Legislators, regulators, and even some courts have sought to alter the status quo in terms of the test for independent contractor status under different laws.  Some have taken the approach that a well-established federal or state law test for determining IC status balances the competing interests of promoting legitimate IC relationships and eliminating IC misclassification – but need to be enforced more vigorously or, if violated, need harsher penalties for misclassification particularly intentional misclassification.  Other legislators, regulators, and judges have sought to change a well-established federal or state test to make it more challenging to maintain IC status and thereby curtailing the number of lawful IC relationships.  Still others have sought to make an applicable test for IC status less challenging in order to expand legitimate IC relationships.  These types of initiatives fall into three categories, each of which are described below.

“IC-Neutral” legislation, rule-making and court decisions refers to recent and proposed laws and regulations and recent judicial rulings that do not penalize legitimate independent contractor (IC) relationships or alter the test for IC status, but are intended to focus on the misclassification of employees as ICs and, in particular, intentional IC misclassification.  Such laws would include those that deter or discourage IC misclassification by, among other things, increasing penalties or other sanctions for improper classification of employees as ICs.

“IC-Minus” legislation, rule-making and court decisions refers to recent and proposed laws and regulations and recent judicial rulings that are intended to or will result in curtailing legitimate IC relationships by, among other things, altering existing tests for IC status so that those who would otherwise qualify as ICs under the common law or other existing legal tests for IC status may now become “employees” as a matter of law, and the maintenance of previously lawful IC relationships would now become unlawful – unless the IC relationship is restructured and re-documented to maintain lawful status.

“IC-Plus” legislation, rule-making and court decisions refers to recent and proposed laws and regulations and recent judicial rulings that are intended to or will result in expanding the number of legitimate IC relationships by, among other things, altering existing tests for IC status so that those who would not  otherwise qualify as ICs under the common law or other existing legal tests for IC status may now become “lawful” ICs.  Such laws would include newly added safe harbors for workers and businesses that wish to structure their relationship as independent contractors.

“IC-Neutral”, “IC-Minus” and “IC-Plus” legislation and rule-making is often a result of political and economic interests being articulated through legislative or administrative change.

Certain of the state laws enacted since July 2007 (as catalogued in the preceding page under Resources) are IC-Neutral while others are IC-Minus or IC-Plus.

The following are selected articles, blog posts, and publications that address the issue of IC-Neutral, IC-Minus and IC-Plus laws, rule-making and judicial decisions. It is a “running” list with new IC-Neutral, IC-Minus, and IC[-Plus developments added on an ongoing basis:

  • “A Solution to the ‘Five Degrees of Independent Contractor Misclassification,’” is a comprehensive commentary where this blog’s publisher explains how the term “independent contractor misclassification” is a phrase used to cover a wide array of disparate forms of IC misclassification: unpardonable; uninformed; unprepared; unintentional; and unjust. The commentary focuses initially on a recent example of an “unjust” use of the term IC misclassification: California’s Assembly Bill 5 (AB5) – now reissued without much change as AB2257 – which codified the Dynamex court decision and expanded it to cover virtually all situations involving ICs in California, except for about 50 categories of independent contractors, who were exempted from the Dynamex ABC test and permitted to establish IC status based on the decades-old test in the Borello decision.  The legislature purportedly sought to simplify IC law in California, but the exemptions have created a far more complex and ambiguous set of tests, with many exemptions having up to a dozen criteria that must be satisfied to avoid the ABC test.  The legislation is perhaps the quintessential form of IC-Minus government action because it codified a court decision that “changed the rules in the middle of the game” for many businesses and freelancers, who had relied upon existing law on the books for almost three decades to create legitimate and lawful independent contractor relationships, many of which have now become unlawful under AB5 and its successor AB2257.
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    The commentary notes that other states and some members of Congress are contemplating the adoption of an ABC test for IC status similar to California, although the backlash from AB5 has been so dramatic that some legislative bodies are understandably having serious reservations about emulating California on the test for IC status.In the commentary, the publisher of this blog cited to repeated public statements of Obama Administration officials including the Secretary of Labor and Administrator of the Wage and Hour Administration urging increased enforcement of existing laws and coordination with state workforce agencies to (a) raise tax revenues that the federal and state governments are losing from those businesses that engage in intentional IC misclassification and, by so doing, are not paying unemployment and payroll taxes to taxing authorities; and (b) level the playing field for companies that operate in accordance with the law; and (c) ensure that workers receive minimum wages for their work.  Such an approach, they remarked, would preserve what they described as the vital role that legitimate ICs play in the U.S. economy – without having to change well-established tests for IC status that businesses and freelancers have relied upon in structuring lawful IC relationships. Finally, the commentary cites to governmental studies by both the Obama and Trump Administrations and a study by Gallup Polling showing that those who have chosen an independent contractor relationship are far more satisfied with their work than those laboring in traditional employment relationships.
  • “Independent Contractor Bombshell for California Businesses: California Supreme Court Curtails the Lawful Use of ICs,” details how the California Supreme Court in Dynamex Operations West v. Superior Court (No. S222732), created a new test that is modeled after the so-called ”ABC” test used in Massachusetts, widely viewed as the toughest test in the country for ICs.  This “IC-minus” court decision was  particularly surprising in light of recent legislative efforts across the country to regulate, instead of curtail, the increasing use of freelancers and on-demand workers including those in the gig economy. Questions left open by that decision, which applies to so-called “non-wage order” claims in California, was the subject of a later blog post.
  • “New York’s Highest Court Issues IC-Friendly Ruling,” analyzes an October 25, 2016 decision by the New York Court of Appeals affirming that New York’s highest court supports the use of properly classified independent contractors and recognizes that some facts that are just as readily required of an IC as of an employee cannot be used by administrative agencies and lower courts in New York to defeat a worker’s classification as an independent contractor. This decision is “IC-Neutral” as it simply applies existing law to a factual scenario.

Analysis by Richard Reibstein

Edited by Janet Barsky