Misclassification in the Fashion Industry: How Creative Professionals Are Being Denied Basic Worker Protections

The misclassification of employees as independent contractors is a serious labor issue which often deprives workers of essential rights and protections like overtime pay, paid time off, unemployment insurance, and other key benefits only required by law to be provided to employees. While workers in any industry can suffer from employee misclassification, contractors and freelance workers in creative industries like fashion and design are often particularly vulnerable to this unlawful practice due to the high demand for labor, reliance on gig work and freelancers, on-demand services, and project-based contracts. The ability to identify employee misclassification is thus especially relevant to individuals in design and other creative fields.

The Proliferation of Misclassification in Fashion

Multiple big names in the fashion world, including large corporations and famous fashion brands, have recently come under fire for misclassification and workers’ compensation violations.

In May 2024, massive publishing company Condé Nast, which owns a vast array of major fashion magazines including Vogue, Teen Vogue, Vanity Fair, and GQ, faced criticism from its workers’ union, Condé Union. Condé Union is affiliated with the NewsGuild of New York and is comprised of workers from all of Condé Nast’s affiliated magazines, representing about 540 editorial workers.  The labor organization challenged the increasing role of “permalance” work. “Permalance,” a portmanteau of “permanent” and “freelance,” is an unofficial designation for a type of worker who performs the same tasks as a full-time permanent staffer but is not granted the legal rights and benefits that come with the employee title. Condé Union workers have condemned the company for using this method to undercompensate writers and other creatives for full-time work through various high-profile stunts.  For example, Union leaders threatened to stage a picket line at the 2024 Met Gala, forcing company management to literally come face to face with frustrated workers and picketers.

Condé Nast isn’t the only company to face legal trouble for employee misclassification and under-compensation. Another large name in fashion which has recently been called out for mistreatment of contractors is the high-end Japanese fashion brand Comme des Garçons.  The Paris-based label has its U.S. headquarters in New York. In June 2021, Gabriel Herrera and thirteen other plaintiffs, all of whom worked as assistant floor managers, floor managers, or sales managers, filed a class action against the company for failing to pay them overtime as required by the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL).  After the United States District Court for the Southern District of New York dismissed the complaint, the Second Circuit reversed, stating that the allegations created an inference of a “plausible claim of overtime” and explaining that plaintiffs do not need to include a “week-by-week recounting of the hours they worked” in their pleading. This decision was significant for New York wage employees, as it clarified the pleading standard for FLSA overtime and claims and provided a clearer roadmap for pleading similar misclassification-related issues. Thus, misclassified workers in the fashion and design industries may have an avenue for relief through the FLSA and NYLL.

What are the standards for determining employee vs. contractor status?

Preliminarily, it is important to note that different states have different tests to determine whether a worker is an employee or an independent contractor.  Generally, the difference between employee and contractor status comes down to the degree of control and independence in the workplace. The IRS defines someone as an independent contractor “if the person for whom their services are being performed has the right to control or direct only the result of the work and not what will be done and how it will be done.” Independent contractors are self-employed, and their earnings are subject to self-employment tax. If an individual performs services that can be controlled by an employer (i.e., the employer controls what will be done and how it will be done), they are not an independent contractor. This is true even if the workers are given freedom of action. What matters is that the employer has the legal right to control the details of how services are performed.

The IRS uses three categories to determine the degree of control and independence a worker might have under their employer. There is no magic set of factors that might make the determination between the two; instead, the IRS assesses the relationship holistically, considering “the extent of the right to direct and control the worker.”

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (this inquiry includes factors like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of relationship: Are there written contracts or employee-type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor.

What options do misclassified fashion and design workers have?

According to the American Federation of Labor–Congress of Industrial Organizations (AFL-CIO) Department for Professional Employees, misclassified employees have many legal avenues for relief. First, workers can anonymously contact their state departments of revenue or labor to report a potential misclassification case, or they can file Form SS-8 to the IRS to request a determination of their worker status. If the worker has not been paid overtime or was paid less than minimum wage, they can also contact the United States Department of Labor Wage and Hour Division.

Additionally, workers seeking to take legal action may contact an employment attorney who can advise on the best course of action given their circumstances. If the misclassification at issue affects many others, the worker may be eligible to file a class action claim.  The attorneys at Miller Shah LLP are deeply versed in misclassification and other labor and employment law issues and can help you understand your options.