The first case on which we report below involves a class action lawsuit asserting independent contractor (IC) misclassification involving Lawyer.com. A plaintiff who answered calls to this well-known legal referral business alleges that he, along with others who are similarly situated, should have been classified as employees instead of ICs. The plaintiff in this case characterizes his work as a call center representative. This filing is the second such lawsuit against the legal industry in the past six months. We reported on a similar class action lawsuit in a blog post this past July, where a legal consultant sued a business providing client intake and retention services for personal injury law firms. Few industries are immune from legal challenges alleging IC misclassification, and the legal industry has now become a target of class action lawyers representing plaintiffs in lawsuits of this nature. Businesses that use an IC business model can minimize their exposure to these types of lawsuits by using a process such as IC Diagnostics (TM) to determine whether their IC relationships can be structured and documented in a manner that can meet applicable federal and state tests for IC status and, if so, how they can do so in a customized and sustainable manner.

This month’s legal developments include a key case decided in New Jersey that supports a less stringent application of that state’s ABC test for independent contractor (IC) status. In late April 2025, the New Jersey Labor Commissioner proposed regulations that would have made it even more challenging to meet the state’s strict ABC test for IC status. The proposed regulations provoked a firestorm of opposition from stakeholders including freelancers operating as ICs and businesses that rely on ICs as part of their business models. The publisher of this blog filed extensive comments critical of certain aspects of the proposed rule. One of our comments pertained to the manner in which the proposed regulations addressed the second part of the B prong of the ABC test, which we argued was not only contrary to existing New Jersey Supreme Court case law but, as drafted, would “foster the elimination of almost all independent contractors in this State.” Notably, as reported below in our summaries of seven key legal developments last month, an appellate court in New Jersey concurred with the publisher’s view, concluding that the Commissioner’s argument on the B prong was contrary to New Jersey Supreme Court case law. Regardless of whether the Commissioner heeds our comments and the comments of other stakeholders supporting IC status in New Jersey, many companies operating in New Jersey and elsewhere have used a process such as IC Diagnostics (TM) to structure, document, and implement their IC relationships in a manner that enhances compliance with even those laws containing the most stringent tests for IC status.

The most noteworthy legal development last month in the area of independent contractor (IC) compliance and misclassification law was the $19 million assessment paid to the New Jersey Department of Labor and Workforce Development (NJDOL) by a ride-sharing platform connecting passengers with drivers via a mobile app. As we note below, the payment was for contributions to the state for unemployment insurance and disability benefits for drivers, based on the state’s application of its strict ABC test for IC status. While the company made the payment, it maintains that it classifies drivers properly as ICs under the state’s ABC test. Notably, the NJDOL did not require the company to reclassify its drivers as employees. This type of result is not uncommon: payment by an app-based company accused of IC misclassification to resolve a legal dispute, but without any requirement to reclassify the gig workers as employees. Indeed, the first case on which we report below included a settlement by an app-based business with only minor tweaks to its business model, implicitly confirming the gig workers’ IC status. While this appears to be a solid business approach to resolving a legal challenge, is there a way for companies using an IC business model to insulate themselves from any exposure to liability and the attendant legal fees incurred in defending attacks on their worker classification? One approach many app-based businesses have used is a process such as IC Diagnostics (TM), which enhances compliance with IC laws in a customized and sustained manner while maintaining a company’s business model.

This past month, three of the longest-running class actions alleging independent contractor (IC) misclassification are finally ending. In all three cases, the companies, after vigorously defending themselves for close to a decade, have chosen to resolve their cases rather than continue to litigate, and have now settled their cases for substantial seven-figure amounts: $24.75 million in one of the cases, and $5.75 million and $2.1 million in the other two. The costs of defending and then settling class action lawsuits for IC misclassification are not limited to the amount paid in a settlement agreement; another sizeable cost for companies are the legal fees paid to their own legal counsel, which can amount to seven-figure sums. These cases, summarized below, illustrate how important it is for businesses using ICs to enhance their compliance with state and federal laws governing ICs and thereby minimize the likelihood of being sued in the first place. Many businesses have chosen to use a process such as IC Diagnostics (TM) to structure, document, and implement their IC relationships in a manner that maximizes their IC compliance in a customized and sustained manner, consistent with their business model. Plaintiffs’ class action attorneys and government agencies often choose not to initiate legal proceedings against those businesses that have taken an effective, proactive approach to IC compliance. 

Unless you were in the health care industry, July 2025 was a relatively slow month for judicial developments in the law of independent contractor (IC) misclassification and compliance. Only two significant IC cases came to our attention, and they impact doctors and nurses. As described below, a Virginia nursing agency and its owner lost their appeal of a $9 million class action judgment in connection with nurses found to have been misclassified as ICs instead of employees. The other case is a new filing by two doctors in Colorado that commenced a lawsuit against a mental health and wellness clinic, alleging they were misclassified as ICs and denied wages due to them as employees. The health care industry should take solace, however, because contract doctors and nurses can be properly classified as ICs under federal and most state laws. Businesses in that industry (and practically all other industries) can enhance their compliance with such laws governing ICs if they use a process such as IC Diagnostics (TM) to structure, document, and implement their IC relationships in a manner that maximizes IC compliance — and they can do so in a sustained manner consistent with their business model.

The following comments were submitted by Richard J. Reibstein, the publisher of this legal blog, critiquing the proposed regulation of the New Jersey Department of Labor and Industry (the Department) regarding the so-called ABC test for independent contractor (IC) status under a variety of New Jersey laws, including minimum wage and overtime, wage payment, disability benefits, and earned sick leave laws. The comment period ended August 6, 2025. The comments below are re-printed verbatim, and include some of our initial thoughts, first published in our blog post of April 30, 2025, titled “New Jersey May Soon Become Even Less Favorable to [the Use of] Independent Contractors Than the Golden State.”

Last month, there were only a couple of legal developments in the area of independent contractor (IC) compliance and misclassification, but they were significant because two more industries — home improvement and legal services — were added to those in the crosshairs of plaintiffs’ class action lawyers. As summarized below, one of the largest gutter protection companies was targeted in Colorado by class action attorneys representing salespersons who sell gutter protection systems to homeowners. And in Tennessee, intake and client retention consultants providing services for law firms sued their company for IC misclassification. There may well be defenses to both lawsuits, and the companies sued may be party to an arbitration agreement with a class and collective action waiver. But winning these types of lawsuits can be costly, so the objective is remaining free from these types of cases. Many savvy companies have resorted to a process such as IC Diagnostics (TM), which structures, documents, and implements IC relationships in a manner that enhances IC compliance and does so in a customized and sustainable manner, limiting exposure to IC misclassification liability.  

Five months ago, we reported about a class action lawsuit against an artificial intelligence (AI) company that engages workers to perform data labeling and content creation and classifies them as independent contractors (ICs) instead of employees. We remarked then that it was only a matter of time before the AI industry became the subject of independent contractor misclassification litigation. Last month, among the four court cases we summarize below, is yet another class action lawsuit alleging IC misclassification filed against an AI company that engages data annotators to perform AI work. As we noted in that earlier blog post, nothing in particular about the AI industry should dissuade 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 utilize a process such as IC Diagnostics (TM) to maximize IC compliance in a customized and sustainable manner consistent with their business models. Companies working on large language models would be wise to implement these types of steps to minimize the chances they will be sued for IC misclassification.