United States: April 2013 - Monthly Independent Contractor Compliance And Misclassification Update

In the Courts

  • New York federal district court grants plaintiffs' motion for class certification in lawsuit  alleging that the United States Tennis Association (USTA) misclassified U.S Open umpires as independent contractors and failed to compensate them with overtime pay in violation of the New York Labor Law and Fair Labor Standards Act. The court rejected the USTA's arguments that the plaintiffs could not show commonality or typicality, that common questions did not predominate, and that the class action is not the superior method of adjudicating the claims.  Meyer et al. v. United States Tennis Association, 11 Civ. 6268 (S.D.N.Y. April 25, 2013).
  • Trucking and courier company reaches $700,000 settlement with its drivers in Pennsylvania who had brought class action lawsuit alleging that they had been misclassified as independent contractors in violation of Pennsylvania Wage Payment and Collection Law. Sherman, et al. v. American Eagle Express, Inc., Civil Case No. 09-0575 (E. D. Pa. April 12, 2013).
  • California federal court grants plaintiffs' motion for certification of a collective action brought against a military government contractor under the Fair Labor Standards Act. In October 2012, a class action complaint was filed against MHN Government Services and its parent, Managed Health Network (MHN), claiming that the government contractor misclassified over 1,200 employees (Military Family Life Consultants) as independent contractors and, as a result, failed to pay massive amounts of overtime pay as required under the federal wage and hour law.  See our prior blog post regarding this case, published October 9, 2012.  Zaborowski, et al. v. MHN Government Services, Inc., No. C 12-05109 SI (N. D. Ca. April 25, 2013).
  • $8 million class action settlement reached between adult dancers and the Penthouse Executive Club where dancers claimed they were employees under federal and state laws and had been misclassified as independent contractors.  See prior blog post dated April 9, 2013, entitled, "$8 Million Independent Contractor Misclassification Class Action Settlement."

On the Legislative Front 

  • Arkansas law entitled "An Act to Regulate Motor Carriers in Relation to Workers' Compensation Laws" was enacted April 12, 2013, allowing owner-operators of commercial motor vehicles to maintain independent contractor status even if they elect to be covered under a workers' compensation policy or self-insurance plan that insures the motor carrier for whom they provide services.  This legislation appears to be protective of independent contractor status in the Arkansas transportation industry.
  • North Carolina bill (H.B. 826) introduced in the state House of Representatives on April 10, 2013 seeks to amend that state's labor laws by requiring employers to notify employees in writing of their employment status both at the time of hire and upon any material changes in the relationship; imposing fines for misclassification of independent contractors, including more substantial fines when the violation is intentional; and  defining "employment status" using  common law rules.
  • Members of New York Teamsters Union attend advocacy day in Albany, New York seeking legislative support for proposed "New York State Commercial Goods Transportation Industry Fair Play Act" (A05237, S04589). This bill, introduced with identical language in the Assembly in February and the Senate in March, is limited to the trucking industry and, among other things, imposes a presumption of employment unless several detailed factors are demonstrated evidencing independent contractor status or that the person has a separate business entity, and provides for penalties for misclassification, including willful violations.
  • Public hearing held on April 17, 2013 regarding Texas bill (HB 1925) outlining factors to be met in order to classify certain individuals as independent contractors in the construction industry and penalties to be assessed for misclassification.

Other Newsworthy Matters 

  • President Obama's 2014 fiscal year Budget makes clear that his administration, through the Department of Labor, intends to continue its crack down on employers who are misclassifying employees as independent contractors. The budget includes $14 million to combat misclassification, including $10 million for grants to States to identify misclassification and recover unpaid taxes and $4 million for personnel at the Wage and Hour Division to investigate misclassification.  See prior blog post dated April 10, 2013 entitled, "The 2014 Budget and Independent Contractor Misclassification: 'Preventing and Detecting Misclassification of Employees as Independent Contractors' Remains a Funding Highlight in President Obama's Newest Budget."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Lisa B. Petkun
Andrew J. Rudolph
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