The U.S. Department of Labor today issued a rule yesterday that withdraws the Trump Administration’s regulation setting forth a test to classify workers as independent contractors or employees under the federal Fair Labor Standards Act. Ordinarily, rules set forth new standards, but this one was quite unusual – it essentially rejected a rule issued by a prior Administration and, in doing so, foretells a return to the Obama era in terms of the Labor Department’s position as to who is and who is not an independent contractor. The Labor Department’s view, however, is not particularly meaningful, at least from a legal perspective. But it sends a signal to businesses that this Administration views IC misclassification through a different lens.  As a result, more companies are likely to ask, do we now need to enhance our independent contractor compliance? We address that issue below and provide some guidance for businesses seeking ways to minimize their exposure to IC misclassification liability.…

Immediately following the issuance of the U.S. Supreme Court’s decision in New Prime v. Oliveira on January 15, 2019, we stated in a blog post that “even if an individual or group of workers is excluded [from arbitration] under the federal arbitration law, state arbitration laws may cover them and provide a statutory basis for compelling arbitration.” Soon thereafter, in a Law 360 article discussing a Washington State federal district court ruling that independent contractor drivers providing services to Amazon could not be compelled to arbitrate their IC misclassification claims, the reporter Linda Chiem quoted the publisher of this blog: “There’s a ‘hidden lesson’ from the Amazon decision. Companies can get around ‘arbitration-unfriendly laws’ by making sure it’s spelled out that their independent contractor agreements are governed by state laws that do not have the type of exclusions found in the Washington state arbitration law that tripped up the Amazon agreement.” As noted in the first two case developments from March 2021 as reported below, that is precisely what companies are beginning to do and the courts have agreed that state arbitration laws are all that is needed to compel arbitration.…

Tonight the President is expected to announce on the major networks and cable news services that he has signed or will sign into law today the next stimulus bill called the American Rescue Plan Act of 2021, which Congress passed ‎on Wednesday, March 10. The bill (H.R. 1319) includes the “Crisis Support for Unemployed Workers Act of ‎‎2020,” which provides for yet another extension of the CARES Act unemployment provisions – this time ‎from March 14, 2021 until September 6, 2021. The law, which we refer to as CARES Act III, includes a ‎type of benefits called pandemic unemployment assistance (PUA) for self-employed individuals including ‎independent contractors and gig workers. ‎…

Micro-mobility company Lime, which provides electric scooter and bike sharing to customers through its mobile app, has been targeted by plaintiffs’ lawyers in class action and representative lawsuits attacking one of the core components of its business model.  Lime engages drivers to recharge the batteries of electric scooters and bikes for its customers.  It treats the drivers as independent contractors.  As detailed below, on the same day a state court rejected Lime’s effort to settle four related representative lawsuits for $5 million, it was sued again in the same court in a proposed class action lawsuit. The litigious assault Lime has experienced mirrors the challenges other companies using an independent contractor business model have experienced: multiple lawsuits.…

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.…

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.…

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.…

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.…

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.…

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.‎…