Pros and Cons of “IC-Neutral” and “IC-Minus” Legislation

The Massachusetts Delivery Association (MDA) has succeeded in its appeal of a federal district court’s dismissal of its lawsuit to invalidate the Massachusetts Independent Contractor Law as an impermissible law “related to a price, route, or service of any motor carrier . . . with respect to the transportation of

California joins a growing list of states that have enacted independent contractor misclassification legislation in the past four years.  This new law, signed by Governor Jerry Brown on October 9, 2011, adds harsh financial penalties for companies and persons who engage in “willful misclassification” of employees as independent contractors,

Commentary:

As noted previously in prior articles and postings on this blog, Congress is poised to pass a labor and a tax bill that will discourage businesses from misclassifying employees as independent contractors and end the issuance of Form 1099s to workers who are not legitimate independent contractors.  Both bills

In the absence of federal legislation addressing the issue of misclassification of employees as independent contractors, no less than 16 states have passed their own laws seeking to curtail misclassification of employees as independent contractors, including five states so far in 2010: Connecticut, Nebraska, New York, Vermont, and Wisconsin.

As noted in the preceding blog post on this site (see below), Congress has now introduced in this session of Congress two bills seeking to crack down on misclassification of employees as independent contractors: the Employee Misclassification Prevention Act (EMPA) and the Fair Playing Field Act of 2010.  Although those  two bills, if enacted, would dramatically change the landscape of federal IC legislation, neither should end the use of legitimate independent contractors.  Rather, businesses would be able to continue to use ICs provided that the legal tests are satisfied for independent contractor status under federal and state laws.  This blog post discusses the ways  by which businesses can enhance their compliance with existing and proposed IC laws, including two alternatives to the costly and often unacceptable alternative of reclassifying independent contractors as employees.

The first decision on the merits has been issued in the FedEx Ground class action “independent contractor” cases. . . . On May 28, 2010, Judge Robert L. Miller, Jr., the judge assigned to hear and decide all of these Fed Ex Ground cases, granted summary judgment in favor of the Illinois plaintiffs on their wage claims under the Illinois Wage Act. . . . The decision by Judge Miller is limited to the statutory claims under a single state’s wage law. He expressly noted in his decision that he was not deciding the common law claims brought by the Illinois plaintiffs. Nonetheless, this decision by Judge Miller is a partial setback for Fed Ex, which has experienced mixed results in the courts to date.