Wrestler in ringDozens of former World Wrestling Entertainment, Inc. (WWE) wrestlers and performers have filed a class-action lawsuit against the WWE, in which they claim that they were inaccurately and intentionally hired as independent contractors rather than employees.

Since they are classified as independent contractors, the former WWE performers are some of the only athletes in any major professional sport that do not have union representation. This is significant because, as opposed to regular employees, independent contractors are not entitled to enjoy the benefits of critical employment laws. These include the Family and Medical Leave Act (FMLA), the Fair Labor Standards Act (FLSA), unemployment insurance benefits, workers’ compensation protection, as well as applicable income tax contributions.

The 53 former WWE performers involved claim that they suffered concussions and other head injuries that have resulted in long-term brain damage. The plaintiffs further allege that they were misclassified intentionally as independent contractors in order for the WWE to avoid being held liable for their injuries.

The complaint also states in detail how the WWE strictly controlled the plaintiffs’ personal lives, including claims that the performers were told specifically where and how they could train, how they travelled, and even what they wore in public. Moreover, the plaintiffs’ complaint alleges that the WWE also determined if the performers were to receive medical care, and only allowed them to receive treatment exclusively from the WWE’s medical staff.

In response to the lawsuit, the WWE stated: “This is another ridiculous attempt by the same attorney (Konstantine Kyros of Massachusetts) who has previously filed class action lawsuits against WWE, both of which have been dismissed. A federal judge has already found that this lawyer made patently false allegations about WWE, and this is more of the same. We’re confident this lawsuit will suffer the same fate as his prior attempts and be dismissed.”

As any experienced tax lawyer in San Mateo can tell you, employers must pay taxes on employees but are not required to do so with independent contractors. In practice, the misclassification of workers can effectively reduce labor costs for employers, and so is unfortunately a common tax strategy.

Employee misclassification also deprives the state and federal governments of millions of dollars in tax revenue that is needed to pay for public services. Indeed, a 2006 report by the Government Accountability Office estimated that in only that one year the federal government lost $2.72 billion in Social Security, unemployment and income taxes due to employee misclassification.

Even further, if a worker is considered an independent contractor that person is responsible for paying their own taxes, which can result in underpayment if the person does not understand or comply with these obligations.

Under the Department of Labor’s FLSA guidelines, the ultimate measure for determining how a worker should be classified is whether or not the worker is completely economically dependent on the employer. Additionally, the amount of an employer’s control over a worker is also often used in determining how a worker should be classified. That being said, if the plaintiffs’ allegation that the WWE exercised complete control over their professional and personal lives is proved to be true, the WWE may be facing a significant judgment.

Tax problems can affect the lives of American taxpayers in a number of different ways. If you are seeking an experienced tax lawyer in San Mateo to help you settle your unique tax issues once and for all, contact us today for a free consultation!