Author: Richard Reibstein Esq.

Not So Fast: January 2021 Independent Contractor Law Update

January 2021 may well be remembered in the independent contractor area of law as the “not so fast” month. The Fifth Circuit Court of Appeals told lower courts “not so fast” when it comes to certifying collective actions.  That appellate court imposed a new and more rigorous standard that plaintiffs will have to meet to attain certification of their collective actions under the Fair Labor Standards Act. GrubHub and other companies that engage couriers to deliver food from restaurants have generally succeeded in compelling arbitration of courier claims for independent contractor misclassification.  These companies have avoided application of the arbitration exemption in the Federal Arbitration Act for interstate transportation workers.  As we reported here on September 18, 2020, the United States Court of Appeals for the Seventh Circuit held that couriers providing deliveries for customers of GrubHub were not involved in interstate commerce. But only last week, as reported below, a Massachusetts court essentially said, “not so fast,” reaching the opposite conclusion when it held that couriers providing deliveries to GrubHub customers of pre-packaged and non-food items originating outside of Massachusetts (such as soft drinks, chips, toilet paper, cleaning products, and flowers) were exempt from arbitration under the interstate transportation worker exemption. This area of the law is evolving with new arguments by plaintiffs’ class action lawyers seeking to circumvent arbitration agreements.

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Owner-Operator Drivers Are Independent Contractors, Says Labor Department

Today, only one day before the end of President Trump’s Administration, the U.S. Department of Labor issued an opinion letter that certain owner-operator drivers that provide services to a transportation and logistics company are independent contractors and not employees under the federal Fair Labor Standards Act.  Owner-operator drivers have brought countless class and collective actions against transportation and logistics companies over the past decade, as reported in this blog.  One large transportation company paid $100 million to settle a collective and class action lawsuit brought by 20,000 owner-operators alleging independent contractor misclassification. This final-day opinion letter may be useful to logistics and other transportation companies defending these types of class actions, but it does not create a safe harbor under the FLSA. Rather, the most effective way by which transportation and logistics companies can elevate their level of compliance with federal and state IC laws is through the use of a process such as IC Diagnostics (TM), as discussed in the Takeaway below.

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Labor Department’s Last Opinion Letter: Distributors of Food Products are Independent Contractors

Today, less than 24 hours before the end of the Trump Administration, the Labor Department issued an opinion letter that distributors who resell to retail outlets food products they purchase from two or more unnamed food manufacturers can be lawfully classified as independent contractors under the federal wage and hour law. Distributors of food products have brought a number of class and collective actions against food manufacturers over the past few years, as reported in this blog. One large food manufacturer paid over $47 million in settlements of collective and class action lawsuits brought by distributors alleging independent contractor misclassification. While this last-minute opinion letter may be useful to companies defending these types of cases, savvy food manufacturers that have chosen to elevate their level of compliance with federal and state IC laws through the use of a process such as IC Diagnostics (TM) shouldn’t need to rely on this administrative action to successfully establish the IC status of their independent distributors.

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No Major Changes; Impact of Final Independent Contractor Regulation Issued Today ‎Is Questionable

As we reported here on the day the U.S. Department of Labor issued a proposed regulation regarding the classification status of independent contractors, the regulation, once finalized, would be “much ado about (almost) nothing.”  We observed that unlike regulations with hard and fast rules, the proposed regulation was in the nature of an administrative interpretation comprising the Labor Department’s review of existing court decisions and its articulation of a preferred legal analysis. We predicted that, when released in final form (which occurred today), courts would not give much if any deference to this agency regulation on the classification of independent contractors under the federal wage and hour law.

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A Company’s Best Friend ‎– An Effectively-Drafted Arbitration Clause in an IC Agreement: December 2020 News Update

December was a very slow month for court decisions affecting independent contractors, but both decisions reported below confirm that effectively drafted arbitration clauses remain one of two “best friends” for businesses that engage independent contractors. On the very day the U.S. Supreme Court issued its decision in New Prime Inc. v. Oliveira in January 2019, we predicted here that, despite some commentators’ exuberance and others’ despair, the decision “may have little or no impact as to whether workers classified as independent contractors can be compelled to arbitrate their IC misclassification claims.”  In New Prime, the Supreme Court held that a court, not an arbitrator, should decide if an IC is covered by the Federal Arbitration Act’s arbitration exclusion for workers engaged in interstate transportation. We commented that the FAA is not the only basis upon which companies can seek to compel arbitration; most state arbitration laws, which typically do not have exclusions for interstate transportation workers, also may provide an alternative basis to compel arbitration of IC misclassification class action claims. That is exactly what transpired in one of the two IC arbitration cases we discuss below.

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CARES Act, Take 2: Pandemic Unemployment Assistance Extended for Independent Contractors

Earlier this evening, December 27, the President signed the next stimulus bill that Congress ‎passed on December 21. The legislation extends unemployment assistance not only for ‎employees but also for independent contractors and other self-employed individuals for 11 ‎weeks. The bill (H.R. 133) includes the “Continued Assistance for Unemployed Workers Act of ‎‎2020,” which provides for an extension of the CARES Act unemployment provisions from ‎December 31, 2020 until March 14, 2021, including the provisions that had created a new form ‎of benefits for all self-employed individuals: pandemic unemployment assistance (PUA). As ‎detailed in a prior blog post, the original CARES Act provided PUA benefits for up to $600 a ‎week for as many as 39 weeks, retroactive to January 27, 2020. The new stimulus bill, CARES ‎Act II, halves that amount and limits PUA to $300/week. Those eligible for PUA also will ‎receive an additional $300/week through the end of the extension period, whereas CARES Act I ‎had added $600/week in federal stimulus payments. Finally, the new stimulus bill provides ‎independent contractors with paid sick and paid family leave benefits through March 14, 2021.‎

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Tough Month for Football, Interpreting, Energy, and Trucking Industries in Misclassification Cases: November 2020 News Update

November 2020 was a superb month for ride-sharing and app-based delivery companies and for President-Elect Biden, but was far less favorable to professional sports leagues, interpreting and translation companies, oilfield businesses, and the trucking industry. We comment below on the success enjoyed in a California voter referendum for selected gig economy industries and the Biden Plan for addressing independent contractor misclassification. But unfavorable class action litigation experiences in other industries, including high-profile cases involving the NFL and the trucking industry, send a message to businesses using independent contractors that they need to enhance considerably compliance with federal and state independent contractor laws. 

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The Confusing Biden Plan for Independent Contractor Misclassification

President-elect Joe Biden’s campaign issued a comprehensive labor plan that seems to focus on empowering unions. But while the title of this campaign platform is “The Biden Plan for Strengthening Worker Organizing, Collective Bargaining and Unions,”[1] buried inside is a proposal addressing the misclassification of independent contractors that is internally inconsistent. Was it purposeful, reflecting the Biden campaign’s effort to court union voters, while maintaining a moderate view of the vital role played in our economy by the contingent workforce and businesses that play by the rules? Or is it just confusing? And what should businesses that use independent contractors do in the meantime?  We answer these questions below.

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Oil and Gas, Cable, Shopping, Pet Sitting, and Shipping Companies Lose Ground in Independent Contractor Misclassification Cases: October 2020 News Update

In October, a diverse group of industries experienced adverse court rulings defending independent contractor classification class and collective action cases.  Two cases involved courts granting conditional certification of collective status: one involves Texas oil field workers; the other concerns Illinois cable technicians.  Both industries have been targeted by multiple IC misclassification class actions, as reported on a number of occasions in this blog. Shipt, the personal shopping service, was subjected to a new IC misclassification lawsuit, also in Illinois, which uses a test for independent contractor status that is very unfavorable to companies with an independent contractor business model. A pet sitting company in Missouri also fared poorly when an appellate court affirmed an administrative decision finding the pet sitters with whom it contracts are employees and not independent contractors.  A shipping company suffered the worst news last month for companies relying on the use of independent contractors when it lost its effort to bypass an administrative decision assessing it $1.8 million in unemployment tax liabilities for drivers found to be misclassified as independent contractors.

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“Yes” on Prop 22 in California Brings Relief to Rideshare and App Delivery Services; Legal Challenges Will Continue, However

The results are in. Voters in California don’t want their rideshare and app-based delivery services to change.  By an overwhelming majority, Proposition 22 was approved by California voters.  Essentially, that means that unlike all other businesses in California that have to meet the strict Dynamex ABC test or, if they are exempted from this test, the more rational multi-factor Borello test, companies in these gig economy industries now have a safe harbor, so long as they provide the benefits set forth in Prop 22 to their independent drivers and couriers.

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About The Publisher

Richard ReibsteinRichard Reibstein is the publisher of this legal blog, which has been, since its inception in 2010, the only legal blog in the country dedicated exclusively to the subject of independent contractor compliance and misclassification. Read more

JDSupra The publisher of this blog, Richard Reibstein, was named “Top Author” in JD Supra Readers’ Choice Awards (2016, 2017, 2019 and 2020) for his thought leadership on the topic of “Employer Liability” issues as well as “Top Author” on “Class Actions” in 2016 and 2020.

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Locke Lord LLP

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