Lawsuit Alleges New York Pepsi-Cola Distributors Misclassified as Independent Contractors

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Pepsi-Cola Bottling Company of New York, Inc. and its top-level management have misclassified distributors as independent contractors and owe them unpaid wages and reimbursement for expenses, a proposed class and collective action alleges.

According to the suit out of New York federal court, the defendants have maintained control over “virtually every detail and aspect” of distributors’ jobs, and thus should have classified them as bona fide employees entitled to certain protections under state and federal labor laws, including the payment of minimum and overtime wages and reimbursement for business expenses.

The case alleges that in light of the “economic realities” of the relationship between the defendants and their distributors, who are tasked with delivering non-alcoholic Pepsi-Cola beverages to retail and corporate accounts across New York City’s five boroughs, the use of the term “independent contractors” in the workers’ distribution agreements is “meaningless and absurd.”

“In fact, the reality is just the opposite,” the complaint contends. “Defendants oversee and dictate virtually every aspect of the Plaintiffs’ working lives. Simply put, Defendants are Plaintiffs’ employers.”

According to the amended complaint filed on September 15, the defendants’ workers sign distributor agreements through which they “purchase” a route from Pepsi-Cola in exchange for the exclusive right to service certain of the defendants’ accounts. The case explains that distributors are provided with Pepsi-Cola products, such as Pepsi, Gatorade, Starbucks, Evian, Mountain Dew, Lipton, Aquafina, Pure Leaf Tea and others, and tasked with selling the beverages to retailers. Distributors then pay the defendants for the products that were provided, the suit says.

The lawsuit alleges, however, that the defendants maintain strict control over distributors’ jobs, including by requiring them to wear Pepsi-Cola uniforms and display the Pepsi-Cola or its brands’ logos on their trucks. Distributors are also required to work exclusively for the defendants, and cannot retain any other employment, including jobs like maintenance or carpentry that are completely unrelated to soft drink sales, the suit attests. Moreover, Pepsi-Cola controls how distributors sell its products, what prices must be charged to retailers and paid by distributors, what equipment they use, and which accounts are included on their schedules, according to the complaint.

The lawsuit further claims that distributors must undergo a background check before working for the defendants and obtain the company’s approval before selling their distributorship. If a distributor fails to follow the defendants’ policies, they may be penalized, the suit adds.

The complaint argues that distributors cannot lawfully be classified as independent contractors given they exercise no independent judgment in the execution of their duties, perform tasks that are “an essential and significant part” of the defendants’ business operations and work under the company’s complete control.

The case alleges, however, that because distributors have been misclassified as contractors, the defendants have willfully refused to pay them for every hour worked, including proper overtime wages, and provide benefits such as a retirement plan, insurance programs and expense reimbursement.

“Defendants have intentionally misclassified the Plaintiffs and members of the FLSA Collective and Class as ‘independent agents’ to avoid providing the same wages and benefits that they provide to their other employees,” the complaint alleges.

Per the case, distributors have incurred various expenses—including the costs of owning or leasing and operating their trucks, insurance, required equipment, mandated training, paying tolls, route “purchase” expenses, merchandising, marketing and uniforms—at the defendants’ direction and for the company’s benefit without being reimbursed for such.

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