In 2025, we published blog posts about two class action lawsuits by workers alleging independent contractor (IC) misclassification by two artificial intelligence (AI) companies. The first blog post involved an IC misclassification case brought against Scale AI by so-called “taskers,” workers who perform AI large language model tasks to mimic human expression by engaging in data labeling, content creation, and responding to prompts. The second blog post dealt with an IC misclassification case against Surge Labs Inc. by a data annotator engaged to perform coding assignments, distillation tasks, comparisons of AI generated responses, and data labeling to ensure that large language models become more accurate and capable of mimicking human expression. Among the legal developments from last month that we summarize below is an IC misclassification case against yet another AI firm, Mercor.io, on behalf of highly skilled professionals who train AI models and chatbots. The first two AI lawsuits were filed in Northern  California courts under that state’s strict test for IC status. Notably, this new case was not brought in California but rather in Texas, and it alleges violations of ERISA and the Internal Revenue Code, both of which have far more reasonable tests for IC status than does California. We anticipate that this new lawsuit will likely prompt even more AI workers around the U.S. to file IC misclassification cases against other AI companies. We also expect that this type of case will propel savvy businesses in the AI field to use processes such as IC Diagnostics™ to enhance their compliance with state and federal IC laws and thereby minimize their exposure to IC misclassification lawsuits and liability.

In the Courts (4 cases)

AI FIRM SUED BY ‘EXPERT’ PROFESSIONALS FOR IC MISCLASSIFICATION IN CLASS ACTION SEEKING ERISA BENEFITS. AI startup, Mercor.io Corp., faces a proposed class action suit in a Texas federal court alleging IC misclassification on behalf of 30,000 “experts” who train AI models and chatbots for the startup’s clients. The proposed class includes physicians, attorneys, bankers, and software engineers. The plaintiff performed subject matter expert evaluation and peer review work for the company’s clients. She claims that by misclassifying experts as ICs instead of employees, Mercor violates ERISA by denying them benefits under the company’s 401(k) and health plans. In support of her allegations, the plaintiff asserts that the company dictates the experts’ hours and weekly availability; monitors and tracks their computer screens through a mandatory surveillance app; sets their payrates; trains and supervises them; offboards those that fail to meet expectations; and fails to pay experts for work completed outside of the tracking app including time spent on preparatory activities. The plaintiff also asserts claims for fraudulent filing of Form 1099s, breach of contract, and unjust enrichment. White v. Mercor.io Corp., No. 6:26-cv-00201 (N.D. Tex. May 8, 2026).

COURT FINDS LIVESTREAMING COMPANY MISCLASSIFIED ADULT ENTERTAINMENT ‘STREAMERS’  UNDER NEW JERSEY STATE LAW BUT NOT FEDERAL LAW. A New Jersey federal court has held that a company using Streamate, a hosting platform, misclassified livestream adult performers as ICs instead of employees under the New Jersey wage and hour laws, but properly classified them as ICs under the federal wage and hour law. As discussed in our blog post of June 1, 2026, the court first found that the performers were legitimate ICs under the “economic realities” test of the federal Fair Labor Standards Act (FLSA). But the court next found that the streamers had been misclassified as ICs under New Jersey’s ABC test and were therefore entitled to minimum wage as “employees” under the state’s wage and hour law. The New Jersey ABC test presumes workers to be employees and not ICs unless, among other things, the businesses utilizing them can show that the workers perform services “outside of all of the places of business of the enterprise.” In the court’s view, the streamers “are effectively performing services within the virtual footprint of the enterprise” because the digital platform functions as a “commercial venue where the business operates.” Prior to this decision, all places of business in New Jersey under its ABC test were “brick and mortar” locations, not electronic platforms. Unless reversed on appeal, this decision may adversely impact businesses that use ICs residing in New Jersey or in other states with similar ABC tests. Because so many businesses use electronic systems in their interactions with ICs, prudent companies may wish to re-document and re-implement their IC relationships. Tomasello v. ICF Technology Inc., No. 2:23-cv-03759 (D.N.J. May 30, 2026).                                 

CATERING DELIVERY PLATFORM SUED FOR IC MISCLASSIFICATION IN PROPOSED CLASS ACTION BY DELIVERY DRIVER. Dlivrd Technologies Inc. (formerly known as “Dlivrd” and later rebranded as “Expedite”) is a catering delivery platform. A delivery driver that used its platform commenced a proposed class action lawsuit filed in a California state court alleging that Dlivrd misclassified him and other drivers as ICs instead of employees and, as a result, engaged in violations of the wage and hour provisions of the California Labor Code. According to the class action complaint, the drivers pick up, transport, deliver, and set up catering and other high-value orders and must operate under the company’s control in order to meet customer satisfaction standards. Among other things, the complaint alleges that the company pays the drivers a flat fee that is not subject to negotiation; conducts real time tracking through its app; uses a system that prioritizes drivers that have positive customer ratings and other metrics; maintains a termination or deactivation policy for drivers when their metrics are sub-standard; directs and supervises the manner of catering set-up at  delivery locations; provides training through the app on how to present catering orders; publishes operational guidelines and customer-experience standards that the drivers are expected to follow; and requires them to use their personal vehicles without reimbursing them for related expenses. The complaint also alleges that the drivers were not compensated at the minimum wage for all hours worked such as for wait time at restaurants and drive time to and from restaurant pick-up locations. Barrero v. Dlivrd Technologies Inc., No. 26STCV14579 (Super. Ct. Los Angeles County Cal. May 6, 2026).

US SUPREME COURT FINDS THAT INDEPENDENT DISTRIBUTORS ARE EXEMPT FROM ARBITRATION, BUT OPENS THE DOOR TO A NUMBER OF COUNTERARGUMENTS. On May 28, 2026, the U.S. Supreme Court issued a unanimous decision that independent distributors that make “last mile” deliveries as part of a “continuous journey” of goods from one state to another may be exempt from arbitration under the interstate transportation worker exemption in Section 1 of the Federal Arbitration Act (FAA) even if all of the distributor’s services are intrastate. As the Court stated, such workers “can sometimes be direct, necessary, and active participants in moving goods ‘from … points in one state’ to ‘points in another state’ without crossing state lines or interacting with vehicles that do.” As we stated in our blog post that day, what may seem like an unfavorable outcome for manufacturers using distributors to deliver products to customers such as retail stores may actually be a favorable decision. The Court observed that the Section 1 exemption from arbitration might not be applicable in three situations: where (1) the worker is an IC performing services pursuant to a distribution agreement between the manufacturer and the worker’s own independently operated company; (2) where the worker or his company purchases the goods from the manufacturer and takes title to the goods before selling them to retail stores; or (3) whether the goods had reached their “intended destination” prior to being handled by the distributor. The Supreme Court opinion noted, however, that those facts were not before the Court for decision. These and other facts, though, may lead federal courts (and perhaps the Supreme Court in a future case) to conclude that the FAA arbitration exemption for interstate transportation workers does not apply to certain independent distributors. While the Supreme Court’s decision eliminates one of the many arguments that have been raised in the past by plaintiffs to qualify for the interstate arbitration exemption under the FAA, manufacturers that use distributors operating as ICs should regard this opinion as providing legal support for advancing counterarguments in response to plaintiff-distributors seeking to escape arbitration agreements they have signed. Flowers Foods v. Brock, No. 24-935 (U.S. Sup. Ct. May 28, 2026).  

Administrative and Regulatory Initiatives

MASSACHUSETTS APP-BASED RIDESHARE DRIVERS ARE THE FIRST IN US TO UNIONIZE DESPITE THEIR IC STATUS. Last month, the Massachusetts Department of Labor Relations (DLR) certified the App Drivers Union, SEIU 32BJ/IAM, as the exclusive bargaining representative for “Transportation Network Drivers” (i.e., rideshare drivers) who drive for ride-sharing companies in that state. Massachusetts rideshare drivers are the first to organize and collectively bargain while maintaining their IC status under a voter-approved law passed in Massachusetts permitting such workers to be represented by a union upon a sufficient showing of interest. In November 2024, Massachusetts voters approved Ballot Question 3, which gave Transportation Network Drivers the right to unionize and collectively bargain for wages, benefits, and conditions of work if at least 25% of them designated a labor organization as their collective bargaining representative. The union now will have the right to negotiate on behalf of any Transportation Network Company operating in Massachusetts with regard to rates of pay, wages, hours, and other conditions of work. As stated in a press release issued on May 26, 2026 by Governor Maura Healey’s office, the union certification by the DLR covers nearly 70,000 workers.

This type of law is referred to as a “sectoral bargaining’ statute because it applies to workers being represented by a union in an entire industry and not at a particular company. A few other states have enacted similar laws or are considering bills similar to the Massachusetts law. This voter-approved statute, however, may well be challenged in court on antitrust, preemption, or other legal grounds, most likely by drivers who have no interest in being represented by a union, even though the law was drafted with carveouts for state and federal antitrust laws.

Legislative Developments

NEW GEORGIA LAW PROVIDES FOR THE CREATION OF PORTABLE BENEFIT PLANS AND ACCOUNTS FOR CONTRACTORS. On May 11, 2026, Georgia Governor Brian Kemp signed into law the Voluntary Portable Benefit Plan Act, which permits ICs to participate in portable benefit plans that may include health, unemployment, disability and life insurance, and retirement benefits from the one or more companies for which such ICs are providing services. These types of benefits typically are only available to employees of companies. Portable benefits are those that are not tied to a particular job or employer but travel with the worker. As a general rule, courts and administrative agencies consider a company’s provision of such workplace benefits to be indicative of employment status. However, the new Georgia law provides that voluntary contributions by a person or entity (including app-based companies) to an IC’s portable benefit account shall not cause such person or entity to be regarded as an employer or cause services provided by the IC to be classified as employment. Our blog post of April 7, 2026 addresses other states that have enacted portable benefits laws for gig workers.