United States: April/May 2014 Monthly Independent Contractor Compliance And Misclassification Update

In The Courts

  • ARIZONA DRYWALL COMPANY TO PAY $600,000 TO SETTLE ALLEGATIONS THAT ITS LABOR SUBCONTRACTOR MISCLASSIFIED IC'S.

Paul Johnson Drywall, Inc. agreed to pay $600,000 in back wages and liquidated damages to 445 current and former employees as result of the U.S. Department of Labor investigation into independent contractor misclassification by its construction labor subcontractor, Arizona Tract LLC. Paul Johnson Drywall had entered into an agreement in 2013 with Arizona Tract for the provision of drywall labor, but the U.S. Department of Labor concluded that the contractor misclassified the drywall workers as ICs instead of employees. While some businesses continue to believe that hiring labor through a contractor or staffing company insulates them from IC misclassification liability, the regional administrator for the Wage and Hour Division's west region stated in a press release that, "With increasing frequency, we are entering into agreements, like this one . . . ." Perez v. Paul Johnson Drywall, Inc., 2:2014-cv-01062 (D. Ariz. May 19, 2014).

  • COLORADO SUPREME COURT CLARIFIES IC TEST.

Overturning prior precedent involving the classification of independent contractors, the Colorado Supreme Court held that the "totality of the circumstances" test should be used when determining if an individual is "customarily engaged in an independent trade, occupation, profession or business related to the service performed" under the Colorado Employment Security Act (CESA). Colorado, like about half of the states, has a form of the "ABC" test for purposes of unemployment benefits. Previously, Colorado courts found that an individual that provided similar services to another business at the same time was determinative of whether the individual was engaged in an independent business. Industrial Claims Appeals Office v. Softrock Geological Services, Inc., 2014 CO 30 (Sup. Ct. Colo. May 12, 2014).

  • HOME IMPROVEMENT INSTALLERS SETTLE IC MISCLASSIFICATION CLAIMS FOR $6.5 MILLION.

Lowe's Home Centers agreed to pay $6.5 million to settle a class action lawsuit brought by home improvement contractors who allege they were misclassified as ICs instead of employees. In addition, the settlement calls for attorneys' fees of 25% of the settlement amount. This settlement, which was the subject of our blog post on May 26, 2014, is scheduled for a "fairness hearing" on June 27, 2014. The case is yet another in a long line of cases that are the subject of blog posts where it appears that the business did not structure its relationship with the ICs in a manner that enhanced compliance with state or federal IC laws. Shepard v. Lowe's HIW, Inc., No. 12-CV-03893-JSW (N.D. Cal. May 23, 2014).

  • MISSOURI CABLE COMPANY AND INSTALLERS HEADED FOR TRIAL ON IC STATUS.

A Missouri federal district court denied competing motions for summary judgment in lawsuit by cable installers suing Integrity Communications, Inc. for IC misclassification resulting in alleged violations of federal and state wage/hour laws. The cross-motions sought a determination of whether the cable installers were employees covered by the Fair Labor Standards Act or independent contractors exempt from the federal Fair Labor Standards Act. The court applied a six-part "economic realities test," considering the degree of control by the alleged employer over the manner in which the installers perform their work; whether the installers had an opportunity for profit or a risk of loss; the installers' investment in equipment or materials; whether a special skill was involved; the duration of the working relationship; and the degree of integration into the company's business. In denying the cross-motions, the Court concluded that there were genuine issues of material fact with respect to many of the six factors, thereby precluding summary judgment and requiring that the parties proceed to trial. Pennington v. Integrity Communications, Inc., No. 1:12-CV-5 SNLJ (E.D. Mo. May 20, 2014).

  • NEW YORK NEWSPAPER MISCLASSIFIED PHOTOJOURNALISTS AS IC'S.

A New York appellate court upholds two administrative determinations that newspaper photojournalists who provided services to the New York Post were employees and not independent contractors for purposes of the New York unemployment insurance laws. Included among the factors found by the court to demonstrate an employer-employee relationship were the need for a trial photography session, the existence of a reasonably regular work schedule, the requirement that the worker adhere to the production standards set forth in a New York Post memo, and the restrictions imposed upon the photojournalist's ability to grant rights to the photos taken for the newspaper. Matter of Nance, No. 516996 (N.Y. App. Div. 3d Dep't May 22, 2014); Matter of Price, No. 516297 (N.Y. App. Div. 3d Dep't May 22, 2014).

  • TAXICAB COMPANY NOT SUBJECT TO OVERTIME WAGE CLAIMS UNDER FEDERAL OR STATE LAW FOR IC MISCLASSIFICATION.

A federal district court in New York granted a taxi company's motion for summary judgment in a class action lawsuit brought under federal and state law by cab drivers seeking damages for allegedly being misclassified as independent contractors. In dismissing the drivers' FLSA claims for alleged failure to pay overtime compensation, the court determined that the drivers operated "taxi cabs" and that they therefore fell within the FLSA's taxicab exemption to the maximum hours rule for "any driver employed by an employer engaged in the business of operating taxis." The court also dismissed the drivers' state minimum wage, overtime, and spread of hours claims, finding that the drivers were not covered by the New York labor laws because they were "drivers engaged in operating a taxi cab." However, with respect to the drivers' claims for minimum wage protection under the FLSA, the court found that the company's argument that the drivers were independent contractors not covered by the FLSA's minimum wage protections was not suitable for summary judgment because there were material factual disputes regarding the drivers' independent contractor/employee status under the "economic realities test" applicable to FLSA claims. Joseph Arena v. Plandome Taxi Inc., No. 2:12-cv-01078 (E.D.N.Y. Apr. 14, 2014).

  • OIL FIELD WORKERS RECEIVE $2 MILLION TO SETTLE THEIR IC MISCLASSIFICATION CLASS ACTION.

A Colorado federal court approved a $2 millionsettlement in an independent contractor misclassification collective action brought under the FLSA by oil field workers who monitored oil and gas wells against J&A Services, LLC. As part of the settlement, 71 workers who had been treated as independent contractors will receive payments for unpaid overtime. Howard v. J &A Services, Inc., No. 1:12-cv-02987 (D. Colo. Apr. 8, 2014).

  • U.S. LABOR DEPARTMENT MUST PAY $600,000 IN LEGAL FEES OF BUSINESS WRONGFULLY PROSECUTED FOR IC MISCLASSIFICATION.

The U.S. Department of Labor was ordered by Texas federal court to pay almost $600,000 in attorneys' fees and expenses to Gate Guard Services, a limited partnership that provides services to oil field operators by contracting with gate attendants to log in vehicles entering and exiting oil field operation sites. The court found that the Labor Department's threatened prosecution of the company for independent contractor misclassification was not substantially justified and because the partnership had a net worth of under $7 million and less than 500 employees, it was entitled to legal fees under the Equal Access to Justice Act. Gate Guard Services L.P. v. Perez, No. 6:10-cv-00091 (S.D. Tex. Apr. 9, 2014)

  • NEW YORK LIMOUSINE COMPANY SETTLES CLASS ACTION IC MISCLASSIFICATION CASE FOR $3.5 MILLION.

Over 400 limousine drivers will share in a class action settlement of $3.5 million against Sunny's Limousine Services in their lawsuit alleging that the company misclassified drivers as independent contractors. See our blog post of April 21, 2014 describing this case. Munir v. Sunny's Limousine Service, Inc., No. 13-cv-1581 (VSB) (S.D.N.Y. Apr. 18, 2014).

  • NFL CHEERLEADERS SUE FOR IC MISCLASSIFICATION.

Former members of the Buffalo Jills, the cheerleading squad for the Buffalo Bills, have sued the professional football franchise and others in New York State court alleging misclassification as independent contractors and violations of the state labor laws, including the minimum wage law. The cheerleaders claim that the Bills and others failed to pay them for all hours worked for each season, failed to reimburse them for business expenses in a timely fashion, and took unlawful deductions from their pay. In addition, they allege that the Bills and others exercised direction and control over the cheerleaders by requiring them to attend all preseason, regular and postseason home football games; attend and participate in all practices, rehearsals, photo sessions and meetings; participate in a Youth cheerleading program; follow a Buffalo Jills handbook; and be subject to monitoring of their activities and behavior, with disciplinary consequences for noncompliance. S., Jaclyn v. Buffalo Bills, Inc., No.804088/2014 (Sup. Ct. Erie County N.Y. Apr. 22, 2014).

Regulatory and Enforcement Initiatives

  • CALIFORNIA JANITORIAL COMPANIES ISSUED $1.5 MILLION CITATIONS FOR IC MISCLASSIFICATION.

The California Labor Commissioner issued citations of over $1.5 million to two janitorial companies for allegedly engaging in multiple wage violations, including misclassification of 52 workers as independent contractors and failure to provide rest or meal breaks or pay minimum wage or overtime wages. The janitorial companies, NLP Janitorial and Coast to Coast West, provided cleaning services to hotels, resorts, theater chains, and restaurants. In a News Release (No. 2014-42) dated May 8, 2014, the Labor Commissioner stated: "There is a high cost to unfair competition, and these 52 workers bore the brunt of it when their earned wages were stolen from them. Honest janitorial employers struggling to compete against scofflaws also pay."

  • NEW YORK DELIVERY / TRUCKING INDUSTRY STANDARDS FOR IC'S ISSUED BY STATE LABOR DEPARTMENT.

The New York State Department of Labor issued standards for determining whether a commercial truck driver operating in New York is an independent contractor or employee under the recently enacted New York State Commercial Goods Transportation Fair Play Act. The Labor Commissioner also issued posters required to be posted by businesses using drivers who are covered under the new law, which applies to drivers operating commercial vehicles with a Gross Vehicle Weight Rating of over 10,000 pounds. See our blog post on April 30, 2014 for further explanation of the Labor Commissioner's newly released standards, as well as our blog post dated March 18, 2014 elaborating upon the important technical amendments made to the new law and our April 2, 2014 blog post offering insights into how to comply with the new law.

On the Legislative Front

  • CONGRESS RE-INTRODUCES PAYROLL FRAUD PREVENTION ACT OF 2014.

Earlier this month, Congress re-introduced a bill to address independent contractor misclassification. As noted in our prior blog post of May 20, 2014, the Payroll Fraud Prevention Act of 2014, if enacted, would expand the federal Fair Labor Standards Act (which currently addresses minimum wage, overtime and child labor laws) to cover a new category of workers – non-employees – and make it a prohibited act to "wrongly classify an employee as a non-employee." The bill would also add new recordkeeping responsibilities on all businesses and impose severe penalties for violations by businesses.

Other Newsworthy Matters

  • NATIONAL EMPLOYMENT LAW PROJECT ISSUES REPORT CRITICAL OF IC USE

National Employment Law Project (NELP) published a report on May 7, 2014 entitled: "Who's the Boss: Restoring Accountability for Labor Standards in Outsourced Work," which condemns independent contractor misclassification. The report concluded that the increasing use of outsourcing, including agency temporary workers (temps), independent contractors, contract company workers, day laborers, and direct-hire temps, often results in lower wages and dangerous working conditions. The report contains many far-reaching objectives including extending liability "up the supply chain" to businesses that use outsourcing and staffing firms; and creating more laws at the state level that create presumptions of employee status.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Lisa B. Petkun
Andrew J. Rudolph
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions