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April 8, 2015

Lepage Bakeries' parent firm faces class-action lawsuit over 'independent contractors'

Flower Foods Inc., the nation’s second largest bakery and the owner of Lepage Bakeries in Lewiston, faces a potential class-action lawsuit by 200 workers in North Carolina who were granted legal standing as a “class” in a recent decision by a federal court.

The March 24 order by the U.S. District Court for the Western District in North Carolina could have ramifications nationwide, because Flowers Foods operates 34 bakeries and distribution centers in 36 states across the eastern and southern United States, said Shawn J. Wanta, an attorney and partner with Minneapolis-based Baillon Thome Jozwiak & Wanta LLP, which represents employees and consumers in class actions and complex litigation nationwide.

“It’s a significant ruling,” Wanta told Mainebiz in a phone interview on Tuesday. “Flowers Foods uses the same distribution model throughout the Flowers’ network of bakeries. What the court found is that there is enough commonality in the design of the distribution model for this [lawsuit] to proceed as a class action.”

At issue in the lawsuit, Wanta said, is Flowers Foods’ practice of classifying distributors of its bakery products as independent contractors, as opposed to employees. In doing so, he said, the company and its regional distribution centers have been able to avoid paying wages (including overtime), pensions and other benefits to those workers. The North Carolina plaintiffs his firm represents, he said, allege that in doing so Flowers Foods is violating the federal Fair Labor Standards Act and North Carolina’s wage and hour laws.

The court’s ruling, he said, now gives those workers the opportunity to proceed with a class-action lawsuit instead of filing individual claims. He anticipates the court ruling will pave the way for “hundreds of distributors” of Flowers Foods products nationwide to file similar claims under state and federal laws on a class-wide basis without having to bear all the costs and risks associated with individual litigation.

“North Carolina is a test case,” Wanta said. “The U.S. Department of Labor is paying a lot of attention to how employers classify workers.” He noted that last September the Department of Labor awarded $10.2 million to fund worker misclassification detection enforcement activities in 19 state unemployment insurance programs.

An attorney with the Atlanta law firm representing Flowers Foods in the North Carolina case did not respond by press time to several questions posed by Mainebiz, including whether the company plans to file an appeal and whether it disputes Wanta’s assertion that the case has legal ramifications for Lepage Bakeries and other regional distributors of Flowers Foods products.

However, in documents on file at the U.S. District Court in western North Carolina, Flowers Foods’ attorneys admit the company through its regional distributor in North Carolina “contracts with independent contractor distributors to sell and distribute fresh baked goods to customers (including grocery stores, mass retailers, fast food chains, cash accounts and others)" and that those contractors are “responsible for merchandising the products and engaging in other promotional, marketing and other sales activities, including but not limited to use of displays, to increase their own sales.” It also admits those distributors did not receive overtime pay, but denies the allegations that those workers are employees and therefore entitled to hourly wages and other benefits. It also disputed arguments that the plaintiffs were entitled to legal standing as a class, rather than as individuals.

“We see this as an employees’ rights case,” Wanta said, noting that if the class-action lawsuit against Flowers Foods succeeds, the bakery may be required to change its distribution model to comply with federal and state employment laws. “This is a significant victory for distributors who have been denied the benefits and privileges of employment, despite being treated as employees for years.”

Flowers Foods (NYSE: FLO), based in Thomasville, Ga., reported $3.75 billion in sales in 2014, according to the company’s website. In May 2012 it purchased Lepage Bakeries for $370 million in cash and stock, noting in a company press release that Lepage had 550 “experienced team members” and would help expand Flowers Foods’ market from 64% to 70% of the U.S. population. Flowers’ brands include Wonder, Sunbeam, Country Kitchen and Mrs. Freshley’s, among others.

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