This past month’s legal developments include new class actions filed against companies in the manufacturing, artificial intelligence (AI), and health care industries alleging independent contractor (IC) misclassification, as well as a court decision finding security guards were misclassified as ICs. Claims for IC misclassification are relatively infrequent in the manufacturing sector. In contrast, we have reported in prior blog posts this year on IC misclassification lawsuits by health care, AI, and security workers, suggesting that plaintiffs’ lawyers view these three business sectors as a fertile source for class action recoveries. While companies in these and other industries cannot entirely insulate themselves against these types of lawsuits, they can take steps both to effectively minimize the likelihood that they will be sued and maximize their chances of success in litigating these types of cases. Prudent businesses have used a process such as IC Diagnostics^® to structure, document, and implement their IC relationships in a customized and sustainable manner that enhances their compliance with applicable IC laws. This type of proactive approach can also minimize the chances that a state or federal agency will initiate or prevail in an administrative investigation or legal proceeding against such companies to enforce wage and hour, unemployment, workers’ compensation, benefits, or tax laws. 

Last month, one of the key legal developments involving independent contractors (ICs) was a decision by the highest court in Massachusetts involving a legal doctrine being used more frequently than ever against businesses that engage ICs: negligent hiring. Many companies assume the doctrine applies only to employees and often assume that, by retaining ICs, they are free from liability in the event an IC causes personal injury or property damage to third parties. Yet, as summarized below, among the key legal developments last month, a business can be liable for damages to third parties caused by an IC under a number of different legal theories: negligent hiring of the IC, if it can be shown that the business knew or should have known that the contractor was unsuitable for the services to be performed; ordinary negligence, if the business did not draft the IC contract in a manner to protect itself from such claims; and vicarious liability (also called respondeat superior) if the worker was misclassified as an IC instead of an employee. Companies can use a process such as IC Diagnostics® to structure, document, and implement their IC relationships in a manner that maximizes compliance with laws governing ICs and, at the same time, minimizes their exposure to third-party liability.

For years, we have been reporting on independent contractor (IC) misclassification cases, especially class action and collective action lawsuits. While the media in recent years has paid more attention to the impact of these types of claims on companies in the so-called gig economy, the majority of these cases continue to target companies in traditional industries, such as transportation, healthcare, consumer sales, financial services, utilities, and real estate. This blog post includes an update below of new lawsuits filed and court cases that have settled in the past two months involving businesses related to insurance, energy, geologic services, outdoor recreation, audio/video services – industries that have little to do with the gig economy. But regardless of whether the industry is in tech, involves a platform, or operates on a brick-and-mortar basis, savvy companies wishing to minimize their IC misclassification exposure have taken steps or undertaken a process to structure, document, and implement their IC relationships in a manner intended to maximize compliance with applicable laws. One such process is IC Diagnostics®, which can provide a customized and sustainable approach to reducing the likelihood of individual, class action and collective action lawsuits alleging IC misclassification.

Sixteen years ago, we began this legal blog – the first one that focused on independent contractor compliance and misclassification law. Today, 380 blog posts and well over half a million views later, it remains the only legal blog exclusively dedicated to publishing original content in this area of the law. As the publisher and managing editor, we are pleased to inform subscribers and readers that we have moved our IC compliance and misclassification practice as well as this blog to a new law firm, Littler Mendelson P.C.  Littler is the largest labor and employment law firm dedicated to representing management exclusively. Littler’s announcement that we joined the firm can be found here.

In 2025, we published blog posts about two class action lawsuits by workers alleging independent contractor (IC) misclassification by two artificial intelligence (AI) companies. The first blog post involved an IC misclassification case brought against Scale AI by so-called “taskers,” workers who perform AI large language model tasks to mimic human expression by engaging in data labeling, content creation, and responding to prompts. The second blog post dealt with an IC misclassification case against Surge Labs Inc. by a data annotator engaged to perform coding assignments, distillation tasks, comparisons of AI generated responses, and data labeling to ensure that large language models become more accurate and capable of mimicking human expression. Those two AI lawsuits were filed in Northern  California courts under that state’s strict test for IC status. Among the legal developments from last month that we summarize below is an IC misclassification case against yet another AI firm, Mercor.io, on behalf of highly skilled professionals who train AI models and chatbots. Notably, this new case was not brought in California but rather in Texas, and it alleges violations of ERISA and the Internal Revenue Code, both of which have far more reasonable tests for IC status than does California. We anticipate that this new lawsuit will likely prompt even more AI workers around the U.S. to file IC misclassification cases against other AI companies. We also expect that this type of case will propel savvy businesses in the AI field to use processes such as IC Diagnostics™ to enhance their compliance with state and federal IC laws and thereby minimize their exposure to IC misclassification lawsuits and liability.

Businesses using independent contractors (ICs) that reside in any state that has a so-called ABC test to determine a worker’s IC status, including all companies that operate with ICs on a nationwide basis, may be asking themselves if they need a legal reset of their IC relationships after a recent decision by a New Jersey federal district court. The case involves New Jersey entertainers that livestream their performances on a hosting platform. The court first found that the performers were legitimate ICs under the “economic realities” test of the federal Fair Labor Standards Act (FLSA). But the court next found that the streamers had been misclassified as ICs under New Jersey’s ABC test and were therefore entitled to minimum wage as “employees” under the state’s wage and hour law. The New Jersey ABC test presumes workers to be employees and not ICs unless, among other things, the businesses can show that the workers perform services “outside of all of the places of business of the enterprise.” In the court’s view, the streamers “are effectively performing services within the virtual footprint of the enterprise” because the digital platform functions as a “commercial venue where the business operates.” Prior to this decision, such places of business were “brick and mortar” locations, not electronic platforms. Unless reversed on appeal, this decision may negatively impact businesses that use ICs residing in New Jersey or other states with similar ABC tests. Because so many businesses use electronic systems in their interactions with ICs, prudent companies may wish to re-document and re-implement their IC relationships using a process such as IC Diagnostics™.

On its face, the unanimous decision issued today by the U.S. Supreme Court on the scope of the interstate transportation exemption from arbitration under the Federal Arbitration Act (FAA) may seem like an unfavorable outcome for manufacturers using distributors to deliver products to customers such as retail stores. The Court’s rather short opinion, authored by Justice Neil Gorsuch, clarified that independent contractors (ICs) and employees that make “last mile” deliveries as part of a “continuous journey” of goods from one state to another are exempt from arbitration under Section 1 of the FAA covering interstate transportation workers even if all of the distributor’s services are intrastate. As the Court stated, such workers “can sometimes be direct, necessary, and active participants in moving goods ‘from … points in one state’ to ‘points in another state’ without crossing state lines or interacting with vehicles that do.”