We report below on three new lawsuits filed last month for independent contractor (IC) misclassification. In the first, an automotive repair tool company operating on a franchise business model was sued by mobile tool dealers who signed franchise agreements classifying them as ICs. The franchise business model has been a frequent subject of IC misclassification cases under state and federal wage and hour laws, as we have noted in a number of our blog posts. While one well-known franchisor successfully defeated a state IC misclassification case in Massachusetts, most of these class action lawsuits have resulted in unfavorable results for franchisors including costly settlements. But franchise arrangements can be structured in a manner that maximizes compliance with state and federal labor and employment laws. Franchisors can use a process such as IC Diagnostics (TM) to structure, document, and implement franchise arrangements in a manner that enhances IC compliance in a customized and sustainable manner — in much the same way that other companies can when utilizing an IC business model. Use of a standard franchise agreement designed for company-to-company relationships is not well suited from an IC compliance standpoint for use with franchisees that own and operate a one-person business, whether as a sole proprietor, limited liability company, or corporation.     

In the Courts (3 cases)

MOBILE TOOL FRANCHISOR SUED IN CLASS ACTION LAWSUIT ALLEGING IC MISCLASSIFICATION. A mobile tool dealer that signed a franchise agreement with an automotive repair tools company commenced a class action lawsuit in a federal court in California alleging that the company misclassified him and other franchisees as ICs instead of employees. The dealer, who signed a “Dealer Franchise Agreement,” claims that the company violated California’s Labor Code and wage orders by failing to reimburse him and other dealers for their business expenses or pay for overtime hours. The court complaint states that the company’s website provides that it is the longest running mobile tool company selling direct to professional technicians across the country via mobile tool franchise owners. The complaint further asserts that the company requires the dealer franchisees to wear company-approved uniforms, undergo extensive training, participate in ride-alongs, attend meetings and other company-sponsored events, and pay for the costs of their fuel consumption, uniforms, truck payments, and insurance, and broadly reserves the right to terminate its relationship with the dealers. The complaint further alleges that the arbitration provisions of the franchise agreement are unenforceable in California. Florea v. The Cornwell Quality Tools Company, No. 5:25-cv-03343 (C.D. Cal. Dec. 11, 2025).

ANOTHER IC MISCLASSIFICATION LAWSUIT INVOLVING THE LEGAL INDUSTRY. We reported last month in a blog post that the legal industry was under attack for IC misclassification, noting two recent cases: one involving a worker who fielded inquiries by prospective clients for Lawyer.com, and the other involving a consultant providing client intake and retention services for personal injury law firms. This past month, a lawyer engaged by a personal injury law firm calling itself The Law Collective filed a lawsuit in a California state court claiming violations of the state’s Labor Code for wage and hour violations and for retaliatory discharge. The lawyer, who served as a settlement negotiator, claimed he worked an average of 84 hours a week, yet the law firm, which initially classified him as an employee but later reclassified him as an IC, did not pay him for his overtime hours. He also alleges the firm unlawfully terminated him because he complained about being misclassified as an IC and not being paid the wages he was allegedly owed under law. Israel Garcia-Wood v. The Law Collective, No. 25STCV35143 (Super. Ct. Los Angeles County Dec. 2, 2025).

PHARMACY DELIVERY COMPANY AND ITS CEO SUED BY DRIVERS FOR IC MISCLASSIFICATION. A group of delivery drivers has filed a proposed collective action lawsuit against a pharmaceutical delivery company and its CEO under the federal Fair Labor Standards Act (FLSA) as well as a proposed class action under Kentucky wage and hour laws, alleging that the drivers were misclassified as ICs instead of employees. According to the complaint filed in federal court in Kentucky, PharMerica Drug Systems, LLC d/b/a Diligent Delivery Systems classified as ICs the drivers it engaged to deliver medication to its customers, including senior living communities, hospitals, and behavioral facilities. The plaintiffs contend that Diligent paid the drivers a “route pay” per weekday regardless of the time it took them to complete their work each day, and that after accounting for the costs of providing their own “employee benefits” and transportation costs, the drivers were paid less than the statutory minimum wage and did not receive applicable overtime compensation. The drivers contend that the defendants dictated the details of the performance of the work, including how, when, and where to provide the services, and subjected them to supervision and monitoring. The drivers also claim that they exercised no independent judgment or discretion in performing their services; did not have an opportunity for profit; and did not make any significant investments in relation to their work for the defendants. In addition, the complaint alleges that Diligent and its CEO “consented that their ‘driver employees’ were employees instead of independent contractors in a similar case brought by the Secretary of the U.S. Department of Labor” in an Arizona federal court and that Diligent and the CEO paid the driver over $5.7 million in back wages and liquidated damages and $100,000 in civil monetary penalties. Carr v. PharMerica Drug Systems LLC, et al., No. 3:25-cv-00768 (W.D. Ky. Dec. 9, 2025).

Regulatory Initiatives (1 case)

D.C. ATTORNEY GENERAL REACHES $1.5 MILLION SETTLEMENT WITH CONSTRUCTION COMPANY FOR IC MISCLASSIFICATION.  The Attorney General for the District of Columbia has reached a $1.5 million settlement with a mechanical services company resolving allegations that the company and its subcontractors misclassified hundreds of workers as ICs, resulting in their loss of wages and benefits. Brothers Mechanical Inc. specializes in design, installation, and service of air conditioning, heating, ventilation, plumbing, and control systems and has worked on construction projects in D.C. and nationwide. According to a press release issued on December 9, 2025 by the Attorney General, his office “uncovered evidence that from 2020 through the present [that] Brothers Mechanical entered into agreements with subcontractors to provide about 500 construction workers to staff its projects, and that these workers were illegally misclassified as independent contractors.” Because they were misclassified, these workers were not paid overtime premiums when they worked more than 40 hours in a week, were not provided with paid sick leave, and were excluded from unemployment insurance and workers’ compensation programs. The settlement requires the company to make payments to eligible workers and pay penalties to the District. In addition, it also requires the company to treat the workers as employees and mandates that any company subcontractors submit certified weekly payroll information.