October 2023

The highly controversial joint employer regulation just issued by the National Labor Relations Board (NLRB) on October 26 is not so different than the standard that has historically been applied in determining whether a group of workers are employees or independent contractors under many state and federal laws. Indeed, a legitimate criticism of the NLRB’s joint employer rule is that it improperly relies upon one of the most important factors used by the courts to determine independent contractor status: reservation of the “right to control” the manner and means by which the agreed upon services are performed, “regardless of whether control is exercised.” 29 C.F.R. 103.40(e)(1). …

Every so often a large settlement of a class action lawsuit reverberates in the independent contractor world – but last month there were two mega-settlements. The first was between Flowers Foods, a large nationwide baked goods company, and a class of distributors who sued for allegedly misclassifying them as independent contractors in violation of the California Labor Code. The $55 million settlement covering 475 distributors is a very high per plaintiff result. In addition, Flowers Foods reports that it will be incurring another $50 million to buy back about 350 distributor routes and then convert them to an employee distributor model. The other mega-settlement involves a large commercial cleaning company, JanPro, which was sued in California by over 2000 janitorial franchisees for misclassification under the state’s Labor Code and fair trade practices laws as well as breach of contract. JanPro is settling for $30 million. These two settlements demonstrate that California’s very strict test for IC status is extraordinarily unfavorable to many companies with IC relationships that are otherwise lawful under most other state and federal IC laws, assuming the IC relationships are structured, documented, and implemented in a compliant manner. Many businesses that seek to maintain their IC relationships across the U.S. but minimize misclassification exposure in California and other states have followed a process such as IC Diagnostics (TM), which offers companies a customized and sustainable approach to enhance IC compliance.…

It’s been almost a full year since the U.S. Department of Labor issued its proposed regulation ‎entitled “Employee or Independent Contractor Classification under the Fair Labor Standards ‎Act.” The proposed regulation was fully intended to overwrite the Trump Administration’s ‎regulation covering the same subject, which the Biden Administration felt was weighted in ‎favor of businesses. Over 55,000 comments to the proposed regulation were posted in a two-‎month period by individuals and organizations both in support of and in opposition to the ‎proposed regulation. Informed sources indicate that a final regulation is expected to be released ‎this month, perhaps as soon as this coming week. We anticipate that the final regulation will ‎contain few if any meaningful changes from the proposed regulation despite the tens of ‎thousands of comments. But, does it really matter – at least legally? And what will the practical ‎effects be? ‎…