THOMASVILLE, GA. — Flowers Foods, Inc.’s share price fell 3.9% on July 27 — the sharpest decline since early February — after plaintiffs in a Fair Labor Standards Act lawsuit dating back to 2012 filed a motion in the U.S. District Court for the Western District of North Carolina requesting a pretrial conference.
At issue in the case is whether the litigants should be classified as Flowers employees, qualifying for overtime pay, or independent contractors, the current arrangement.
After moving as high as $19.62 per share July 26 in New York Stock Exchange trading, Flowers’ share price closed at $18.91. A day later, Flowers shares fell 3.9% to close at $18.18.
The legal dispute dates back to September 2012, when plaintiffs, including Scott Rehberg, Willard Allen Riley and Mario Ronchetti, filed suit alleging violations of the Fair Labor Standards Act and the North Carolina Wage and Hour Act.
The plaintiffs, a group of bakery product distributors for Flowers Baking Co. of Jamestown, L.L.C., purchase distribution rights to sell and distribute products to customers in a defined territory. The distributor position at issue in this case entails picking up Flowers bakery products from one of 24 Jamestown-owned warehouses in North Carolina, South Carolina, Virginia, and West Virginia, and delivering them to customers in a defined geographic territory.
Distributors’ job duties include delivering Flowers products to customers, restocking shelves with fresh product, removing stale product, and — to an extent disputed by the parties — making sales of Flowers products to account customers.
The plaintiffs allege they were misclassified by Flowers Foods as independent contractors, as opposed to employees. As a result, the plaintiffs have sought to receive time-and-a-half pay for hours worked in excess of 40 per week.
In the motion for pretrial conference filed July 27, the plaintiffs state that the court has observed that the dispute is “one of the oldest on this court’s docket.” Additionally, since the dispute began, including pre-litigation negotiations, the parties have engaged in five different mediation sessions with three different mediators totaling six days. Most recently, the parties participated in two rounds of mediation over the course of three days in June and July.
On July 25, Flowers filed a motion asking for 10 days to produce another expert disclosure and offer 20 days for plaintiffs to take expert depositions. In response, the plaintiffs on July 27 filed their motion for a pretrial conference at the earliest convenience.
“Flowers continues to comply in good faith with the court-ordered mediation, which has not ended,” Flowers said in an emailed statement. “Last week, the company filed with the court a motion requesting clarification on certain items that came up in the course of mediation. The court has yet to respond to this motion. We remain confident in our legal position.”
Flowers’ executives earlier this spring discussed the company’s independent distributor model. As of February, an additional 17 such lawsuits had been filed against Flowers Foods.
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| D. Keith Wheeler, president of the Flowers direct-store delivery operating segment |
“Flowers has operated an independent distributor model for over 30 years,” D. Keith Wheeler, president of the Flowers direct-store delivery operating segment said. “From the 1980s through today the model is intended to offer opportunities for distributors beyond that of company owned routes. Independent distributors are business partners to Flowers. Distributors have the exclusive right to sell and distribute our brands in their territories. They grow their income and their equity as they increase sales. They own their own business. They make decisions about how to operate for their products, for their customers, take responsibility for the management of their business, many hire their own employees. All make their own important decisions every day.
“Flowers benefits when distributors are successful and distributors benefit when Flowers invests in brands, new products, marketing support and improved technology. We believe this model creates an entrepreneur incentive that will deliver significant benefit for independent distributors, their customers and for Flowers.
“In the past few years, independent distributor models in general have been challenged. Those challenges have been across many industries, not just the baked foods industry. Flowers has some distributor lawsuits and so do others in the baking industry. We do not believe the lawsuits have merit and we’re vigorously defending our independent distributor model.”
