May 5, 2015 – The Supreme Court for the County of Erie, New York denied the National Football League’s motion to dismiss claims against it brought by current and former members of the “Buffalo Jills,” i.e., the cheerleading squad for the Buffalo Bills.
The Jills filed a class action lawsuit in April 2014, alleging they had been improperly classified as independent contractors rather than employees. As a result, the Jills had not been paid at least minimum wage for all hours worked and, in fact, had not been paid at all for most of the hours they worked. For example, the complaint alleges that the Jills worked approximately eight hours on each day of a home game and attended two mandatory practice sessions a week, each lasting three-and-a-half hours. In addition, the Jills made roughly two dozen other “personal appearances” each season, the large majority of which were unpaid.
The Jills also contend (1) that they were not reimbursed for required expenses, such as uniforms that cost up to $600 and annual audition fees of approximately $50, and (2) that they did not receive “spread of hours” premium pay. (Under New York law, employees whose “spread of hours” in a given day – that is, the length of time between the beginning and end of their workday – exceeds ten hours are entitled to “one hour’s pay at the minimum hourly wage rate, in addition to the minimum wage.”)
There’s an interesting backstory here: In the mid-1990s, in response to alleged violations of labor laws, a group of Jills formed the NFL Cheerleaders Association (“NFLCA”), seeking to represent the cheerleaders in collective bargaining. The Jills’ owner opposed unionization, claiming that the cheerleaders were “independent contractors/volunteers,” not employees. The National Labor Relations Board (“NLRB”), in a January 1995 decision, disagreed:
The facts herein clearly establish that the cheerleaders are employees rather than independent contractors. The Employer controls their rehearsal schedules, their costumes, their routines, the times and places of performances and requires each to maintain a specific weight. The cheerleaders are not allowed to book their own performances and have no ability to employ or arrange for replacements. The Employer places strict limits on their discretionary time, prohibiting fraternization with members of the Buffalo Bills team or staff, and requiring all their actions as an individual to reflect the Jills’ organization. All significant business decisions are made by the Employer which alone decides if and when appearances are made as well as how much, if anything will be paid for the appearance.
The following month, the members of the Jills voted to make the NFLCA the first NFL cheerleaders’ labor union. Their success was short-lived, though. Almost immediately after the vote, the Jills’ employer cancelled their public appearances and held auditions for replacement cheerleaders – essentially locking out the unionized Jills. These actions led the Jills to file a labor grievance with the NLRB in March 1995. The corporation that managed the Jills folded the next month, and the union disbanded in 1996.
If the allegations of the complaint are correct, the details of the Jills’ working conditions and compensation haven’t changed significantly since the NLRB’s 1995 ruling that the Jills were employees. The court in the current lawsuit seems to agree: in denying the Bills’ motion to dismiss, the court wasted no time in concluding the Jills are employees, noting the “minute control” the entities that manage them exercise. (The court has not yet resolved the question of whether the Bills are an employer of the Jills, since this issue needs to be fleshed out through discovery.)
The Jills’ claims against the NFL, by contrast, do not depend on whether the NFL is their employer. In fact, the Jills concede that it is not. Instead, they allege the NFL aided and abetted the other defendants in committing common law fraud. (The Jills also allege that the NFL was unjustly enriched by their unpaid work, some of which benefitted the league as a whole, and not just the Bills – but this claim is less interesting than aiding and abetting.)
The aiding and abetting theory stems from the fact that the NFL, through Commissioner Roger Goodell, approved contracts between the Bills and Citadel, the company that broadcast the Bills’ games and related programming. Those contracts, in addition to governing the broadcast rights, also governed the terms of the Jills’ work. Specifically, the contracts gave Citadel exclusive rights to operate the Jills program and required Citadel to get signatures from each member of the squad on agreements providing that the were independent contractors and would not be paid for working at Bills games. Further, the contracts expressly state that they would not take effect unless approved by the NFL.
In short, the Jills contend that the Bills “engag[ed] in a fraudulent scheme to misclassify the Jills as independent contractors” and that they did so with the assistance and support of the NFL.
Under New York law, the elements of a claim for aiding and abetting fraud are: (1) the existence of an underlying fraud; (2) actual knowledge of the material facts; and (2) substantial assistance in carrying out the fraud. The NFL conceded that the Jills had properly alleged an underlying fraud committed by the other defendants but attacked the pleadings on the other two elements.
With respect to actual knowledge, the NFL argued that it lacked any real knowledge of how the Jills program operated, and it submitted declarations to that effect by its general counsel and by Goodell himself. The court had no difficulty disposing of this argument, explaining that “actual knowledge need only be pleaded generally, particularly at the pre-discovery stage, because a plaintiff lacks access to the very discovery materials which would illuminate a defendant’s state of mind.” Thus, the plaintiffs’ allegation that “because the NLRB had determined that the Jills were employees and not independent contractors in 1995, the NFL and Commissioner Goodell had actual knowledge that the Jills were being misclassified by the Bills as independent contractors” was sufficient to withstand a motion to dismiss.
The court likewise disposed of the NFL’s attack on the Jills’ contention that the NFL provided substantial assistance in committing the alleged fraud by approving the agreement between the Bills and Citadel. The court was not persuaded by the NFL’s arguments that “it never approved the terms and conditions of the Jills’ employment” and that “the portion of the agreements between the Bills and Citadel relating to the conduct of the Jills squad was of minor importance and never approved by the NFL.” In rejecting the NFL’s challenge, the court cited earlier cases holding that “the affirmative approval of contracts containing fraudulent representations can satisfy the substantial assistance requirement.”
This wasn’t fourth down for the NFL, though. The court observed that no discovery has yet been conducted into the NFL’s role in the Jills’ misclassification. Expect the NFL to file a motion for summary judgment once that discovery has been completed.