United States: February 2014 Monthly Independent Contractor Compliance And Misclassification Update

In the Courts

  • FIELD TECHS IN CALIFORNIA SUE HOME SECURITY FIRM AND TELECOM GIANT FOR IC MISCLASSIFICATION.  Class action complaint filed in California federal district court against Carter Brothers Security Services, LLC and AT&T by field technicians who installed home security systems and provided technical-related services. The technicians allege that they are employees and were willfully misclassified as independent contractors. The complaint seeks allegedly unpaid overtime wages, pay for rest and meal breaks, unpaid minimum wages, reimbursement of expenses, and damages for failure to pay timely wages due at termination under a variety of state laws. The technicians claim that they did not set, determine or follow their own work schedules; were required to drive vehicles owned and provided by AT&T, displaying AT&T's logos and trademarks; had no ownership or investment in their own business; were required to wear uniforms bearing AT&T logos and attend on-going training sessions; and were regularly overseen, supervised and directed by the companies who are alleged to be joint employers.  Gutierrez v. Carter Brothers Security Services, LLC, No. 2:14-CV-00351 (E.D. Cal. February 4, 2014).
  • ILLINOIS MISCLASSIFICATION LAW UPHELD ON CONSTITUTIONALITY CHALLENGE.  Supreme Court of Illinois rejects constitutional challenge by roofing/construction contractor and upholds the state's Employee Classification Act, which became effective in January 2008. The court concluded that the Act, which was aimed at addressing the practice of misclassifying employees as independent contractors, is not unconstitutionally vague in its prohibitions and that "its provisions provide a person of ordinary intelligence a reasonable opportunity to understand what conduct it prohibits."  The Court noted that "the provisions explaining what will constitute an independent contractor, sole proprietor, or partnership are highly detailed and specific, resulting in a reasonably intelligent person understanding how to qualify for an exemption...." Bartlow v. Costigan, 2014 IL 115152 (Sup. Ct. Feb. 21, 2014). 
  • COMPLIANCE WITH FEDERAL TRANSPORTATION LAW NO LONGER A FACTOR IN IDAHO WHEN DETERMINING IC STATUS OF OWNER- OPERATORS.  Idaho Supreme Court overrules its 2008 ruling in Giltner, Inc. v. Idaho Department of Commerce and Labor, which held that owner-operators operating under the motor carrier's U.S. Department of Transportation (DOT) number/authority were employees and not independent contractors.  The Giltner court held that, as a matter of law, operating under the motor carrier's DOT number prevented the owner-operator from being engaged in an independently established trade, occupation, or profession within the meaning of the state Employment Security Law. In overruling that portion of the Giltner decision, the Idaho high court decided that where federal law and/or regulations required owner-operators to operate under the motor carrier's DOT authority even if the owner-operator had its own DOT number, it was improper to focus on DOT authority as the single determinative factor that would preclude an owner-operator from satisfying that portion of the test used to determine independent contractor status. The source of the DOT authority will no longer be a factor considered in determining whether the owner-operator is an employee or independent contractor. West Home Transport, Inc. v. State of Idaho, Department of Labor, No. 40462 (S. Ct. Idaho February 11, 2014).

On the Legislative Front

  • GEORGIA BILLS TO PROVIDE MORE CLARITY FOR DETERMINING IC STATUS AND STIFFER PENALTIES FOR MISCLASSIFICATION.  Georgia bill (SB 401) introduced in state Senate would amend the Employment Security Law's  "AB" test for determining independent contractor/employee status. SB 401 would presume that services performed by an individual for wages are deemed to be employment unless the Georgia Department of Labor makes a contrary determination based upon evidence submitted of seven factors demonstrating that such individual has been and will continue to be free from control or direction over the performance of such services.  The factors are non-exclusivity; freedom to accept or reject assignments without consequence; no minimum hours of work/no minimum number of orders; discretion to set own work schedule; minimal directions and no direct oversight or supervision; no territorial or geographic restrictions; and not required or compelled to perform, behave or act in manner which Commissioner determines demonstrates employment. A companion bill, SB 402, would impose graduated civil penalties for misclassification, as well as the additional penalty of a Department of Labor audit for companies who have repeatedly violated the statute.

Regulatory and Enforcement Actions

  • 127,000 WORKERS FOUND MISCLASSIFIED BY NEW YORK REGULATORS IN 2013.  The New York Task Force on Employee Misclassification issued its 2013 Annual Report on February 1, 2014.  The Report identifies the top 12 industries showing the highest incidence of independent contractor misclassification in 2013, including professional, scientific and technical services; food/drink services; administrative and support services; ambulatory health care services; construction; education services; performing arts, spectator sports and related industries; specialty trade contractors; personal and laundry services; couriers and messengers; motion picture and sound recording industries; and amusement, gambling and recreational industries. As discussed more fully in our blog post dated February 28, 2014, the New York State Department of Labor found nearly 127,000 workers to have been misclassified in the state and over $55 million in unpaid unemployment contributions were due.

Other Newsworthy Matters 

  • STUDY FINDS TWO-THIRDS OF PORT WORKERS IN U.S. ARE MISCLASSIFIED AS IC'S.  Study released in February entitled "The Big Rig Overhaul: Restoring Middle Class Jobs at America's Ports through Labor Law Enforcement" finds that approximately 49,000 out of 75,000 port drivers are employees who are misclassified as independent contractors and that the unemployment system losses due to misclassification of port drivers is almost $18 million dollars in state funds and $3 million in federal funds. Collaborating on this research project were the National Employment Law Project, Change to Win Strategic Organizing Center, and Los Angeles Alliance for a New Economy.

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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Lisa B. Petkun
Andrew J. Rudolph
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