s. As an employer, you can get a headstart on the issue by going to the IRS website which has lots of commentary and resources on the subject.