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

Last Updated: September 3 2014
Article by Richard J. Reibstein, Lisa B. Petkun and Andrew J. Rudolph

This month's headline development are the seismic decisions, issued on August 27, 2014 by the U.S. Court of Appeals for the Ninth Circuit, concluding as a matter of law that FedEx Ground had misclassified over 2,300 drivers in California and a smaller group of drivers in Oregon. The appellate decision reversed a district court decision applicable to over 40 lawsuits filed around the country by FedEx Ground drivers. The Ninth Circuit decision, which is arguably the most significant legal development to date in 2014 in the field of independent contractor misclassification, was based on the court's close examination of the terms of the independent contractor agreement and the policies and procedures used on a nationwide basis by FedEx Ground. This game-changing decision is likely to have broad ramifications across all industries, and cause regulators and class action lawyers to more closely scrutinize independent contractor agreements in an effort to determine if the company in question retains sufficient direction and control over the manner or means by which the work is performed by individuals who claim to be employees and not independent contractors.

In the Courts (3 cases)

  • FED EX GROUND SLAMMED BY NINTH CIRCUIT IN DECISION CHANGING INDEPENDENT CONTRACTOR LANDSCAPE. Federal appeals court overturns a lower court decision applicable to 42 court cases where the lower court had found that FedEx Ground delivery drivers were independent contractors and not employees. The Ninth Circuit Court of Appeals reversed that decision as it applies to California and Oregon law, finding that FedEx Ground had the right to exercise control and/or actually exercised control over the drivers' appearance and dress, their vehicles, the times the drivers work, how and when drivers deliver their packages, and the "decorum" that the drivers must exercise to "foster the professional image and good reputation of FedEx." See our detailed blog post on August 29, 2014, including the impact that the decision will have on other companies using independent contractors and how companies can minimize misclassification liability by restructuring, re-documenting, and re-implementing their independent contractor relationships. Alexander v. FedEx Ground Package System, Inc., No. 12-17458 and 12-17509 (9th Cir. Aug. 27, 2014); Slayman v. FedEx Ground Package System, Inc., Nos. 12-35525 and 12-35559 (9th Cir. Aug. 27, 2014).
  • NEWPAPER AGREES TO PAY $3.2 MILLION TO SETTLE CLASS ACTION LAWSUIT BROUGHT BY ITS HOME DELIVERY CARRIERS. After six years of costly litigation, Lee Publications (d/b/a North County Times) of San Diego has settled an independent contractor misclassification lawsuit brought by home delivery newspaper carriers. The plaintiffs alleged many causes of action against the newspaper, including failure to pay minimum wage, hourly wages and overtime wages and failure to reimburse the carriers for their business expenses. Although the class action claim was limited to exclude the minimum wage claims, the parties settled the state law claims alleging failure to reimburse the carriers for their reasonable business expenses and for unfair business practices. An approval hearing regarding the proposed settlement is scheduled for October 2014. Dalton v. Lee Publications, Inc., No. 08-CV-1072 (GPC NLS) (S.D. Cal. August 15, 2014).
  • WASHINGTON STATE DISCRIMINATION LAW CAN APPLY TO INDEPENDENT CONTRACTOR ALLEGEDLY FIRED IN RETALIATION FOR COMPLAINING ABOUT DISCRIMINATION. The Washington Court of Appeals has found Northland Services Inc. liable for the retaliatory dismissal of an independent contractor truck driver, Larry Currier, under the Washington Law Against Discrimination (WLAD), even though the driver did not have an employer-employee relationship with the company. The independent contractor driver complained to the company that another independent contractor had directed racially derogatory statements at a Latino driver. Two days later, the company terminated Currier's contract. Although the company argued that the WLAD did not apply to independent contractors and, consequently there could be no retaliation as a matter of law, the Court of Appeals disagreed. It found that the WLAD extends broad protections to "any person" engaging in statutorily protected activity from retaliation by an employer or "other person." Currier's complaint about the discriminatory treatment of others was found to be a statutorily protected activity and the timing of the termination of the contract to the complaint by Currier and other evidence served as a causal link evidencing retaliation. Currier v. Northland Services Inc., No. 70128-2-I (Ct. App. Wash. August 4, 2014).

On the Legislative Front (2 matters)

  • VIRGINIA GOVERNOR ISSUES EXECUTIVE ORDER CREATING INDEPENDENT CONTRACTOR MISCLASSIFICATION TASK FORCE. Virginia Governor Terry McAuliffe signs Executive Order 24 establishing an interagency task force to combat worker misclassification and payroll fraud. In a press release issued by his office on August 15, 2014, the Governor stated: "Every Virginian who works hard and follow the rules should get the pay and benefits that they deserve. This executive order will begin a process to ensure that employers throughout the Commonwealth follow the same rules when it comes to benefits and pay for their employees." The activities of the Task force are to include reviewing existing statutes and regulations related to worker misclassification and payroll fraud; evaluating current enforcement practices; developing procedures for more effective inter-agency cooperation and joint enforcement; implementing a pilot program for joint enforcement; developing educational materials; advising about technological improvements in misclassification and payroll fraud detection; and recommending changes to legislation or administrative rules.
  • PENNSYLVANIA LEGISLATOR INTRODUCES BILL TO BOOST ENFORCEMENT OF CONSTRUCTION INDUSTRY MISCLASSIFICATION. Pennsylvania state senator Mike Stack (D. Philadelphia) introduces Senate Bill 1454 in an effort to enhance the enforcement of the current independent contractor misclassification laws in Pennsylvania, particularly the law prohibiting misclassification in the construction industry. In an August 12th press release, Sen. Stack stated: "When it comes to protecting workers and taxpayers from employer manipulation, the state Department of Labor is not up to the job. It's time to give local law enforcement the tools to prosecute when they uncover violations of state labor law." The bill seeks to amend Act 72 (the Construction Workplace Misclassification Act), which required that construction industry businesses satisfy a rigid test for those classified as independent contractors and made it a criminal offense for employers in the construction industry to misclassify employees. The proposed bill, which is currently pending before the Senate Labor and Industry Committee, would allow local district attorneys to investigate and prosecute violations of state law regarding exploitation of the "independent contractor" class of employees. Senator Stack was harsh in his assessment of Pennsylvania regulators, whom he said have resolved less than one third of complaints in the three years following the enactment of Act 72.

Regulatory and Enforcement Initiatives (1 matter)

  • The Illinois Department of Employment Security (IDES) reported on August 11, 2014 that in the prior year, nearly 20,000 workers in that state were found by the IDES to have been misclassified as independent contractors and that the IDES assessed unemployment insurance contributions and penalties attributable to over $250 million in unreported taxable wages. According to the state's Bureau of Labor Statistics, Illinois had the most productive employer auditing effort in the country, with 3,635 audits conducted of employers in 2013.

Other Noteworthy Matters (1 Matter)

  • San Francisco cab drivers vote on August 13, 2014 to join the San Francisco Taxi Workers Alliance, which is the first independent contractor affiliate of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). This alliance was formed in an effort to gain political and legal strength against emerging trend of app-based ride services like Lyft and Uber, in the face of what the taxi drivers believe to be inaction by the City of San Francisco to regulate Internet-based ride services.

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.

Lisa B. Petkun
Andrew J. Rudolph
In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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