Does Yelp have to pay people who submit reviews, on the theory that they are legally 'employees'?

File image. (Richard Drew/Associated Press)

Last week, a federal judge threw out a lawsuit that claims that Yelp has to pay people who submit reviews, on the theory that they are legally "employees." From Jeung v. Yelp, Inc (some paragraph breaks added):

Defendant Yelp, Inc. operates a popular website that describes itself as "the best way to find great local businesses." The website provides a search function that allows users to locate reviews of businesses in a given geographical area, categorized by the type of business and services offered. Plaintiffs in this putative class action seek to establish that Yelp has a legal duty under the Fair Labor Standards Act ("FLSA") to treat persons who write reviews appearing on the website as employees, and to compensate them accordingly….

Here, each of the three named plaintiffs alleges that he or she "was hired by Yelp, Inc. as a writer and she fulfilled that job description and job functions." Each plaintiff allegedly was "directed how to write reviews and given other such employee type direction from employer defendant." Yelp allegedly controlled each plaintiff's "work schedule and conditions." Two of the three plaintiffs are alleged to have been "fired" with "no warning [and] a flimsy explanation." …

[A] court must "draw on its judicial experience and common sense" to evaluate whether a complaint states a plausible claim for relief. A reasonable inference to be drawn from the complaint, and from plaintiffs' arguments, is plaintiffs use the term "hired" to refer to a process by which any member of the public can sign up for an account on the Yelp website and submit reviews, and the term "fired" to refer to having their accounts involuntarily closed, presumably for conduct that Yelp contends breached its terms of service agreement. [Footnote: Plaintiffs appear to be focusing additionally on promotional programs Yelp operates to encourage members to become highly active contributors of reviews and to have those reviews conform to certain standards.]

A further reasonable inference is that plaintiffs and the putative class members may contribute reviews under circumstances that either cannot be reasonably characterized as performing a service to Yelp at all, or that at most would constitute acts of volunteerism. [Footnote: That Yelp may realize financial profit from publishing the reviews written by plaintiffs and other putative class members (through third-party advertising on the website) does not necessarily mean that the writers are performing a service for Yelp.]

If plaintiffs and other putative class members are, at most, volunteers, no claim under the FLSA will lie. "While the statutory definition [of "employee"] is exceedingly broad … it does have its limits. An individual who, 'without promise or expectation of compensation, but solely for his personal purpose or pleasure, worked in activities carried on by other persons either for their pleasure or profit,' is outside the sweep of the Act."

Accordingly, plaintiffs' mere conclusory allegations that they were "hired" and "fired" by Yelp, and given "employee type direction," are insufficient to state a plausible claim under the FLSA in this context. [Footnote: Plaintiffs' state law claims, which their briefing does not separately address, fail for similar reasons. In the absence of some kind of employment relationship or other circumstances not pleaded here, plaintiffs have no cognizable claim for "quantum meruit " or "unjust enrichment."]

Accordingly, the complaint must be dismissed. While it appears dubious that plaintiffs will be able to allege in good faith facts sufficient to show any type of employment relationship, or other basis on which they can pursue a claim for compensation for reviews submitted to Yelp, leave to amend will be granted. Any amended complaint shall be filed within 20 days of the date of this order.

[Footnote: Portions of plaintiffs' complaint, and much of their briefing, focus on the legal distinctions between employees and independent contractors. Those allegations and arguments are misdirected. The issue is not whether Yelp is treating as independent contractors individuals who actually qualify as employees…. The relevant questions are (1) whether plaintiffs can be seen as working for Yelp at all, and, if so, (2) whether they are employees as opposed to volunteers, not employees as opposed to independent contractors. "The test of employment under the [FLSA] is one of 'economic reality.'"] …

Yelp argues that plaintiffs' state law claims represent a Strategic Lawsuit Against Public Participation ("SLAPP") within the meaning of California's anti-SLAPP statute. California enacted the anti-SLAPP statute "in response to the legislature's concern about civil actions aimed at private citizens to deter or punish them for exercising their political or legal rights." The statute was designed to allow courts "to promptly expose and dismiss meritless and harassing claims seeking to chill protected expression."

The statute provides that a party may file a motion to strike a cause of action against it if the complaint "aris[es] from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue." The statute is to be "construed broadly." …

Plaintiffs offer a strident argument, marked by ad hominem attacks on counsel, that the anti-SLAPP statute is inapplicable because they merely seek to hold Yelp liable under quasi-contractual theories for non-payment of wages, not for exercising any free speech rights.

A plaintiff's theory of liability, however, is not relevant to the question of whether the claim "arises from" a defendant's exercise of free speech rights. As alleged, Yelp publishes information—reviews—regarding the services and goods various business establishments offer to the public. Plaintiff's claims plainly arise from that conduct, which undisputedly involves speech on matters of public interest….

[T]he motion to strike is [thus] granted, even though the claims are also subject to dismissal under Rule 12(b)(6).

Sounds generally quite right to me.

Note that the court suggested that Yelp might not be able to recover fees under the anti-SLAPP statute:

Yelp is cautioned, however, that under the circumstances here, the mere fact that its motion to strike is being granted does not support a right to recover attorney fees, at least at this juncture. See Brown v. Elec. Arts, Inc., 722 F.Supp.2d 1148, 1155 (C.D.Cal.2010) (quoting in part Mann v. Quality Old Time Serv., Inc., 139 Cal.App.4th 328, 340 (2006))( "a party is not considered to have 'prevailed' where 'the results of the motion were so insignificant that the party did not achieve any practical benefit from bringing the motion.'"); see also Moran v. Endres, 135 Cal.App.4th 952, 955 (2006) ("The possible recovery against defendants did not change. The factual allegations which defendants had to defend did not change. The work involved in trying the case did not change…. The case was essentially the same after the ruling on the special motion to strike as it was before. The results of the motion were minimal and insignificant, fully justifying the court's finding that defendants should not recover fees.").

But I think this simply reflects the possibility that plaintiffs will be able to amend their complaint in a way that lets them proceed (though the court notes that "it appears dubious that plaintiffs will be able to allege in good faith facts sufficient to show any type of employment relationship, or other basis on which they can pursue a claim for compensation for reviews submitted to Yelp"). Under the California anti-SLAPP rule, "a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney's fees and costs," with some exceptions that aren't relevant here. The court seems to be suggesting that Yelp isn't yet a prevailing defendant on the motion, given the leave to amend (the very issue involved in Brown, the first case that the court cites). But if the amended complaint is itself dismissed, then I think Yelp would indeed be a prevailing defendant.