In the Courts (5 cases)

Massachusetts High Court Defines a Company’s Liability to Third Parties for a Contractor’s Alleged Negligence. The Supreme Judicial Court of Massachusetts in August decided a case involving a roofing subcontractor that failed to use fall protection equipment on a project, allegedly leading to a worker’s personal injury. While the worker was covered by Workers’ Compensation in relation to his claims against the roofing company, he sued the building owner under two legal theories. The first was negligent hiring, based on the injured party’s claim that the owner knew or should have known that the roofing company engaged by the owner had a record of failing to maintain safe worksites. The second was that the owner retained the right in its contract with the roofing company to control the work of the latter, yet failed to take actions to ensure the worker’s safety. The court ruled in favor of the owner on both legal theories. It concluded that the wording in the parties’ contract was a “general right to direct and stop work,” not retained control over safety practices at the worksite.

This case did not present a claim of vicarious liability based on an allegation of IC misclassification. The test for IC status in a third-party liability claim differs considerably from the test for IC status in a wage and hour claim. Many plaintiffs’ personal injury lawyers, though, commonly include a misclassification claim in their lawsuits, claiming an IC’s alleged negligence should be vicariously imposed on the company that engaged the IC under the legal doctrine of respondeat superior. This is the same theory that third parties use when injured by a company’s employee. Unless a business structures, documents, and implements its IC relationships in a manner enhancing compliance, it is vulnerable to all of these types of legal theories. Further, liability can arise not only where the IC is retained to provide services directly to third parties, but also where the IC injures a third party, such as an IC that drives a truck on public roadways in connection with their services. Luis Contento Suquilanda v. Skyway Roofing Inc., No. SJC-13878 (Sup. Jud. Ct. Mass. August 17, 2026).  

General Contractor Sued for IC Misclassification Along with Construction Subcontractor under Joint Employment Doctrine by Carpenters. Construction trades workers engaged to perform carpentry on a resort company’s $900 million project have filed a class action lawsuit in a Virginia federal court against the general contractor and carpentry subcontractor for violations of the wage and hour provisions of multiple state laws, alleging they were misclassified as ICs instead of employees. The claims against the general contractor and carpentry subcontractor were brought under the state’s wage payment act, minimum wage and overtime laws, and paystub transparency law.  The carpenters allege in their class action complaint that they were deprived of overtime wages and pay for work they performed on the project. According to the complaint, the general contractor had a contractual relationship with the carpentry subcontractor who, in turn, allegedly engaged a labor broker to recruit and pay the carpenters for work on the resort company’s project. The complaint alleged the subcontractor was the workers’ employer because it controlled all aspects of the carpenters’ work. The lawsuit also alleges that the general contractor is also liable to the workers under the joint employer doctrine because it supervised the project work and directed the subcontractor’s foreman. Bonilla v. Hensel Phelps Construction Co. and Pillar Construction, Inc., No. 3:26-cv-00814 (E.D. Va. Aug.13, 2026).

Michigan Adult Entertainment Club Settles IC Misclassification Lawsuit by Exotic Dancers. A Michigan federal judge has approved a six-figure settlement between group of exotic dancers and an adult entertainment club resolving class action and collective claims under the FLSA and state wage and hour laws as a result of their alleged misclassification as ICs and not employees. In their amended class and collective action complaints first filed six years ago, the dancers alleged that the club and its former and current owners violated the federal Fair Labor Standards Act (FLSA) as well as Michigan’s wage and hour laws by failing to pay them minimum wage and overtime compensation for hours worked over 40 in a workweek. According to the dancers, the club allegedly failed to pay any wages for the hours the dancers worked, making them rely solely on tips from customers; required the dancers to kick back a portion of their tips received to the managers, bouncers, disc jockeys, and house mothers; exerted significant control over them during their shifts; set prices for all VIP performances; and had the authority to and did suspend, fine, fire, and discipline dancers for non-compliance with the club’s rules and policies. As we have noted in other blog posts about this industry, “even adult entertainment clubs … can comply with independent contractor laws.” Doe v. The Coliseum, Inc., No. 2:20-CV-10845 (E.D. Mich. Aug. 24, 2026).                          

Texas Smoke and Vape Shop Chain Sued by Sales Associates for IC Misclassification.  A sales associate has filed a class action IC misclassification lawsuit in a Texas federal court against a chain of smoke and vape shops alleging the business denied him and similarly situated sales workers overtime compensation in violation of the FLSA. The plaintiff alleges that although he worked between 50 and 70 hours per week, he was only paid a flat hourly rate without any overtime compensation for those hours worked over 40 in a workweek. In his complaint, he also claims that the chain controlled many aspects of his work by changing assignments at will, setting and changing his rate of pay, directing him to travel to suppliers to obtain inventory, and imposing rules of conduct and appearance as well as monetary penalties for lateness. Juan David Uribe Morales v. Synvestor Inc., No. 4:26-cv-06830 (S.D. Tex. Aug. 18, 2026). 

President of Towing Company Cannot Escape Personal Liability in FLSA Lawsuit for IC Misclassification.  A Texas federal court has denied a towing company president’s motion to dismiss an FLSA collective action lawsuit by a tow truck driver that named the president as well as his company as defendants. The driver’s proposed collective action alleged that the company and its president violated the FLSA by failing to pay overtime compensation owed to drivers due to their misclassification as ICs, only paying them a set amount for each vehicle they transported without regard to the actual number of hours worked. On a motion to dismiss filed by the president, the court found that the driver sufficiently pled that the president had “operational control” over the drivers’ employment. Although the company president argued that the president was protected by the corporate veil under Texas law, the court concluded “[c]orporate officers with ‘operational control of a corporation’s covered enterprise’ may be considered ‘an employer along with the corporation, jointly and severally liable under the [FLSA] for unpaid wages.’” The court further concluded that because the driver alleged that the president directs, actively operates, and has the decision-making power over matters related to the drivers’ activities, the complaint sufficiently alleged that the president is an employer under the FLSA. Mariscal v. Fast Responder Towing LLC, No. 3:25-cv-01916 (N.D. Tex. Aug. 31, 2026).

Regulatory and Administrative Initiative

Virginia Worker Protection Unit to Address IC Misclassification As Well As Other Workplace Violations.  Virginia Attorney General Jay Jones announced the creation of a Worker Protection Unit to hold employers accountable for violation of labor laws including those prohibiting misclassification of workers as ICs. At a press conference on August 14, 2026, the Attorney General noted that the new unit will use investigations, civil litigation, education, and partnerships with state and federal agencies to address workplace violations across Virginia and ensure that employers who follow the law are not undercut by those who do not, while protecting workers from unlawful practices such as wage violations, retaliation, and employee misclassification. The Attorney General also noted that he will seek voluntary compliance, where appropriate, including through negotiated settlements, but if serious or ongoing violations are involved, his office will pursue affirmative civil litigation seeking available remedies, such as restitution, injunctive relief, and other penalties.

Legislative Development

North Carolina Enacts Portable Benefits Law for Workers Classified as ICs. On August 11, 2026, North Carolina Governor Josh Stein signed into law S.B. 445, the Regulatory Reform Act of 2026, which includes the Voluntary Portable Benefits Plan Act, allowing ICs and companies that engage such workers to voluntarily participate in portable benefit plans without affecting the workers’ status as ICs. As stated in our blog post of August 12, 2026, courts and administrative agencies typically consider a company’s provision of workplace benefits, such as health insurance, income replacement insurance, disability and life insurance, and retirement benefits, to be indicative of employment status. However, the North Carolina law, effective January 1, 2027, authorizes any person or entity, including an internet or application-based company, to contribute funds to a portable benefit account for an IC. Likewise, the law provides that contributions by a hiring party to a portable benefit account are not treated as evidence that a worker is an employee of the hiring party under state unemployment insurance, workers’ compensation, or labor laws. Further, the bill provides that nothing in the law alters, expands, or contracts the test for IC status under any other provision of the law and the existence of a portable benefits account or any contribution to it shall not be a factor in that determination. Alabama, Kansas, Louisiana, New Hampshire, Tennessee, Utah, and West Virginia are some of the other states that have enacted these types of portable benefits laws.                                           

Written by Richard Reibstein, Publisher
Compiled and edited by Janet Barsky, Managing Editor