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YUM! Brands Recruiter Files ERISA Lawsuit over Misclassification

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Pension benefits depend on being an employee

Los Angeles, CAOn July 9, Tim Alders, formerly an Executive Recruiter for YUM Brands Inc. and Taco Bell Corp. filed an ERISA lawsuit alleging that the fast-food conglomerates deprived him of pension and other benefits by deliberately misclassifying him as an independent contractor, rather than an employee. Tim Alders v. YUM, Inc. is neither a standard-issue misclassification lawsuit (many of which are brought by hourly-wage workers, cheated of California wage protections) or a variation of now-familiar ERISA fiduciary breach action. Rather, it is creative combination of the two. The lawsuit makes painfully clear how much long-term contractors (even the well-paid ones) lose when they are paid as casual workers.

  

Misclassification as an independent contractor

 
YUM Brands, Inc. is the product of multiple corporate spin-offs and reorganizations, the history of which is not immediately relevant to Alders’s basic claims, at least not yet. Alders worked for YUM through its many incarnations from 1995 to 2020. He located and recruited individuals to work in high-level positions, including at the “C suite” (Chief Executive and Chief Operating Officer) level.

He reportedly became something of a cultural icon because of the enthusiasm and good humor with which he did his job. For example, Taco Bell created what it called the annual “Tim Calendar,” as well as the “Tim Pillow,” “Tim Socks,” and the “Tim Drink Holder.” During the entire period, he was classified and paid monthly as an independent contractor.

He alleges that YUM controlled both the work performed and the manner and means by which he did it. For example:
  • He was provided with a corporate office; where YUM expected him to arrive by 8 a.m. and stay until at least 6 p.m. He often stayed later;
  • He was required to log into YUM’s corporate computer system every morning and was directed to use the system to conduct all of his work;
  • He reported to senior HR leadership team members and the chief talent officer and was subject to annual performance evaluations;
  • He was expected to complete annual employee training on professional conduct and computer security;
  • YUM provided him with a corporate email address, office supplies, a work computer and paid for his extensive business-related travel; and
  • He was prohibited from taking on outside work to perform similar services for other quick service or fast-food businesses
In the Complaint, Alders claims that under the standards set out in Dynamex Operations West Inc. v. Superior Court of Los Angeles County, he should have been considered an employee. That rule, sometimes shorthanded as the “ABC” test, presumes that all California workers are employees unless an employer can demonstrate that all of the three following things are true:

(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(B) the worker performs work that is outside the usual course of the hiring entity's business; and

(C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The consequences of being classified as an independent contractor, Alders maintains, have been financially onerous. He was not eligible for paid time-off or holidays. He was ineligible for employer-maintained health insurance and had to pay the employer portion of payroll taxes as self-employment taxes.

More significantly, he was ineligible to participate in three YUM! Brands pension plans – the Pension Equalization Plan (“PEP”); the Executive Income Deferral Program (“EID”); and the Retirement Plan (the “Salaried Plan”) (collectively the “YUM Plans).

Well, hello 63. Startled to see you.


When Alders left YUM, he was 63. He understands that all YUM or YUM Owned Brand employees are eligible to participate in the Salaried Plan if they satisfy applicable age and length-of-service requirements. In addition, certain management level employees of YUM are also eligible to participate in the PEP and the EID. He believes that he would have qualified for participation in each of these plans were he classified as an employee, rather than an independent contractor.

Instead, he got nothing. Nada. Zilch. Zip.

He was not, as far as the company was concerned, an “employee.” Only employees could be eligible to participate in any of the YUM Plans. This is the kind of situation, some might argue, that ERISA was designed to remedy, although time and the details are different since the law was enacted in 1974.

Tim who?           


Alders has tried to quantify his losses but, as of the filing of the Complaint, been unable to receive information from the company about any of the pension plans in which he claims he should have been able to participate because he is not a participant. He has been asked to confirm his identity.

When he sought records of the length of his service, another key element in establishing his claim, he was told that there were none because he was not an employee. It must be all very Twilight Zone to find that he has all-but disappeared from the workplace and colleagues with whom he worked for so long.

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