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Almost one year to the day following the joint statement by the Attorneys General of New York, New Jersey, and Montana that they intended to sue FedEx Ground for misclassifying drivers as independent contractors instead of...

Less than three months after settling independent contractor misclassification charges with the Massachusetts Attorney General for $3 million, FedEx Ground has agreed to pay Montana $2.3 million to settle that State’s...

The federal court judge assigned to over 60 cases involving FedEx Ground drivers who claim they have been misclassified as independent contractors instead of employees has issued his second key ruling in the case.  In contrast...

  On July 15, 2010, the Massachusetts Attorney General’s Office announced that it had reached an agreement with FedEx Ground to settle a citation that the company was misclassifying its drivers as independent contractors...

The first decision on the merits has been issued in the FedEx Ground class action “independent contractor” cases. . . . On May 28, 2010, Judge Robert L. Miller, Jr., the judge assigned to hear and decide all of these Fed Ex Ground cases, granted summary judgment in favor of the Illinois plaintiffs on their wage claims under the Illinois Wage Act. . . . The decision by Judge Miller is limited to the statutory claims under a single state’s wage law. He expressly noted in his decision that he was not deciding the common law claims brought by the Illinois plaintiffs. Nonetheless, this decision by Judge Miller is a partial setback for Fed Ex, which has experienced mixed results in the courts to date.

The highly controversial joint employer regulation just issued by the National Labor Relations Board (NLRB) on October 26 is not so different than the standard that has historically been applied in determining whether a group of workers are employees or independent contractors under many state and federal laws. Indeed, a legitimate criticism of the NLRB’s joint employer rule is that it improperly relies upon one of the most important factors used by the courts to determine independent contractor status: reservation of the “right to control” the manner and means by which the agreed upon services are performed, “regardless of whether control is exercised.” 29 C.F.R. 103.40(e)(1). 

We report below on four case developments during June 2023 in the area of independent ‎contractor misclassification: two of which are centered on Illinois. That state has one of the ‎most stringent statutory tests for independent contractor status. As construed by the courts in ‎that state, the Illinois ABC test for IC status is similar to the tests in California and ‎Massachusetts, creating a hotbed for IC misclassification cases. While states with ABC tests ‎make it more challenging for companies to survive a legal challenge to their IC classifications, ‎there are ways many companies doing business in such states can still comply with such laws. ‎Many companies operating nationwide and in “ABC states” have used a process such as IC ‎Diagnostics (TM) to enhance their compliance and minimize exposure to IC misclassification ‎liability in all states in which they operate or engage the services of independent contractors. ‎

Yesterday, June 13, 2023, the NLRB issued a lengthy decision in its Atlanta Opera case dealing ‎with the applicable test for independent contractor status under the National Labor Relations Act ‎‎(NLRA). This decision reversed the Board’s prior test for IC status as expressed in the ‎SuperShuttle case decided by the NLRB in 2019. In a lengthy decision, three of the four ‎members of the Board expressly declined to follow a 2017 decision by the U.S. Court of Appeals ‎for the District of Columbia Circuit in a case referred to as FedEx II, where the circuit court ‎concluded that the NLRB was seeking to “nullify this court’s [prior FedEx] decision” as to the ‎applicable test for independent contractor status. The bulk of the Board’s majority 19,000-word ‎decision focused on the supposed fallacies in the NLRB’s SuperShuttle decision and the ‎correctness of the NLRB’s prior FedEx decisions, which has twice been rejected by the D.C. ‎Circuit. But when the NLRB majority’s new decision is analyzed, does it really make a ‎difference what test the NLRB uses to determine IC status? As vividly demonstrated by the ‎Atlanta Opera case, nearly all of these independent contractor cases will be decided the same ‎way, regardless of which test is used. ‎

Among the legal developments we report on below from October is a decision by a federal district court in California certifying a lawsuit for independent contractor misclassification as a collective action under the federal wage and hour law, allowing similarly situated individuals to join the lawsuit seeking unpaid overtime.  What was most significant about the decision is that the certification was based on little more than threadbare allegations and conclusory declarations. Unlike the more rigorous standard for class action certification under Rule 23 of the Federal Rules of Civil Procedure governing class actions, federal court judges have traditionally been given wide latitude in deciding whether to grant collective action certification for alleged violations under the federal Fair Labor Standards Act.  Few judges, however, have applied a more lenient standard than the one applied by the court in the first case summarized below, where it granted collective certification based on plaintiff’s declaration that she and other prospective members of the collective action “often worked more than 40 hours a week,” despite documentary evidence to the contrary. How can a business avoid the costs of defending against these types of claims that can turn into collective actions so easily? The answer is to elevate compliance with state and federal IC laws, minimizing the odds of being sued. Savvy companies have done so using a process such as IC Diagnostics (TM), which restructures, re-documents, and/or re-implements their IC relationships in a manner than maximizes IC compliance in a customized and sustainable manner consistent with their business models.

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.‎