Perhaps the most significant development involving independent contractor compliance and ‎misclassification issues in December 2021 received relatively scant attention: a detailed empirical ‎study based on survey results of a cross-section of Americans entitled “The State of Gig Work in ‎‎2021.” The study was undertaken by Pew Research Center, a non-partisan think tank. One of its ‎most important conclusions involves the self-perception of gig workers: “65% see themselves as ‎independent contractors, while 28% view themselves as employees.” Another key conclusion is ‎that almost twice as many Americans support maintaining the status quo in government ‎regulation of companies using gig economy workers. These and other results of the study are ‎likely to influence federal and state legislators who may consider changing existing laws ‎governing independent contractors. The study confirms that an overwhelming percentage of ‎freelancers and other gig workers want legislators and government agencies to take a hands-off ‎approach and leave existing independent contractor laws intact. These and other conclusions of ‎the study are discussed in more depth below.‎

The highlights of independent contractor legal developments in November 2021 focus on interstate transportation workers.  Questions addressed by the courts last month included whether ride-sharing workers classified as independent contractors are considered interstate transportation workers and therefore exempted from the arbitration provisions of the Federal Arbitration Act, and whether the strict test in California for IC status, when applied to interstate truck drivers, is preempted by the federal law deregulating the airline and transportation industry.

October was a relatively “slow” month for legal developments in the areas of independent ‎contractor misclassification and compliance. But for companies that engage drivers to distribute ‎pharmaceutical products, a nearly $12 million settlement of an IC misclassification case last ‎month may persuade even more companies in that industry to consider taking steps to further ‎enhance their IC compliance. Indeed, this eight-figure settlement is one of five IC ‎misclassification cases that we have reported on in the past two years where class action lawyers ‎have targeted companies that use independent contractors to deliver pharmaceutical products.‎

On October 11, 2021, we published a blog post on vaccination mandates for independent contractors.  We addressed the issue of whether OSHA, in issuing a rule covering so called “large employers” with over 100 employees, will seek to expand the definition of employee to include independent contractors. We noted that despite the national debate over the appropriate test for IC status, “OSHA is highly unlikely to wade into that hotly contested area when carrying out the Biden Administration’s COVID-19 Action Plan.”  In the Emergency Temporary Standard (ETS) just released by OHSA, the federal agency has indeed chosen not to cover independent contractors either within the scope of persons who must be vaccinated or tested or in determining whether a company employs 100 or more employees.  As the ETS states: “Part-time employees do count towards the company total, but independent contractors do not.”

State legislative efforts to expand the coverage of new employment laws to independent contractors in addition to employees continue to emerge.  It appears that New York is on the cutting edge of this trend.  We highlight below an amendment to New York’s whistleblower law, which was signed into law on October 28, 2021.  It not only significantly broadens the scope of whistleblower protections in New York State but also enlarges the definition of protected “employees” to include independent contractors. 

In the same month that 7-Eleven prevailed in a federal court trial where convenience store franchisees claimed they were not independent contractors but rather employees entitled to the protections of state labor laws, a federal appellate court concluded last month that franchisees can be employees for purposes of some state laws.  As discussed below, the issue in the appellate case involved whether a commercial cleaning franchisor, Jani-King, was permitted under the Connecticut minimum wage and anti-kickback labor laws to deduct fees from the earnings of the franchisees. The court concluded that Connecticut law permits such deductions even if the franchisees are employees under state wage laws. Franchisors should note, however, that Connecticut law is not in harmony with the minimum wage and wage deduction laws in many other states, and unless the franchisor has elevated its level of compliance with federal and state independent contractor laws, it is at risk of an adverse judgment for misclassification liability.  Franchisors would be wise to utilize a process such as IC Diagnostics (TM) to restructure, re-document, and/or re-implement their IC relationships to enhance IC compliance in a customized and sustainable manner consistent with their business model.

Can companies mandate that independent contractors be vaccinated?  Do independent contractors have any rights if they are unwilling to comply with a vaccination mandate?  The answer to these questions may depend on whether the independent contractor has been properly classified.  Before imposing a vaccination mandate on ICs, companies should take steps to enhance their compliance with applicable federal and state laws governing ICs, as discussed in this article.

The first three cases reported below regarding legal developments in August 2021 have four common denominators: the defendants are all large gig economy companies; plaintiffs’ class action counsel is the same; the lawsuits are all situated in New York; and all four are already on their way to arbitration or are highly likely to end up there shortly.  Lyft, Uber, and Instacart have been the subject of independent contractor misclassification lawsuits around the country by many law firms, but the law firm with the most class action cases against those companies is Lichten & Liss-Riordan. When faced with one of these types of cases, it seems as though we are in a déjà vu environment:  the company’s counsel typically argue that, where there is an arbitration clause with a class action waiver, the Federal Arbitration Act commands a court to compel arbitration of the claims on an individual basis. Then, in cases involving workers who drive vehicles, plaintiffs’ lawyers, including the law firm in the first three cases below, invariably argue that the FAA is inapplicable because Section 1 of that statute has an arbitration exemption for interstate transportation workers.  Thus, many of these cases seem to present the same threshold issue: are the plaintiff and members of the proposed class covered by the arbitration exemption for interstate transportation workers?