How much control is too much?
That is a question that executives within, and shareholders of WWE, my soon be thinking
about as they try to get to sleep at night.

Before I go too far into my perspective on the recent revelation that a number of former
WWE contracted performers have filed suit challenging their previous status as
independent contractors, allow me to share my thoughts regarding litigation in
general:

I despise it.

As I have stated in a previous blog (“Never Say Never”), Shakespeare may have been on to something when he suggested in Henry VI that we “kill all the lawyers”. Don’t get me wrong,
I don’t think all lawyers are scumbags, and I don’t believe that all lawsuits are frivolous and
without merit.

But unfortunately all too many lawsuits and the tactics of the lawyers/’firms and clients
involved, create collateral damage to righteous claims. This damage can range from negative
public opinion (and tainted jury pools), to low-rent law firms that troll for potential class
action litigants on late night local cable television like hookers on a street corner, to a
clogged up judicial system that forces legitimate claims to be dragged into protracted legal
battles and are determined not by case law or a jury, but by a plaintiffs or a defendants
financial ability to run a legal marathon.

Case in point: The recent lawsuit challenging WWE’s independent contractor vs employee
designation.

This is a complex issue and it is going to be a very interesting situation to watch un-fold
as it may have profound impact on WWE and TNA.

Back in 1998, when the full impact of the Turner/Time Warner merger began to manifest
itself as a power grabbing corporate orgy of gamesmanship, one of the issues raised by
some executives that tried previously (and unsuccessfully thanks to Ted’s vision and the
performance of WCW at the time) to divest the Turner Broadcasting portfolio of the WCW
division, was the concern over the independent contractor/employee status of WCW’s talent.
The argument as I remember hearing it (I wasn’t invited to the meetings) was that the exposure
to Turner/Time Warner due to a potential adverse IRS determination regarding this issue could
have resulted in fines, increased cost of business going forward, and a hit to TWX stock as a
result.

Fast-forward 10 years later. WWE is now a publicly traded company. It is responsible to
its shareholders, and therefore must react to market conditions and influences much differently
than when it was a privately held company. While the Chairman can stack the deck with a
Board of Directors and executive management team that looks more like a friends and family
reunion than anything else, should the IRS determine that WWE’s contracted talent are
employees and not independent contractors, there is the potential for significant fines,
expenses and cost of doing business on a go-forward basis that could have a serious
negative impact on WWE stock.

How bad you ask? I am not an attorney or an employment tax expert, but I did get my
ass kicked once by the IRS back in the late 80’s/early 90’s and I do know that they lack
anything that resembles a sense of humor.

When the IRS determines that one didn’t pay what one should have paid in taxes, they tend to
grab a calculator that has it’s own unique decimal system, a calendar, and a team of lawyers
looking for press and attention.

Example?

If, as a result of this recent lawsuit, the IRS determines that WWE’s contract talent are
employees and NOT independent contractors, that means that in addition to many other
expenses relating to the cost of accounting changes, WWE will be required to contribute approximately 7.5% of the salaries paid to its newly minted talent/employees to OASDI
(Old Age and Survivors Disability Insurance).

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