Judges Suing Wizards
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It looks like some folks out in California decided that the Judge Program actually constitutes employment of Judges by Wizards of the Coast and they've filed a class action lawsuit over it.
Complaint:
https://www.scribd.com/doc/309867466/Shaw-Et-Al-v-Wizards-of-the-Coast-LLCWizard's Press Release in Response: http://magic.wizards.com/en/articles/archive/news/wizards-responds-lawsuits-2016-04-20
In relevant part, FLSA (and the California equivalent, apparently) does not allow you to volunteer for a for-profit corporation. See http://webapps.dol.gov/elaws/whd/flsa/docs/volunteers.asp
So, the argument they are making -- and it's fascinating to me professionally - is that what a judge does constitutes "employment" within the meaning of applicable law and, as such, Wizards has been very bad for not paying minimum wage or otherwise complying with the law related to employees. That does not sound frivolous to me, though of course I'm not privy to the details of the Wizards / DCI / Judge relationship. I would expect that no matter how this shakes out, changes will be made the judge program to either resolve the lawsuit or protect against another.
I have questions:
(1) Does this mean anything for Vintage? Do we dodge the results since we usually have the TO judge the event anyway? Is this a boon for unsanctioned "Play Test Tournaments?"
(2) If this pushes on-line play, where judges are not necessary, does that help or hurt the format?
(3) It sure seems to me like this puts a fine point on the Reserve List issue that keeps popping up - yes, yes people WILL sue Wizards of the Coast in a class action if you give them a chance to do so.
(4) Steve, you're the only Magical Card Attorney I know of in California. Care to weigh in as someone who is licensed to do so? I'm not barred there. (PS NO POST IN THIS THREAD SHALL CONSTITUTE LEGAL ADVICE. IF YOU CAME TO A FORUM ABOUT MAGICAL CARD GAMES FOR BABIES AND EXPECTED LEGAL ADVICE, YOU ARE IN THE WRONG PLACE.)
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We should sue wizards too, for restricting Lodestone Golem
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@MaximumCDawg said:
It looks like some folks out in California decided that the Judge Program actually constitutes employment of Judges by Wizards of the Coast and they've filed a class action lawsuit over it.
Complaint:
https://www.scribd.com/doc/309867466/Shaw-Et-Al-v-Wizards-of-the-Coast-LLCWizard's Press Release in Response: http://magic.wizards.com/en/articles/archive/news/wizards-responds-lawsuits-2016-04-20
In relevant part, FLSA (and the California equivalent, apparently) does not allow you to volunteer for a for-profit corporation. See http://webapps.dol.gov/elaws/whd/flsa/docs/volunteers.asp
So, the argument they are making -- and it's fascinating to me professionally - is that what a judge does constitutes "employment" within the meaning of applicable law and, as such, Wizards has been very bad for not paying minimum wage or otherwise complying with the law related to employees. That does not sound frivolous to me, though of course I'm not privy to the details of the Wizards / DCI / Judge relationship. I would expect that no matter how this shakes out, changes will be made the judge program to either resolve the lawsuit or protect against another.
I have questions:
(1) Does this mean anything for Vintage? Do we dodge the results since we usually have the TO judge the event anyway? Is this a boon for unsanctioned "Play Test Tournaments?"
(2) If this pushes on-line play, where judges are not necessary, does that help or hurt the format?
(3) It sure seems to me like this puts a fine point on the Reserve List issue that keeps popping up - yes, yes people WILL sue Wizards of the Coast in a class action if you give them a chance to do so.
(4) Steve, you're the only Magical Card Attorney I know of in California. Care to weigh in as someone who is licensed to do so? I'm not barred there. (PS NO POST IN THIS THREAD SHALL CONSTITUTE LEGAL ADVICE. IF YOU CAME TO A FORUM ABOUT MAGICAL CARD GAMES FOR BABIES AND EXPECTED LEGAL ADVICE, YOU ARE IN THE WRONG PLACE.)
Ramifications for all magic players if they succeed - $5 per pack of cards.
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I am bar certified in California, but am not a labor law expert so I don't have much to offer in terms of analysis at this point. Aside from class certification, two substantive legal hurdles plaintiff will have to clear is (1) that judges are in fact "working", and (2) that WOTC is their employer. The WOTC press release speaks to the latter, and makes a good point that at many (though not all) events judges have no relationship with WOTC, but rather with a local store. But the former may be interesting legal question.
In Walling v. Portland Terminal Co., the Supreme Court wrote:
The definition ‘suffer or permit to work’ [in the Fair Labor Standards Act] was obviously not intended to stamp all persons as employees who, without any express or implied compensation agreement, might work for their own advantage on the premises of another. Otherwise, all students would be employees of the school or college they attended, and as such entitled to receive minimum wages. So also, such a construction would sweep under the Act each person 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.
330 U.S. 148, 152 (U.S. 1947) (finding that participants in a mandatory training course offered by a railroad for prospective breakmen were not "employees" of the railroad). So clearly there is some wiggle room in the definition of work under the FLSA. Whether judges should be treated as employees may depend on how courts have interpreted the definition of "work" in the FLSA and corresponding California law. Without doing a bunch of research, I can't say much more than that, except that the frame and relative strength of the arguments may get a little clearer once there is briefing on the substantive issues, which could take a while.
The capitalized disclaimer at the bottom of the initial post of @MaximumCDawg is hereby incorporated by reference.
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How does the DCI fit into all this? Are they part of Wizards? I was under the impression they were a separate entity.
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Are the judges not paid in foil, judge only, promos? Promos that are worth it, if I may say so myself. Every state's minimum wage differs, how will this effect them? Just thinking out loud guys. Still have to click on the links and do some reading. .
"Memnarch or the vedalken salvage most of the large machines, leaving us only scraps. Scraps are enough."
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If judges are employees, there's a lot more at stake than how much they are paid.
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Not to mention the fact that you'd be hard-pressed to prove that the judge foils that judges receive actually were worth minimum wage plus expenses for the work they put it.
Thanks for the insight, aardshark. I'm going to keep an eye on this issue and I might blog about it for my firm's website. It's at least worth a mention in my standard seminars about independent contractor mis-classification in my state, right up there with California's aggressive treatment of FedEx and (more recently) Uber.
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@MaximumCDawg said:
Not to mention the fact that you'd be hard-pressed to prove that the judge foils that judges receive actually were worth minimum wage plus expenses for the work they put it.
Thanks for the insight, aardshark. I'm going to keep an eye on this issue and I might blog about it for my firm's website. It's at least worth a mention in my standard seminars about independent contractor mis-classification in my state, right up there with California's aggressive treatment of FedEx and (more recently) Uber.
Independent contractors are a big big issue in my state as well - Pennsylvania. So much so that they have their own rules governing workers compensation benefits. That is actually why I asked about the DCI which adds another layer to all this. If the DCI is its own organization and the governing body of the rules for tournaments wouldn't they technically be the ones employing judges? Aren't they the ones who approve judges?
Also are the judges considered volunteers or independent contractors? In my industry I have enough interaction with independent and general contractors (mostly construction but the same theories apply) to at least be aware of these questions. Not being in law I'm less versed on the answers.
In PA for example an independent contractor must meet 3 conditions to NOT be considered an employee:
- have a contract with the GC (in this case the IC is the judge and the GC is wizards). My guess is the judge certification program and agreement meets this criteria
- Be able to turn down work, set own hours etc. In this case they are volunteers. Any given event a judge may be able to say, "no thanks I dont want to judge"
- Have their own quality control. This is a big one and the biggest question mark on how courts would interpret it. In some tournaments a judge's word is final (smaller FNM for example where there is only 1 judge). At larger tournaments if a judge is challenged, a higher authority can review his work and do quality control over it. But of course that higher authority is another judge.
1 and 2 on the surface I think are obvious that they meet the criteria. #3 could fail meaning they'd be considered employees. But there is another wrinkle that throws #1 off and that is the DCI. If the dci is sanctioning the tournaments and the judges and is a separate entity then the judges may be considered IC's with the DCI because they would meet all 3 criteria. But they would not be considered IC's with Wizards because they have on written contract with wizards. As odd as it may sound on the surface its how the courts in PA have ruled on worker's compensation cases involving GC's and the sub-contractors they higher...and the sub-contractors the sub's higher.
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So what I seem to be reading here is that the case may have merit?
WotC on their site claims that the lawsuit is frivolous, but of course I've never seen a company, when facing a lawsuit, publish a press release stating "whoops yeah, the other guys may have a point."
It seems to me that the most likely outcome of the case, if it indeed has merit, is that WotC spins off the DCI as a separate nonprofit entity (and in particular, cedes control of certifying and banning judges to the DCI). This doesn't seem like such a bad outcome.
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@Khahan said:
How does the DCI fit into all this? Are they part of Wizards? I was under the impression they were a separate entity.
I could've sworn there was a news post about this but I can't find it. The DCI is now completely controlled by Wizards. The DCI webpage is on wizards.com (and laughably old). We could have a whole other thread about why this is a good or bad thing. Perhaps the DCI will be spun off again?
@Ten-Ten said:
Are the judges not paid in foil, judge only, promos?
Not anymore. One of the big rumors floating around when this changed was that WotC legal stopped that to prevent judges from looking too much like employees. This is also likely the largest contributor to the near doubling of GP entree fees. (I'm allowed to cite myself, right?)
Now there's the "exemplar" program. Essentially, judges nominate other judges to receive judge foils. On the plus side, bad judges are less likely to get judge foils and lower level judges are now significantly more likely to receive foils. On the negative side, the cost to hire a judge has gone up and the system definitely has potential for abuse.
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There are multiple issues at play here.
- The judges in question are seeking to be recognized as employees of Wizards of the Coast. But they are employed by the local tournament organizer, not WotC.
- WotC has intentionally structured their organized play program so that they do not run most of the tournaments (outside of Pro Tours), so if there was any kind of employee/employee relationship it would be between the judge(s) and the tournament organizer (let's say SCG, Channel-Fireball, etc.). The change in judge Foil compensation and so forth was to help clarify their stance on this issue. Your local gaming store and the regional tournament organizers are the ones paying judges (by whatever labor agreement they come to).
- Most people would consider judges, Uber drivers, and other part time ad hoc workers as contractors. There is a big push in liberal States to try to reclassify these workers as employees, so they fall under greater regulation. This is why if you dig deeper into the recent case law surrounding this crap you will see things like employees of a local McDonald's franchise trying to sue or claim that the greater McDonald's corporation (and not the local franchiser, who is the actual employer) owes them for this or that. They are trying to enjoin the parent companies, who basically have never been considered the employer (for good reason, but probably too long for the scope of discussion here).
- Concurrently, the NLRB under Obama's direction is sticking their nose into these kinds of cases all over, and basically trying to set bogus precedents for further expansion/reach into markets. These things just happen (not a coincidence) to tie into the actions of state Attorney Generals in places like CA, IL, NY, etc. It's been a concerted effort at both the state and federal level.
What does all this mean for WotC? It means they'll likely have to spend extended time and money litigating this wackass issue in front of CA courts and NLRB for a prolonged period of time, even though they're clearly in the right. It is a really dumb move on the judges' part, in that it can only damage WotC/Hasbro in the long run, and negatively affect players (via the money that would otherwise be channeled into organized play programs).
Find me on Twitter @JMJACO and @EternalCentral. If you have an interest in Vintage Eldrazi, check out my book Eldrazi Meditations.
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So are these clowns going to pay back taxes for all the product if they win? Or is being paid in barter somehow tax exempt?
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JACO, while I respect your position, you're not really giving this an even-handed approach.
@JACO said:
- WotC has intentionally structured their organized play program so that they do not run most of the tournaments (outside of Pro Tours), so if there was any kind of employee/employee relationship it would be between the judge(s) and the tournament organizer (let's say SCG, Channel-Fireball, etc.). The change in judge Foil compensation and so forth was to help clarify their stance on this issue. Your local gaming store and the regional tournament organizers are the ones paying judges (by whatever labor agreement they come to).
I'm sure all of that is true, from Wizard's perspective. But, just because you strive to set up a relationship that falls outside of the definition of "employment" does not mean you always succeed. It depends on the particular kind of relationship. I would assume that WOTC attorneys have already vetted the relationship and set up something they believe will pass muster, but it's very hard to stay on top of shifting law in a state like California. Even worse, all your best laid arrangements can sometimes mean nothing if the "worker" themselves is disputing what the relationship actually was.
@JACO said:
- Most people would consider judges, Uber drivers, and other part time ad hoc workers as contractors.
Would they? To begin with, obviously reasonable minds can differ on this. Uber, for instance lost a motion for summary judgment where they contended basically this. (They did then settle the lawsuit before a jury got to decide.)
You have to be careful making sweeping generalizations about what is an employee and what is not. For instance, suggesting that all "part time and ad hoc" workers are not employees would exclude temp workers or part time workers. Courts do a more holistic analysis of the facts of the relationship when they look at it.
- Concurrently, the NLRB under Obama's direction...
You lost me here, when your post started to read more like a political diatribe than a reasoned opinion. Here, you started using words like "bogus precedents," call the case "wackass," suggest that WoTC is "clearly in the right," and so on. In an effort to bring more moderation to the discussion, let me explain the situation as I see it (as someone who litigates this issue on both sides in my state):
I have observed a push by state agencies (in non-liberal states) towards reclassifying workers as employees. Locally, this started around the time of the recession in 2008, when the state unemployment insurance office started hemorrhaging money due to all of the people being out of work. It appears to me that the agency beefed up its enforcement wing substantially to recoup the losses and has been pushing hard ever since.
The way the agencies view it, they are not trying to "push a libru'l agenda on 'merica" or anything like that. They see themselves as trying to fight a business system that has evolved to try and escape regulation through artificial structures designed to make what would at first blush look like an employee -- the person who actually does the work your business gets paid to do, under the company's direction and control -- into an independent contractor. Sometimes, like for small contractors, this is done out of ignorance or because the worker sees a bigger paycheck if they get a 1099 instead of a W-2. For more sophisticated businesses, like FedEx or trucking companies, this is a very specific plan designed to minimize the business' costs or liability exposure.
It's not "clear" at all which side is in the right here. I have seen and dealt with many businesses who have very deliberately designed a relationship to try to escape the normal protections workers enjoy. I have also seen businesses who legitimately need to hire contractors and not employees (for example, where the workers are doctors or other licensed professionals who need to exercise independent judgment.) It depends on the context.
The reason I find this case so fascinating is that I have not yet encountered a situation where someone is freely engaging in a leisure activity, but in an authoritative role, and considered when that would cross the line into employment. Consider: are sports referees employees? At the professional level, I bet they are. What about people who volunteer to ref at a Little League game? Or parents who run a Cub Scouts Den? There's probably cases out there on this, but I have not read them yet, so I look forward to learning more about where the line is.
@nedleeds said:
So are these clowns going to pay back taxes for all the product if they win? Or is being paid in barter somehow tax exempt?
Tax advice is a tricky thing and you need to pay a lot of money to get it from someone who will review the particulars of each situation. In general, however, the IRS will tax income from any source, including litigation, absent certain exceptions.
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@MaximumCDawg said:
@nedleeds said:
So are these clowns going to pay back taxes for all the product if they win? Or is being paid in barter somehow tax exempt?
Tax advice is a tricky thing and you need to pay a lot of money to get it from someone who will review the particulars of each situation. In general, however, the IRS will tax income from any source, including litigation, absent certain exceptions.
They should have been paying taxes on the product from the start. Being paid in barter is not a workaround to paying taxes, it just means that now you need to come up with the fair market value (at that time) of whatever it is you bartered your services for, and include that as income. Whether you would also be responsible for self employment tax or any of the payroll taxes in such a situation I am not sure of.
But basically under no circumstances are the judge rewards gifts. They were given in exchange for service, and without a doubt represent payment, or at the very least a prize. They are income. The interesting part, to me, is not whether the rewards or whatever are income but what kind of deductions the judges would get. Are they employees? Are they independent contractors? Are they self employed? That would all matter, and until you sort out their classification you can't really assess the full scope of the tax implications beyond the fact that the judges should DEFINITELY have been reporting their judge rewards as income.
Don't trust your secrets to the sea.
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I don't think you're wrong, exactly, but as a practical matter there are lots of transactions that should be taxed that people tend not to report. Did you hire someone to perform contract work at your house? Did you hire a babysitter to watch your kids each weekend? You may have been supposed to issue them a 1099, or in the case of child care, you may technically have been required to pay them like an employee, withhold wages, and issue a W-2. Fun, huh?
I think there are specific thresholds of an amount of money you pay to someone each year that trigger a need to report the payment, but the general point is that there are tons of taxable transactions that fly under the radar due to ignorance all the time.
@rikter said:
That would all matter, and until you sort out their classification you can't really assess the full scope of the tax implications beyond the fact that the judges should DEFINITELY have been reporting their judge rewards as income.
Can you defend against a tax assessment on an issue like this by claiming something like "innocent spouse?" That is, the transaction was re-classified as a gift to compensation for employment after the fact? My sense of fairness makes me think there probably is a way to avoid paying at least penalties and interest in that case, but I dont know.
Woe be onto he the Judge who received 100 Force of Will judge promos as his compensation, I guess.
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Ultimately, this isn't about what's best for the game. This is about California law. It's easy to get emotionally invested, but the fact is that the game is fundamentally intertwined with the law because it can't exist without strong copyright and trademark protections. It thrives in part because of a massive and unregulated secondary market without any of the usual protections or restrictions.
Ultimately, Magic will be a bubble that pops. The cards simply aren't "worth" their ascribed values. Unlike a dollar that has guaranteed value as a means of paying American taxes, nobody is sitting around guaranteeing the value of Black Lotuses or aggressively hunting down counterfeiting operations. In fact, we presently see counterfeiting operations increasing both their quality and rate of output over time. Unless Wizards agrees to be a buyer of last resort for authentic Magic cards and guarantees buy prices, a card is only "worth" the cost of producing an undetected forgery. The cost is dropping and so is the rate of detection.
If you're going to get up in arms about anything, it shouldn't be the relationship between Wizards and judges. It should be that Wizards isn't making an effort to make Black Lotus harder to counterfeit. The treasury actively takes older, more easily counterfeited bills out of circulation. Wizards is making zero attempt to remove Beta cards from circulation and replace them with cards with stronger anti-counterfeiting protections.
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P.S. I still love you, Duck.
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@MaximumCDawg said:
I don't think you're wrong, exactly, but as a practical matter there are lots of transactions that should be taxed that people tend not to report. Did you hire someone to perform contract work at your house? Did you hire a babysitter to watch your kids each weekend? You may have been supposed to issue them a 1099, or in the case of child care, you may technically have been required to pay them like an employee, withhold wages, and issue a W-2. Fun, huh?
I think there are specific thresholds of an amount of money you pay to someone each year that trigger a need to report the payment, but the general point is that there are tons of taxable transactions that fly under the radar due to ignorance all the time.
@rikter said:
That would all matter, and until you sort out their classification you can't really assess the full scope of the tax implications beyond the fact that the judges should DEFINITELY have been reporting their judge rewards as income.
Can you defend against a tax assessment on an issue like this by claiming something like "innocent spouse?" That is, the transaction was re-classified as a gift to compensation for employment after the fact? My sense of fairness makes me think there probably is a way to avoid paying at least penalties and interest in that case, but I dont know.
Woe be onto he the Judge who received 100 Force of Will judge promos as his compensation, I guess.
In the examples above, you wouldn't have to issue the 1099 unless the payments were made as part of a trade or business, so that would be out. The babysitter, under certain circumstances, may require you to withhold and do a W2, but again, situation dependent. The common conception of a babysitter would likely not require a W2.
As to the judges: depending on how much they made, the value of the compensation, etc. not every judge would need to report...but this would be because their total income didn't exceed the standard deduction for that year. If you are at the filing threshold, even $5 you found on the street should be included as income. Now obviously no one is going to report that they found $5, and no one is going to catch you, but the fact remains that you are supposed to include it.
You could maybe try and argue that the promos from Wizards represent an Achievement award, and should therefore be excluded, but the sealed product that the TO gave you is straight up income.
The guy that got paid in 100 Judge FoW's might be OK, you'd have to use the value at the time of issuance to figure out what the hit would be, but I don't know what those things opened at.
Theres no way to get around the interest. You might be able to get around the penalties, but not the interest.
@AmbivalentDuck said in Judges Suing Wizards:
Ultimately, Magic will be a bubble that pops. The cards simply aren't "worth" their ascribed values. Unlike a dollar that has guaranteed value as a means of paying American taxes, nobody is sitting around guaranteeing the value of Black Lotuses or aggressively hunting down counterfeiting operations. In fact, we presently see counterfeiting operations increasing both their quality and rate of output over time. Unless Wizards agrees to be a buyer of last resort for authentic Magic cards and guarantees buy prices, a card is only "worth" the cost of producing an undetected forgery. The cost is dropping and so is the rate of detection.
Dude I just picked up of the new black core proxies for research purposes. They are shit. Even if you managed to take away the gloss they are shit, because the printing is shit and fine details get obliterated. Anyone with a loupe and a few commons for reference could spot the issues. Even without a loup they evidently don't luminesce under UV light as well, though I haven't personally tested this yet because my light hasn't come in yet. But these are touted as state of the art, and they are shit, trust me. They look scary good in pictures, but in person they are shit.
Older Magic cards have inherent value simply because of their rarity. Marquis baseball cards still have high value, and you can't even do anything with them besides look at them. Magic cards are deeds, that allow you to take actions in the game...they are functional aside from being rare.
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@AmbivalentDuck I am very curious as you are making pretty sweeping claims about massive counterfeiting operations currently operating and increasing in scope. Could you provide some articles or evidence of this that you have personally experienced? Extremely curious about this particular issue.
