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Lowe’s Home Centers agreed to settle a class action brought by its home improvement contractors who allege that they were misclassified as independent contractors instead of employees. The maximum settlement amount, depending on the number of contractors who file claims, is $6,500,000, plus an additional 25% payment for plaintiffs’ attorneys. A hearing is scheduled for June 27, 2014, where a federal district court judge in California, Judge Jeffrey S. White, will approve the proposed settlement if he finds it meets applicable standards of “fairness.” Shepard v. Lowe’s HIW, Inc., No. 12-CV-03893-JSW (N.D. Cal. May 23, 2014).

The plaintiffs in this case are home improvement contractors comprised of both individuals and businesses. They allege that Lowe’s Home Centers offered its customers the opportunity to hire contractors to install products and services purchased from Lowe’s. Such installations included appliances, kitchens, bath and plumbing fixtures, flooring, doors and windows, garage doors, lighting, outdoor fixtures, and insulation. The complaint, originally filed in state court, alleged that Lowe’s had the right to control, and did control, all aspects of installation jobs by, among other things, requiring that the installers identify themselves as “installers for Lowe’s” or “I work for Lowe’s”, wear Lowe’s hats and shirts at work sites; use signs stating “Lowe’s Installation”, attend training by Lowe’s; and comply with Lowe’s production requirements.

The complaint also alleged that Lowe’s Production Office managed each installation project; Lowe’s set the fees to be earned by each home improvement contractor; imposed a non-compete covenant on installers; and marketed the contractors’ services on its website on an “Installation” page that provided “Let Us Do The Installation For You” with our “trained installers,” who services were “guaranteed by Lowe’s warranty.”

The installers alleged that Lowe’s failed to provide them with an array of benefits that were available to employees, including comprehensive group medical insurance, prescription drug coverage, vision care, group life insurance, paid sick leave, paid vacation, tuition reimbursement, employee discounts for purchases, short and long term disability coverage, a stock purchase plan, and a matching 401(k) savings plan. The installers alleged that they were entitled to such benefits under California Labor Code Sections 2750.5 (which establishes a rebuttable presumption that a worker performing services for which a license is required is an employee and not an independent contractor). The installers also alleged that under California Labor Code Section 2802. They were entitled to reimbursement, as employees, for all necessary expenses incurred in performing their services.

Lowe’s denied the allegations and maintains that the installers are independent contractors. After numerous motions and extensive discovery including the exchange of thousands of pages of documents and depositions of both the plaintiffs and Lowe’s personnel, the parties settled their disputes at a private mediation. The proposed settlement notes that if the case went to trial, the maximum amount recoverable for the class would be approximately $33 million, but the case presents “complex legal and factual issues” including the risk that class certification will be denied. Those issues, the plaintiffs’ counsel claim, make the maximum settlement amount of $6.5 million a fair and reasonable compromise that is in the best interests of the class members