March 2013 Monthly Independent Contractor Compliance and Misclassification News Update

March 2013

In the Courts:

  • A Pennsylvania federal district court grants motion of trucking and courier company, American Eagle Express (AEX), to decertify a class of 201 delivery drivers who allege that AEX misclassified them as independent contractors and denied them overtime compensation under the federal Fair Labor Standards Act (FLSA). Although the drivers, who had been conditionally certified as a class in 2011, all signed a contract classifying them as independent contractors,  the court found that they were not similarly situated because AEX policies were not uniformly applied among the drivers.  Some were given specific start times, while others had no set hours; some testified that they could not refuse assignments, while others said they could; some described AEX as setting the order and sequence of deliveries, while others testified that they were free to rearrange the deliveries. In a decision dated March 14, 2013, the court found that because the economic realities test for determining independent contractor status under the FLSA requires an individualized assessment of the worker’s actual relationship with AEX, the varying employment circumstances would make the certification of a class unsuitable. Spellman v. American Eagle Express d/b/a AEX Group, No. 10-1764 (E.D.Pa. Mar. 14, 2013).
  • Illinois federal district court grants motion for summary judgment under the Illinois Employee Classification Act (ECA) by construction workers who claimed that they had been misclassified as independent contractors.  The Court found that the contractor’s conclusory statements that it did not exert control over the workers, that the work was not performed outside of the place of business, and that the workers were not members of an independently established trade were insufficient to defeat the workers’ motion for summary judgment on the ECA claims. Summary judgment was denied under the FLSA, Illinois Minimum Wage Law, and Illinois Wage Payment and Collection Act; the Court concluded that there were too many disputed and inconclusive issues of fact to grant the  motion as to those other claims.  Jaworski v. Master Hands Contractors, No. 09 C 07255 (N.D.Ill. Mar. 27, 2013).

On the Legislative Front:

  • First public hearing held on March 4, 2013 regarding Oregon bill (H.B. 2907) proposing that the Oregon Bureau of Labor and Industries establish a full-time position for an investigator to investigate misclassification of employees as independent contractors and assess graduated civil penalties for misclassification.

Regulatory and Enforcement Initiatives: 

  • U.S. Department of Labor’s Wage and Hour Division (“WHD”) collects over $226,000 in back wages and liquidated damages from a Georgia company, Southeastern Painting Contractors, which misclassified 67 painter-employees working on a federally-funded construction project as independent contractors and failed to pay them overtime compensation under the FLSA. In a press release by the WHD on March 4, 2013, the company was also was found to have violated the minimum wage and recordkeeping requirements of the FLSA and the prevailing wage and fringe benefits provisions of the Davis-Bacon Act. The WHD found that despite the company’s designation of the painters as ICs, none of the 67 was found to be “true independent contractors with businesses of their own.”
  • Comments were submitted to the U.S. Department of Labor by interested parties including one of the publishers of this blog in response to the DOL’s proposed questions to be asked of workers and employers in the DOL’s upcoming Worker Classification Survey.  As noted in the Comments filed by Richard Reibstein, “absent substantial revisions to close to three dozen of the proposed interview questions to be asked of workers selected for the survey, the information to be collected would not likely serve any ‘practical utility.’”  See prior blog post dated March 19, 2013 entitled, “Comments Submitted on Worker Classification Study to U.S. Department of Labor.”

Other Newsworthy Matters:

  • Business industry groups weigh in with comments on proposed regulations on the Affordable Care Act.  As noted by the publishers of this Blog, the Act extends the range of potential collateral consequences of independent contractor misclassification and retroactive re-classification of service providers. See prior blog post published March 21, 2013, entitled “Worker Classification Issues Are Raised by Affordable Care Act Proposed Regulations.”
  • Freelancer’s Union, recipient of $340 million loan from the Obama Administration, makes access to affordable insurance and other types of group insurance and social benefits available to independent contractors, as noted by the publishers of this Blog.  See prior blog post published March 24, 2013 entitled “Commentary: The Freelancers Union and Independent Contractor Misclassification.”

Published by Richard Reibstein, Lisa Petkun, and Andrew Rudolph. Compiled by Janet Barsky.

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