Immediately following the issuance of the U.S. Supreme Court’s decision in New Prime v. Oliveira on January 15, 2019, we stated in a blog post that “even if an individual or group of workers is excluded [from arbitration] under the federal arbitration law, state arbitration laws may cover them and provide a statutory basis for compelling arbitration.” Soon thereafter, in a Law 360 article discussing a Washington State federal district court ruling that independent contractor drivers providing services to Amazon could not be compelled to arbitrate their IC misclassification claims, the reporter Linda Chiem quoted the publisher of this blog: “There’s a ‘hidden lesson’ from the Amazon decision. Companies can get around ‘arbitration-unfriendly laws’ by making sure it’s spelled out that their independent contractor agreements are governed by state laws that do not have the type of exclusions found in the Washington state arbitration law that tripped up the Amazon agreement.” As noted in the first two case developments from March 2021 as reported below, that is precisely what companies are beginning to do and the courts have agreed that state arbitration laws are all that is needed to compel arbitration.

Micro-mobility company Lime, which provides electric scooter and bike sharing to customers through its mobile app, has been targeted by plaintiffs’ lawyers in class action and representative lawsuits attacking one of the core components of its business model.  Lime engages drivers to recharge the batteries of electric scooters and bikes for its customers.  It treats the drivers as independent contractors.  As detailed below, on the same day a state court rejected Lime’s effort to settle four related representative lawsuits for $5 million, it was sued again in the same court in a proposed class action lawsuit. The litigious assault Lime has experienced mirrors the challenges other companies using an independent contractor business model have experienced: multiple lawsuits.

January 2021 may well be remembered in the independent contractor area of law as the “not so fast” month. The Fifth Circuit Court of Appeals told lower courts “not so fast” when it comes to certifying collective actions.  That appellate court imposed a new and more rigorous standard that plaintiffs will have to meet to attain certification of their collective actions under the Fair Labor Standards Act. GrubHub and other companies that engage couriers to deliver food from restaurants have generally succeeded in compelling arbitration of courier claims for independent contractor misclassification.  These companies have avoided application of the arbitration exemption in the Federal Arbitration Act for interstate transportation workers.  As we reported here on September 18, 2020, the United States Court of Appeals for the Seventh Circuit held that couriers providing deliveries for customers of GrubHub were not involved in interstate commerce. But only last week, as reported below, a Massachusetts court essentially said, “not so fast,” reaching the opposite conclusion when it held that couriers providing deliveries to GrubHub customers of pre-packaged and non-food items originating outside of Massachusetts (such as soft drinks, chips, toilet paper, cleaning products, and flowers) were exempt from arbitration under the interstate transportation worker exemption. This area of the law is evolving with new arguments by plaintiffs’ class action lawyers seeking to circumvent arbitration agreements.

As we reported here on the day the U.S. Department of Labor issued a proposed regulation regarding the classification status of independent contractors, the regulation, once finalized, would be “much ado about (almost) nothing.”  We observed that unlike regulations with hard and fast rules, the proposed regulation was in the nature of an administrative interpretation comprising the Labor Department’s review of existing court decisions and its articulation of a preferred legal analysis. We predicted that, when released in final form (which occurred today), courts would not give much if any deference to this agency regulation on the classification of independent contractors under the federal wage and hour law.

December was a very slow month for court decisions affecting independent contractors, but both decisions reported below confirm that effectively drafted arbitration clauses remain one of two “best friends” for businesses that engage independent contractors. On the very day the U.S. Supreme Court issued its decision in New Prime Inc. v. Oliveira in January 2019, we predicted here that, despite some commentators’ exuberance and others’ despair, the decision “may have little or no impact as to whether workers classified as independent contractors can be compelled to arbitrate their IC misclassification claims.”  In New Prime, the Supreme Court held that a court, not an arbitrator, should decide if an IC is covered by the Federal Arbitration Act’s arbitration exclusion for workers engaged in interstate transportation. We commented that the FAA is not the only basis upon which companies can seek to compel arbitration; most state arbitration laws, which typically do not have exclusions for interstate transportation workers, also may provide an alternative basis to compel arbitration of IC misclassification class action claims. That is exactly what transpired in one of the two IC arbitration cases we discuss below.

November 2020 was a superb month for ride-sharing and app-based delivery companies and for President-Elect Biden, but was far less favorable to professional sports leagues, interpreting and translation companies, oilfield businesses, and the trucking industry. We comment below on the success enjoyed in a California voter referendum for selected gig economy industries and the Biden Plan for addressing independent contractor misclassification. But unfavorable class action litigation experiences in other industries, including high-profile cases involving the NFL and the trucking industry, send a message to businesses using independent contractors that they need to enhance considerably compliance with federal and state independent contractor laws.