February 2013 Monthly Independent Contractor Compliance and Misclassification News Update

February 2013

In the Courts:

  • Lowe’s Home Centers is sued by construction material installer engaged in installing fences, roofs, siding and decks for Lowe’s customers in a class action misclassification lawsuit. The installer seeks to represent himself and  all other similarly situated installers under the Illinois Employee Classification Act, seeking back wages, employment benefits, and liquidated and compensatory damages. Trinkle v. Lowe’s Home Centers, Inc., No. 2013CH02115 (Cook County Cir. Ct.).
  • Texas federal district court grants summary judgment in favor of Gate Guard Services in a misclassification lawsuit with the U.S. Department of Labor, which had sought over $6 million dollars in back wages for 400 gate attendants and other workers. The court found that the gate attendants, who logged in vehicles entering and departing oil field operation sites, were properly classified as independent contractors and not employees. Gate Guard Services L. P. v. Solis, No. V-10-91 (S.D. Tex. Feb. 13, 2013).
  • California Labor Commissioner wins misclassification case against a port shipping and trucking company that misclassified its four drivers as independent contractors. Seeking damages similar to the type obtained by 200 drivers in their case against FedEx Ground in California (unreimbursed rental fees and other expenses as well as unpaid statutory payments leading to a $14 million award), the Labor Commissioner prevailed after a hearing, despite the presence of an agreement designating the truckers as independent contractors. The four drivers were awarded on average over $25,000 each.  In re Seacon Logix, Inc. (Div. of Lab. Standards Enforcement Feb. 28, 2013).

On the Legislative Front:

  • Texas bill (S.B. 676) was introduced on February 20, 2013 clarifying how to determine whether certain workers in the construction industry are employees or independent contractors for purposes of unemployment insurance coverage; enumerating the administrative penalties to be incurred by employers who misclassify workers; and permitting Texas Workforce Commission to provide notice of violations to each governmental agency that the Commission reasonably believes has received construction services provided by the contractor that has misclassified workers.
  • Two Nevada bills (S.B. 95 and S.B.96) relating to employee misclassification were referred to a committee on February 3, 2013. In addition to providing a statutory definition of the term “employee misclassification,” S.B. 95 would require various  state agencies including the Department of Taxation and Attorney General to share information relating to suspected employee misclassification. S.B. 95 would also create a misclassification task force. The other bill, S.B. 96, sets forth a graduated schedule of administrative penalties that may be imposed for misclassification of employees as independent contractors. The penalties differ according to whether the violation was willful or unintentional. Particularly noteworthy is the proposed section that expands the penalties for misclassification to apply to “a person who, for money or other valuable consideration, knowingly advises an employer or any employee, officer or agent of an employer to misrepresent the classification or duties of an employee of the employer, including, without limitation, misrepresenting that the employee is an independent contractor.”

Regulatory and Enforcement Initiatives: 

  • On February 27, 2013, the IRS issued a release updating its Voluntary Worker Classification Settlement Program (VCSP) that it rolled out in September 2011 (see our prior blog post on this subject). The new release discloses that nearly 1,000 employers have applied for the VCSP in the 17 months since it was introduced (still a minimal number, presumably reflecting the concerns many companies have about the ramifications of participating in this program). Under a special temporary expansion of the VCSP that is scheduled to expire on June 30, 2013, employers that failed to file Forms 1099 for the affected workers will not be excluded from the program.
  • Connecticut Department of Labor’s Division of Wage and Workplace Standards announces on February 4, 2013 that it has issued Stop Work orders against five companies working at construction sites at Wal-Mart stores in Connecticut and Brooklyn, New York. Some of the Stop Work orders were due to the company’s failure to provide proof of Workers’ Compensation coverage or because of misclassification of workers as independent contractors.

Other Newsworthy Matters:

  • Cases involving exotic dancers in Kansas and office cleaning workers in Massachusetts show how a single claim won by a misclassified employee for unemployment benefits can lead to the beginning of an array of IC misclassification claims dealing with the company’s other ICs – unless the company engages in best practices. See Blog Post published February 5, 2013, entitled “Unemployment Benefit Claims and Independent Contractor Misclassification Liability: A Single Claim by One Worker Can Lead to Disastrous Results.”

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

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