Last month’s legal developments in the area of independent contractor (IC) misclassification and compliance reflect the ever-widening variety of businesses that are subject to legal challenges by plaintiffs’ class action lawyers and government agencies. While lawsuits against app-based companies in the ridesharing, shopping, and delivery industries as well as businesses in the courier and transportation industries have proliferated for years, there are few industries that have not yet been targeted. Our report below addresses two cases involving industries on which we have not previously reported. The first involves a $6 million judgment against a business that engages parking “spotholders” (i.e., workers who find and hold parking spots for trucks used by a large utility company in New York City). The second is a class action initiated by livestream video performers against a company hosting an adult entertainment website. Another one of the cases on which we report below is a $7 million settlement by an automotive parts distribution company to resolve IC misclassification violations covering 1,000 delivery drivers. It is important to note, however, that federal and almost all state laws permit the types of workers who are the subject of these cases to be validly classified as ICs, provided the company utilizing them takes care to structure, document, and implement their IC relationships in a compliant manner. This essentially requires dotting all i’s and crossing all t’s, typically addressing well over 48 factors pertinent to IC status under most state and federal tests. Prudent businesses have done so by using a process such as IC Diagnostics (TM) to enhance their level of compliance in a customized and sustained manner to minimize the likelihood they will be targeted for IC misclassification.

In the Courts (4 cases)

COMPANY ENGAGING PARKING SPOTHOLDERS FOR UTILITY TRUCKS LIABLE FOR $6 MILLION IN IC MISCLASSIFICATION DAMAGES. A federal court in New York concluded after a non-jury trial that a company engaging parking “spotholders,” who locate and “hold” parking spots for trucks used by a large utility company making repairs in New York City, had misclassified those workers as ICs instead of employees under the federal Fair Labor Standards Act (FLSA). In 2019, the U.S. Department of Labor (DOL) investigated the classification of those workers, who would drive to job sites, park, and place traffic cones to keep others from parking near utility structures in need of repair. In its 2021 lawsuit, the DOL asserted that the spotholders had no opportunity for profit or loss; had no special skills; did not use independent initiative; and were supervised by the company’s dispatch office, monitored by “spot checkers,” required to follow company rules, and disciplined for rules violations. In ruling for the DOL, the court assessed the company a total of $6 million: $3 million in back wages for unpaid overtime, and an additional $3 million in liquidated damages. In addition, the court issued an injunction permanently preventing the company from treating the spotholders as ICs in the future. Chavez-DeRemer v. CE Security LLC, No. 1:21-cv-00057 (E.D.N.Y. Mar. 6, 2026).

ADULT ENTERTAINMENT WEBSITE UNABLE TO PREVENT VIDEO CHAT PERFORMER FROM CERTIFYING IC MISCLASSIFICATION LAWSUIT AS A CLASS ACTION. A federal district court in Connecticut granted class action status to a performer and similarly situated video chat performers providing services to an adult video chat website. The workers allegedly perform live video content for customers of ICF Technology, Inc. and Accretive Technology Group, Inc. on Streamate.com, an adult entertainment website owned by the two companies. The plaintiff contends that the companies misclassified the performers as ICs in violation of the FLSA and Connecticut wage and hour law by failing to pay them for the entire time spent live-streaming. She also claims that the companies committed wage theft under state law by retaining 65% of discretionary tips paid by customers during the performers’ livestream sessions. The parties have now filed cross motions for summary judgment regarding the IC or employee status of the performers. Nizeul v. ICF Technology Inc., No. 3:24-cv-01393 (D. Conn. Mar. 18, 2026).

MARKETING COMPANY SUED BY ADMINISTRATIVE AND HOME STAFF FOR IC MISCLASSIFICATION. A marketing company was sued for unpaid overtime compensation under the FLSA due to its alleged misclassification of administrative and home office staff as ICs and not employees. The plaintiff, who worked at the property management office belonging to the private residential estate of the company’s owner, contends that she worked as an administrative assistant. She filed her collective action lawsuit in a Connecticut federal court on behalf of herself and others similarly situated who have worked for the company as “administrative employees, house services employees, and other misclassified independent contractors” seeking unpaid overtime wages, liquidated damages, and attorneys’ fees under the provisions of the FLSA. The complaint alleges that the plaintiff was an employee and not an IC because she carried out nonexempt clerical duties; was wholly dependent on the company for earning “her livelihood”; and had no opportunity for profit or loss dependent upon any managerial skill of her own. She also asserts that the company exercised direct and extensive control over the manner in which she was required to perform her work each day, and she did not need any specialized skills to provide her services. Baker v. Market America Inc., No.1:26-cv-22153 (S.D. Fla. Mar. 30, 2026).

MEDICAL COURIER COMPANY SUED FOR IC MISCLASSIFICATION. Lab Logistics LLC operates a courier business for medical laboratories, hospitals, and health care systems to provide specimen pickup and medical delivery services. One of the couriers filed a proposed class and collective action complaint on behalf of herself and others similarly situated, claiming the company misclassified the couriers as ICs and not employees. The lawsuit alleges that the company failed to pay the couriers overtime compensation for all hours worked over 40 in a week, as required by the FLSA and Colorado wage and hour laws. In support of her claim that the couriers were misclassified as ICs, the plaintiff contends, among other things, that the company set the couriers’ schedules and hours of work; created pre-determined operational plans as well as the work assignments to be performed each day; assigned routes and deliveries to the couriers; dictated how each pick-up and delivery was to be performed; required the couriers to wear uniforms; and mandated that the couriers follow specific company guidelines, including what equipment to use, how to store lab specimens, and how to interact with company customers. Garza-Laureles v. Lab Logistics LLC, No. 3:26-cv-00466 (D. Conn. Mar. 27, 2026).

Legislative Developments

STATES ENACT PORTABLE BENEFITS LAWS FOR GIG WORKERS. Last month saw a flurry of legislative activity as a number of states passed gig worker portable benefits bills covering workers classified as ICs. Governors in West Virginia and Wyoming recently signed into law their versions of the legislation (HB 4009 in West Virginia and SF0041 in Wyoming) allowing companies, including those that are internet and app-based, to contribute to gig workers’ portable benefits accounts without affecting the workers’ status as ICs. A similar bill (HB 2602) passed by the Kansas legislature and awaits the governor’s approval. Typically, courts and administrative agencies 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. The legislation in all three of these states provides that contributions to portable benefit accounts shall not be used as a criterion or factor for determining a person’s employment classification. Additionally, the legislation in West Virginia and Kansas (if approved by the governor) provides tax deductions for contributions to the accounts. As noted in the West Virginia statute, “Establishing a portable benefit plan would provide tax incentives for hiring entities as contributions are deductible business expenses, and enhance financial stability for independent contractors, as contributions would not be included in their gross income.” Alabama, Tennessee, and Utah have enacted similar portable benefits laws.

Regulatory Initiative

AUTOMOTIVE PARTS DISTRIBUTOR SETTLES IC MISCLASSIFICATION PROCEEDING IN NEW JERSEY FOR $7 MILLION. The New Jersey Department of Labor and Workforce Development (NJDOL) and the New Jersey Office of the Attorney General announced last month that a last-mile automotive parts distribution company agreed to pay $7 million to settle a worker misclassification case asserting violations involving 1,000 delivery drivers. In addition to the settlement amount, the company, PDX North, Inc., agreed to reclassify its delivery drivers as employees and comply with all state wage, benefit, and tax laws. According to a March 12, 2026 news release from the NJDOL, the agreement resolves four audits covering the years 2006 through 2019, which determined that PDX improperly classified delivery drivers as ICs rather than employees in violation of the state’s unemployment compensation and temporary disability benefits laws.