More than a dozen current and former package agents with the state’s Department of Alcoholic Beverage Control (DABC) filed an $8.6 million federal civil lawsuit last week against the agency.
The contract workers claim DABC, which strictly controls alcoholic beverage sales in Utah, purposely misclassified their employment status to escape typical workplace obligations, such as overtime pay, benefits and payroll taxes, according to a copy of the complaint obtained by the Chronicle Progress.
Two Millard County package agents are listed among plaintiff s seeking court relief. Package agents typically operate storefronts in communities across the state. These State Liquor Agency stores follow a rigid set of rules, selling alcohol provided by the state and collecting money and taxes from such sales on the state’s behalf. Package agents receive a set salary in lieu of sharing in the profits from liquor and beer sales.
Many of the plaintiffs named in the lawsuit live and work in rural counties, including Sanpete, Beaver, Iron, Carbon, Washington, Wayne and Garfield. Many of them have spent decades working for DABC.
The lawsuit not only targets DABC as a state agency, but also names members of the entity’s leadership team, both individually and in their official capacities.
At the heart of the complaint are allegations the DABC violated federal labor law, particularly the Fair Labor Standards Act (FLSA), as well as numerous state laws.
“The Plaintiff s have been subjected to a pattern of willful misclassification, misrepresentation, and denial of benefits and wages for decades,” attorneys for the plaintiffs alleged in a press release about the lawsuit. “When these employees raised concerns about their misclassification to representatives of the DABC and the Office of the Attorney General, these governmental entities misled the employees by misrepresenting that they conducted a thorough analysis of their classification and concluded that they were properly classified as independent contractors instead of employees. To Plaintiff s’ knowledge, no such thorough investigation was actually ever conducted.”
According to the complaint, DABC exerts an enormous amount of control over its independent contractors. This includes controlling a store’s layout, operating hours, signage, credit card and point of sale terminals, who it can hire, what it can sale and even a store’s location. DABC officials also can enter the premises of package stores at any time.
“Plaintiffs and Collective Members are paid a monthly salary, which is nonnegotiable, not related to the number of hours worked, and from which Plaintiff s and Collective Members must pay all operating costs of the agency, including but not limited to rents, labor, utilities, insurance and bonds, and maintenance,” according to the complaint filed in federal court.
Attorneys for the package agents argue that such strict controls alter the nature of the employer-employee relationship in the eyes of the law. Similar lawsuits, in fact, have been fi led against a number of companies who similarly utilize contract labor in order to reduce costs and avoid legal liabilities. Many of these have recently focused on such companies as Uber and DoorDash, though such high-flying stalwarts as Federal Express and Microsoft have paid millions of dollars in settlements in response to similar litigation.
However, DABC is not some high-tech, gig economy darling—it is a state agency.
Erika Larsen, an attorney with Sandy law firm Steele Adams Hosman, who is representing plaintiff s in the lawsuit against DABC, said typically state agencies avoid such legal entanglements, usually because they are advised by state-employed legal counsel. She said the state code relating to DABC regulations treats the entity as a private business, susceptible to litigation and liabilities like any other business enterprise. And federal FLSA contains provisions relating to public agencies as well.
“To be quite frank, it’s probably not that common (for public entities to face labor misclassification lawsuits), because any state or municipal entity is going to have lawyers who are going to advise them on certain issues like this,” said Larsen, who also represents some municipalities in Utah and often advises them on labor issues. “That’s why this lawsuit is a little surprising that we had to take it this far.”
Larsen said the assistant state attorney general assigned to advise DABC seems to have had a hand in misclassifying package agents. And when the package agents sought an investigation, this assistant attorney general “completely ignored our clients’ request to investigate the issue.”
According to the lawsuit, package agents raised concerns about their status multiple times, including once in July 2020 and again in March this year.
According to the lawsuit, package agents operate on one-year contracts that are typically automatically renewed. Some package agents have worked for DABC for decades, with almost no issue in their annual contract renewals. However, with the threat of legal action over the misclassification, package agents told their attorneys they felt threatened by DABC.
Larsen said the attorneys representing the plaintiff s felt the threat was serious enough they actually waited until most of their clients’ contracts were renewed during the summer before filing their lawsuit.
“The last time this was brought up, where our clients wanted them to look into this issue, the DABC said it’s going to be really hard for us (DABC) to want to work with people (package agents) who are suing us,” Larsen said. “Which is retaliation under the Fair Labor Standards Act. There was a concern, which is why we waited to file.”
A phone call and email seeking comment from the Utah Attorney General’s Office director of communications was not returned as of press time.
LeeAnne Maxfield, who operates the Delta DABC State Liquor Agency store and who is listed on the lawsuit as the lead plaintiff, referred the Chronicle Progress to plaintiff attorneys last week when she was reached by phone.
This case was assigned to the Southern Region of the Central Division of the District of Utah federal court last Thursday, with Magistrate Judge Paul Kohler assigned to preside over pretrial matters. The State of Utah had not filed an answer to the complaint as of press time.
