By:  Aaron Minc, Principal & Founder

A class action lawsuit was filed against the company Yelp last week seeking to “recover unpaid compensation” for certain users of the site who write reviews.

Yelp is a popular website that features information about local businesses nationwide and around the world that includes ratings, reviews, photos and more. The website is considered by many to be a valuable resource for consumers to learn about local businesses and service providers. The website averages 108 million visitors per month and users have posted over 42 million reviews. The majority of these reviews are submitted voluntarily by Yelp’s user.

The lawsuit was filed on behalf of four plaintiffs who were previously “elite Yelpers,” but seeks to represent thousands of other similarly situated users who have allegedly not been paid for their work and labor performed for the company.

Yelp Forces on Employment Relationship

Unlike most defamation lawsuits that we typically handle involving Yelp, the complaint alleges that Yelp violated the Fair Labor Standards Act (“FLSA”) by refusing to pay wages to its users by designating them as “reviewers” or “Yelpers” or “independent contractors” or interns” or “volunteers” or “contributors” even though “they are performing vital work that inures to the benefit of Yelp.”

The complaint accuses Yelp of devising “a system of cult-like rewards and disciplines to motivate its  non-wage paid writers to labor without wages or expense reimbursement… by offering such rewards as trinkets, badges, titles, praise, social promotion, free liquor, free food, and free promotional Yelp attire, such as red panties with ‘Make Me Yelp!’” written on them. The lawsuit further claims that Yelp encourages unpaid user to work faster and churn out more reviews and that the company chooses to exercise direct control over its “reviews to pander to advertisers.”

The lawsuit seeks unpaid wages and liquidated and statutory damages for violations of the Fair Labor Standards Act, quantum meruit, and unjust enrichment. A Yelp spokeswoman made a statement calling the suit “frivolous on its face” and apologized that “the court has to waste its time adjudicating it.”

Analysis of Yelp Lawsuit

This lawsuit likely has very little chance of succeeding. The Plaintiffs’ primary claim will require them to prove the existence of an employer-employee relationship between Yelp and it’s “Yelpers” pursuant to the Fair Labor Standards Act (“FLSA”).

Under the FLSA, the existence of the relationship will be determined by the “economic reality” test. In applying this test the Court will look at several factors, including whether Yelp has the power to: (1) hire and fire; (2) supervise and control work; (3) determine the rate and method of payment; and (4) maintain employment records.  The Court will also focus on whether Yelp exercises control over the nature and structure of the relationship or has “economic control.” Lambert v. Ackerley, 180 F.3d 997, 1012 (9th Cir. 1999).

Looking at the above factors, I don’t see how the plaintiffs are going to win this case. Yelpers sign up for Yelp pursuant to its “terms of use” and are not “hired” or “fired.” Yelpers write content how, when, and where they want. Finally, Yelp users are neither given nor promised any formal monetary compensation.

I do give the Plaintiffs’ attorneys points for creativity. But construing an individual’s voluntary choice to “Yelp” about things clearly does not constitute an employment relationship any more than someone choosing to voluntarily engage in activity on websites like Facebook, Twitter, Kudoala, LinkedIn, Instagram, or Vendalize. In fact, one could extrapolate on this analogy further to offline activities, like participating in non-profits or other social/community organization that have incentives or structure to encourage participation.

I also don’t see how the fact that Yelp chooses to engage in a more direct relationship with its “Elite” users by incentivizing and encouraging their participation, hosting events, and providing additional guidance regarding its preferences for reviews changes this analysis.  The case seems similar to an action against the Huffington Post for unpaid contributors.

The lawsuit also fundamentally ignores the fact that Yelp provides valuable services and benefits to its users, which completely undermines the Plaintiff’s claims that Yelp is being unjustly enriched without providing some sort benefit in return.

The case is interesting. It represents a growing trend of business and individuals who are becoming frustrated with online companies like Yelp and the use and power over user generated content. Its notable that it was filed by a law firm called “The Yelp Class-Action Law Firm.”  I would be surprised if any of the claims wind up sticking, but something tells me this might be the first of many more to come.To schedule a free, no-obligation initial consultation call (216) 373-7706 or schedule a meeting online.

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