Few industries are immune from class actions alleging IC misclassification of workers paid on a 1099 basis. One industry that has not yet been besieged by these types of lawsuits is travel, but that may be changing. While some companies in this industry employ travel advisors on a W-2 employee basis, a host of others engage such professionals as 1099 contractors. That can be risky — unless the travel business takes effective steps to enhance its compliance with laws classifying workers as employees or ICs — as seen in the first case summarized below among key legal developments last month. A number of companies using an IC business model in the travel industry (as well as an array of other industries) have resorted to a process such as IC Diagnostics (TM) to minimize exposure to IC misclassification liability in a customized and sustainable manner. This type of process can also be used to defend against lawsuits for IC misclassification and offers a number of special defenses, even in states with a strict test for IC status.

Few federal regulations over the past five years have produced more needless concern by stakeholders than the independent contractor rules under the federal Fair Labor Standards Act (FLSA) issued by the different administrations. One administration’s Labor Department issues regulations and the next administration changes them; and the new Trump Administration is likely to change them once again. None of these rules change the law itself. They simply offer alternative interpretations of decisions rendered by the courts over the past several decades. This type of administrative ping-pong match is little more than “white noise.” It should not distract businesses from taking the types of steps noted below to enhance their IC compliance, which will minimize the likelihood of being sued and better position themselves to survive any legal challenge to their IC business model.

As the business of artificial intelligence is expanding, it seemed it was only a matter of time before the AI industry became the subject of an independent contractor misclassification lawsuit. Last month, one of the leading generative AI modeling companies was sued in a proposed class action in California by a worker who claims that he and similarly situated AI workers were misclassified as independent contractors instead of employees. As described below, the AI worker’s lawsuit alleges that the company for whom he provided generative AI services directed and controlled how and when he performed his tasks. While the complaint alleges a high degree of direction and control by the company over the manner and means by which the named plaintiff and other AI workers performed their services, there is nothing in particular about the AI industry that should derail AI businesses from structuring, documenting, and implementing their IC relationships in a manner that complies with federal and almost all state laws governing ICs. Like companies in many other industries, companies in the AI industry can use a process such as IC Diagnostics (TM) to maximize their IC compliance in a customized and sustainable manner consistent with their business models.

A federal agency last week accused the companies that created and produce the Netflix reality television series “Love is Blind” of misclassifying the contestants on the show as independent contractors (ICs) instead of employees. The complaint issued by a regional director of the National Labor Relations Board (NLRB) against the…

The most compelling news involving independent contractor compliance and misclassification last month was not a class action lawsuit or a government investigation but rather a government study released by the Bureau of Labor Statistics of the U.S. Department of Labor. The study, discussed in more depth below, covers the…

Private equity firms regularly conduct due diligence of legal risks that could impact potential investments. Yet when considering whether to invest in a target company structured in whole or in part on an independent contractor (IC) business model, few PE firms consider IC misclassification exposure with a sufficient degree of…

Businesses can learn quite a lot from a legal challenge faced by others in the same industry. Recently, we noticed that a large health care system operating in seven states west of the Mississippi had been sued in a class action for allegedly misclassifying registered nurses (RNs) as independent contractors…

The most significant legal development in the past month in the area of independent contractor compliance was the enactment of California’s Freelance Worker Protection Act, which goes into effect on January 1, 2025. We have reported on freelance pay protection laws enacted recently in Illinois and New York,…