In October, a diverse group of industries experienced adverse court rulings defending independent contractor classification class and collective action cases.  Two cases involved courts granting conditional certification of collective status: one involves Texas oil field workers; the other concerns Illinois cable technicians.  Both industries have been targeted by multiple IC misclassification class actions, as reported on a number of occasions in this blog. Shipt, the personal shopping service, was subjected to a new IC misclassification lawsuit, also in Illinois, which uses a test for independent contractor status that is very unfavorable to companies with an independent contractor business model. A pet sitting company in Missouri also fared poorly when an appellate court affirmed an administrative decision finding the pet sitters with whom it contracts are employees and not independent contractors.  A shipping company suffered the worst news last month for companies relying on the use of independent contractors when it lost its effort to bypass an administrative decision assessing it $1.8 million in unemployment tax liabilities for drivers found to be misclassified as independent contractors.

The results are in. Voters in California don’t want their rideshare and app-based delivery services to change.  By an overwhelming majority, Proposition 22 was approved by California voters.  Essentially, that means that unlike all other businesses in California that have to meet the strict Dynamex ABC test or, if they are exempted from this test, the more rational multi-factor Borello test, companies in these gig economy industries now have a safe harbor, so long as they provide the benefits set forth in Prop 22 to their independent drivers and couriers.

Last month presented a clash between the enactment of a new version of the most restrictive ‎state law test in the nation for independent contractor status and the issuance of a proposed ‎federal regulation that would create one of the more lenient legal standards for IC status. The ‎state law, California Assembly Bill 2257 (AB2257) which Governor Newsom signed into law on ‎September 4, 2020, replaced Assembly Bill 5 (AB5), which had codified California’s version of ‎the so-called ABC test. Many commentators regard this ABC test, which changed decades of ‎settled law, as the death-knell for the overwhelming number of California independent contractor ‎relationships that were structured in a lawful manner, causing many freelancers to lose their work ‎opportunities with both gig economy and traditional businesses. Meanwhile, the U.S. Labor ‎Department issued a proposed regulation establishing a test for IC status under the Fair Labor ‎Standards Act that essentially preserves the legitimate nature of many independent contractor ‎relationships but did so in a manner that may insulate more businesses from misclassification ‎liabilitys. ‎

Earlier today, the U.S. Labor Department issued a proposed regulation addressing the ‎classification criteria of workers as independent contractors or employees under the Fair Labor ‎Standards Act (FLSA). Unlike regulations with hard and fast rules, this proposed regulation is in ‎the nature of an administrative interpretation articulating the Labor Department’s view of the ‎law. It analyzes decades of court decisions and seeks to issue a uniform interpretation of those ‎cases for the courts to apply in the future. Yet at the same time, the proposed regulation includes ‎a 90-page preamble that acknowledges that the courts have, with few exceptions, uniformly ‎applied the test for independent contractor status under the FLSA. The proposed rule, therefore, ‎if issued in final form, would provide little guidance to the public or the courts. But it will shine ‎a brighter light on the issue of independent contractor misclassification. Companies would be ‎wise to enhance their independent contractor compliance, such as in the manner noted in the ‎‎“Takeaway” below.

Last month’s legal news in the area of independent contractor misclassification and compliance was dominated by two key arbitration decisions by federal circuit courts: one that compelled arbitration of an IC misclassification lawsuit by drivers delivering restaurant food through the GrubHub platform, and the other where a motion to compel arbitration was denied in an IC misclassification lawsuit by drivers making last-mile deliveries of packages for Amazon.com. We commented on the Amazon case in a separate blog post last month and in a Law360 article quoting the publisher of this blog, where we noted that most companies should not be concerned about the Amazon decision because the arbitration clause used by Amazon appeared to be rather unique. Two of the other cases we report on below are meaningful for businesses in two industry sectors: blogging and pharmacies.

Two recent federal appellate court decisions struck down Amazon’s arbitration clause ‎in its agreements with workers who deliver its packages to Amazon customers. Those ‎two rulings have created great concern for businesses in the transportation industry. ‎However, it is important to understand that the contractual language at issue in these ‎two cases is unique to Amazon. In most instances, arbitration agreements with class ‎action waivers can be enforceable, even when applied to workers who deliver or ‎transport products in interstate commerce. This blog post provides tips for companies in ‎all industries (including the transportation, delivery, and logistics sectors) how to more ‎effectively draft arbitration provisions with class and collective action waivers in their ‎independent contractor agreements.

Six of the nine cases reported below from July 2020 involve drivers’ class action lawsuits alleging independent contractor misclassification against transportation and logistics companies. They include three settlements, the largest of which could cost the defendant trucking company as much as $28 million. The fourth and fifth cases involve conflicting decisions by key appellate courts as to whether arbitration clauses are enforceable against drivers found to be engaged in interstate commerce. The sixth case pertains to a court’s certification of yet another class action IC misclassification case by drivers brought against a transportation company.