Author: Richard Reibstein Esq.

Last month’s legal news in the area of independent contractor misclassification and compliance was dominated by two key arbitration decisions by federal circuit courts: one that compelled arbitration of an IC misclassification lawsuit by drivers delivering restaurant food through the GrubHub platform, and the other where a motion to compel arbitration was denied in an IC misclassification lawsuit by drivers making last-mile deliveries of packages for Amazon.com. We commented on the Amazon case in a separate blog post last month and in a Law360 article quoting the publisher of this blog, where we noted that most companies should not be concerned about the Amazon decision because the arbitration clause used by Amazon appeared to be rather unique. Two of the other cases we report on below are meaningful for businesses in two industry sectors: blogging and pharmacies.

Two recent federal appellate court decisions struck down Amazon’s arbitration clause ‎in its agreements with workers who deliver its packages to Amazon customers. Those ‎two rulings have created great concern for businesses in the transportation industry. ‎However, it is important to understand that the contractual language at issue in these ‎two cases is unique to Amazon. In most instances, arbitration agreements with class ‎action waivers can be enforceable, even when applied to workers who deliver or ‎transport products in interstate commerce. This blog post provides tips for companies in ‎all industries (including the transportation, delivery, and logistics sectors) how to more ‎effectively draft arbitration provisions with class and collective action waivers in their ‎independent contractor agreements.

Six of the nine cases reported below from July 2020 involve drivers’ class action lawsuits alleging independent contractor misclassification against transportation and logistics companies. They include three settlements, the largest of which could cost the defendant trucking company as much as $28 million. The fourth and fifth cases involve conflicting decisions by key appellate courts as to whether arbitration clauses are enforceable against drivers found to be engaged in interstate commerce. The sixth case pertains to a court’s certification of yet another class action IC misclassification case by drivers brought against a transportation company.

Many companies are asking, should we require independent contractors to sign advance waivers and releases of liability for contracting the Coronavirus? Most commentators have urged companies to refrain from requiring employees to sign such waivers and releases, but there is little reason not to require independent contractors to sign well-drafted Covid-19 liability waivers.

We highlight in this past month’s news update two class action settlements entered into by bakery companies alleged to have misclassified product distributors as independent contractors. One of those baked goods companies has now incurred over $47 million settling IC misclassification cases brought by distributors. We also comment below on a new class action lawsuit filed against one of those bakery product companies.

May 2020 was not a busy month for the filing of new independent contractor misclassification lawsuits, as some courts were closed for new filings and many lawyers were working remotely. But five cases came to our attention that provide meaningful lessons for companies seeking to comply with laws impacting independent contractors or defending against class or collective actions brought under such laws.

The last two months have consumed all of us with matters related to COVID-19. This public health emergency has created an anomalous situation virtually no one could have foreseen: legislation being passed at the federal level that treats independent contractors in a similar fashion to employees for purposes of unemployment benefits and paid sick and family leave benefits. Since the inception of this blog almost ten years ago, we have reported on over a dozen bills introduced in Congress addressing independent contractors – and not a single one was seriously considered due to a lack of bipartisanship on Capitol Hill. Yet, in a legislative effort almost as swift as the spread of the Coronavirus itself, two key pieces of federal legislation were passed by Congress and signed into law by the President in the course of only nine days that provided pandemic benefits not only to employees but also to self-employed individuals including gig workers and freelancers.

Federal and state laws have historically barred independent contractors and other non-employees from unemployment insurance benefits—until the COVID-19 crisis descended on the U.S. workforce. This pandemic, almost overnight, suspended almost all work opportunities for those who have operated as self-employed individuals and received a Form 1099 for their compensation, except for individuals whose work can be performed remotely or who provide an essential service.

Self-employed individuals are now covered for pandemic unemployment assistance under the CARES Act, as we discussed in our blog post of March 26, 2020. Many independent contractors whose work has ceased or lessened substantially during the Coronavirus pandemic have started to file claims for unemployment compensation and are filing as if they are employees. This is because the state Unemployment offices have not yet updated their claim forms to add a box for “self-employed individuals” or have chosen not to consider claims by such ICs until their claims as employees have been denied.  That is now creating a heightened risk for businesses.  Nevertheless, there is a way for companies to protect themselves while still assisting ICs to receive desperately needed “unemployment” benefits available to them under the CARES Act.