This past month, the most notable lawsuit alleging independent contractor misclassification was an ERISA claim.  ERISA lawsuits by workers alleging independent contractor misclassification can potentially expose companies to enormous liability.  For example, in 2017 a federal district court entered a judgment following a jury trial involving ERISA claims by insurance agents seeking damages under several types of ERISA plans. That judgment reportedly would have imposed liability upon the insurance company defendant in the hundreds of millions of dollars, but it was reversed on appeal in January 2019 by the U.S. Court of Appeals for the Sixth Circuit.  The defendant argued that the agents were independent contractors and not employees, and the appellate court agreed.  That approach is but one way to defend against ERISA lawsuits by workers classified as independent contractors.  Another way is to argue that the workers, even if they are employees, were excluded from eligibility as participants in the ERISA plans. That was the thrust of a successful defense last month in an ERISA lawsuit brought by a worker classified as an independent contractor.  The court held that even if the worker was a common law employee and not an independent contractor, he did not allege he was an eligible participant in the plans in question.  This result teaches companies to buttress the language in their ERISA plans to exclude those they classify as independent contractors.  As we note in our blog describing the IC Diagnostics (TM) process, the language needed to exclude such workers is neither straightforward nor intuitive.  But companies that take steps to ensure that eligibility language in each ERISA plan is drafted in an effective manner, consistent with judicial precedent, can eliminate exposure to IC misclassification liability under ERISA, even if the workers can ultimately establish they were misclassified.…

Federal and local officials in Washington, D.C. took steps last month to gear up their counter-attacks against independent contractor misclassification, but companies that have taken meaningful steps to enhance their compliance with applicable federal, state, and local independent contractor laws remain unlikely to become a target for an enforcement action. Why?  Because governmental crackdowns like those described below by the U.S. Department of Labor and the Attorney General for the District of Columbia typically focus on companies that are relatively easy marks, such as those that have taken minimal measures to comply with independent contractor laws.  In contrast, government agencies are far less likely to use their limited resources to target companies that have developed state-of-the-art agreements for individuals engaged as independent contractors.  For that reason, a number of more sophisticated companies have utilized a compliance process such as IC Diagnostics (TM) to structure, document, and implement their independent contractor relationships in a customized and sustainable manner designed to minimize misclassification liability.…

Perhaps the most significant development involving independent contractor compliance and ‎misclassification issues in December 2021 received relatively scant attention: a detailed empirical ‎study based on survey results of a cross-section of Americans entitled “The State of Gig Work in ‎‎2021.” The study was undertaken by Pew Research Center, a non-partisan think tank. One of its ‎most important conclusions involves the self-perception of gig workers: “65% see themselves as ‎independent contractors, while 28% view themselves as employees.” Another key conclusion is ‎that almost twice as many Americans support maintaining the status quo in government ‎regulation of companies using gig economy workers. These and other results of the study are ‎likely to influence federal and state legislators who may consider changing existing laws ‎governing independent contractors. The study confirms that an overwhelming percentage of ‎freelancers and other gig workers want legislators and government agencies to take a hands-off ‎approach and leave existing independent contractor laws intact. These and other conclusions of ‎the study are discussed in more depth below.‎…

The highlights of independent contractor legal developments in November 2021 focus on interstate transportation workers.  Questions addressed by the courts last month included whether ride-sharing workers classified as independent contractors are considered interstate transportation workers and therefore exempted from the arbitration provisions of the Federal Arbitration Act, and whether the strict test in California for IC status, when applied to interstate truck drivers, is preempted by the federal law deregulating the airline and transportation industry.…

October was a relatively “slow” month for legal developments in the areas of independent ‎contractor misclassification and compliance. But for companies that engage drivers to distribute ‎pharmaceutical products, a nearly $12 million settlement of an IC misclassification case last ‎month may persuade even more companies in that industry to consider taking steps to further ‎enhance their IC compliance. Indeed, this eight-figure settlement is one of five IC ‎misclassification cases that we have reported on in the past two years where class action lawyers ‎have targeted companies that use independent contractors to deliver pharmaceutical products.‎…

On October 11, 2021, we published a blog post on vaccination mandates for independent contractors.  We addressed the issue of whether OSHA, in issuing a rule covering so called “large employers” with over 100 employees, will seek to expand the definition of employee to include independent contractors. We noted that despite the national debate over the appropriate test for IC status, “OSHA is highly unlikely to wade into that hotly contested area when carrying out the Biden Administration’s COVID-19 Action Plan.”  In the Emergency Temporary Standard (ETS) just released by OHSA, the federal agency has indeed chosen not to cover independent contractors either within the scope of persons who must be vaccinated or tested or in determining whether a company employs 100 or more employees.  As the ETS states: “Part-time employees do count towards the company total, but independent contractors do not.”…

State legislative efforts to expand the coverage of new employment laws to independent contractors in addition to employees continue to emerge.  It appears that New York is on the cutting edge of this trend.  We highlight below an amendment to New York’s whistleblower law, which was signed into law on October 28, 2021.  It not only significantly broadens the scope of whistleblower protections in New York State but also enlarges the definition of protected “employees” to include independent contractors. …

In the same month that 7-Eleven prevailed in a federal court trial where convenience store franchisees claimed they were not independent contractors but rather employees entitled to the protections of state labor laws, a federal appellate court concluded last month that franchisees can be employees for purposes of some state laws.  As discussed below, the issue in the appellate case involved whether a commercial cleaning franchisor, Jani-King, was permitted under the Connecticut minimum wage and anti-kickback labor laws to deduct fees from the earnings of the franchisees. The court concluded that Connecticut law permits such deductions even if the franchisees are employees under state wage laws. Franchisors should note, however, that Connecticut law is not in harmony with the minimum wage and wage deduction laws in many other states, and unless the franchisor has elevated its level of compliance with federal and state independent contractor laws, it is at risk of an adverse judgment for misclassification liability.  Franchisors would be wise to utilize a process such as IC Diagnostics (TM) to restructure, re-document, and/or re-implement their IC relationships to enhance IC compliance in a customized and sustainable manner consistent with their business model.…