We spotlight beneath the unbiased contractor misclassification and compliance developments that occurred in July and August 2022, however three deserve particular point out. One of an important judicial developments is a brand new lawsuit alleging that Perdue Farms misclassifies rooster growers as unbiased contractors. This lawsuit could sign that agribusiness is the following business being focused by class motion legal professionals. Another key authorized growth is a bipartisan initiative in Congress to suggest laws recognizing the respectable use of unbiased contractors. While there’s little probability that the pending invoice will change into regulation on this Congress, the very fact it has bipartisan assist means that it will likely be reintroduced in future classes of Congress and could achieve momentum. A 3rd authorized growth is a regulatory initiative by the National Labor Relations Board and the Federal Trade Commission to coordinate company motion towards firms, significantly these within the gig economic system, considered undermining competitors and the precise to unionize via the misclassification of workers as unbiased contractors. There have been many coordinated company efforts prior to now which have targeted on misclassification of unbiased contractors, however they’ve didn’t lead to any significant enforcement actions. Moreover, as defined beneath, the NLRB will not be statutorily approved to analyze firms referred to it by different administrative businesses, making any coordinated enforcement motion between the NLRB and the FTC extremely unlikely. Nonetheless, the heightened deal with the use unbiased contractors since President Biden’s election has despatched a robust message to firms that use contractors: improve your compliance with federal, state, and native unbiased contractor legal guidelines. Many firms have utilized a course of corresponding to IC Diagnostics (TM), which restructures, re-documents, and/or re-implements unbiased contractor relationships as a way to decrease danger of misclassification legal responsibility in a custom-made and sustained method, with out altering the corporate’s enterprise technique or targets.
In the Courts (8 instances)
CHICKEN PRODUCER SUED BY GROWERS IN CLASS ACTION FOR IC MISCLASSIFICATION. Perdue Farms faces a category motion grievance introduced in a Georgia federal courtroom by rooster farmers claiming wage and hour violations beneath the Fair Labor Standards Act as a result of farmers’ alleged misclassification as unbiased contractors as a substitute of workers. The farmers, who elevate chickens, which Perdue Farms personal, from shortly after hatching till slaughter, additionally allege that Perdue breached their unbiased contractor agreements with the farmers and terminated a grower’s contract in retaliation for his contacting the USDA a couple of potential violation by Purdue. According to the grievance, Perdue “treats all of its [farmers] across the country in the same fashion, using the same restrictive contracts and guidelines with all of them to dictate nearly every aspect of how they run their farms.” The grievance additionally alleges that Perdue has “devised a scheme to saddle [farmers] with risk and debt, while at the same time directing and controlling every aspect of the chicken growing process….” The farmers declare they make massive investments in barns, tools, and “grow out” homes, typically requiring them to take out massive loans to finance their purchases, which causes the farmers’ compensation to fall beneath the minimal wage. Among different issues, Perdue allegedly requires the farmers to work solely for Purdue; trains, supervises, and screens the farmers; requires the rooster homes to fulfill sure exact specs; requires every farmer to signal an an identical Poultry Producer Agreement; requires compliance with its pointers and bio-security insurance policies; controls the strategies used to boost the chickens; requires use of feed supplied by Perdue; and controls the schedule of the growers’ work and timing for supply of chicks. Parker v. Perdue Farms Inc., No. 5:22-cv-00268 (M.D. Ga. July 22, 2022).
NEW JERSEY SUPREME COURT REQUIRES HIGH EVIDENTIARY BURDEN TO ESTABLISH INDEPENDENT CONTRACTOR STATUS UNDER “ABC” TEST. The New Jersey Supreme Court utilized that state’s restrictive “ABC” check for unbiased contractor standing and held that drywall installers are workers, not unbiased contractors. At problem was whether or not 11 enterprise entities offering drywall companies had been unbiased contractors beneath the state’s Unemployment Compensation Law. East Bay Drywall, LLC, a drywall set up firm, engages employees to finish the drywall set up, taping, and ending on a per-job foundation. Applying the three-part conjunctive ABC check that applies in New Jersey, the state’s highest courtroom discovered that Prong C – whether or not the person is typically engaged in an independently established commerce, occupation, career or enterprise – was not happy by East Bay as a result of it didn’t introduce proof that the entities maintained unbiased enterprise areas, marketed, or had workers. Although East Bay testified that “the subcontractors worked for other contractors, that sometimes a subcontractor would leave the job before it was completed, and that the subcontractors were free to accept or decline work,” the courtroom acknowledged that such proof was inadequate to show the entities’ independence as a result of “even wholly dependent employees may choose to work for more than one employer or abruptly resign from their position.” Likewise, though East Bay launched proof that a lot of the subcontractors had certificates of insurance coverage and enterprise registrations, the courtroom acknowledged that “these documents do not elucidate whether the disputed entities were engaged in independent businesses separate and apart from East Bay.”
The courtroom selected to not analyze Prongs A and B as a result of Prong C was not happy and the failure to fulfill any prong dooms any firm from establishing unbiased contractor standing as a result of the ABC check requires that every one three prongs should be confirmed. Although the Supreme Court didn’t want to achieve the problem, totally different constituencies have been involved about how Prong B, which requires the entity’s work to be “outside the usual course of the business” or “outside of all the places of business” of the potential employer, could be interpreted by the courts in New Jersey. In a footnote to its resolution, the Supreme Court recommended, in gentle of the prevalence of distant work, that the New Jersey Department of Labor and Workforce Development promulgate laws clarifying the place an enterprise “conducts an integral part of its business” and what constitutes the “usual course of business.” East Bay Drywall LLC v. Department of Labor and Workforce Development, No. 085770 (Sup. Ct. N.J. Aug. 2, 2022). .
FEDERAL APPEALS COURT REVERSES CLASS ACTION CERTIFICATION AND SUMMARY JUDGMENT IN FAVOR OF PLAINTIFFS IN IC MISCLASSIFICATION CASE. The U.S. Court of Appeals for the Ninth Circuit has dominated in favor of a pre-foreclosure property preservation firm on its attraction of a district courtroom’s certification of a category of employees who present in foreclosures property preservation companies and the district courtroom’s grant of abstract judgment in favor of the employees. The grievance had alleged that Field Asset Services, LLC (FAS) willfully misclassified the named plaintiff and over 150 related employees as unbiased contractors and not workers, and that by doing so it allegedly resulted in FAS’s failure to pay extra time compensation and to reimburse the proposed class members for their enterprise bills. The district courtroom had licensed the category and granted partial abstract judgment in favor of the category members, discovering that that they had been misclassified as unbiased contractors and had been entitled to damages. On attraction, the Ninth Circuit reversed, concluding that the category members had failed to fulfill the category motion “predominance” requirement as a result of it couldn’t set up by frequent proof that the employees all labored extra time or incurred enterprise bills however reasonably might solely be confirmed by extremely individualized inquiries as as to if every explicit class member ever labored extra time or incurred needed enterprise bills. The appeals courtroom discovered that abstract judgment was inappropriate on the expense reimbursement problem as a result of the dedication whether or not FAS managed the category members’ work ought to have been determined by a jury and not by the district courtroom decide. The case was remanded to the district courtroom. Bowerman v. Field Asset Servs. Inc., Nos. 18-16303 and 18-17275 (ninth Cir. July 5, 2022).
ANOTHER FEDERAL APPEALS COURT REVERSES SUMMARY JUDGMENT IN FAVOR OF U.S. LABOR DEPARTMENT IN IC MISCLASSIFICATION CASE. The U.S. Court of Appeals for the Eighth Circuit has reversed a district courtroom’s grant of abstract judgment in favor of the U.S. Department of Labor, discovering that there have been real disputes of fabric truth that ought to have been submitted to a jury concerning the suitable employee classification of drivers offering companies to a non-emergency medical transport firm. Travelon Transportation engages drivers to move sufferers to and from medical appointments and assigns journeys to drivers via an app on the drivers’ tablets. The district courtroom, making use of the financial realities check, concluded that the corporate violated the Fair Labor Standards Act on account of its misclassification of the drivers as unbiased contractors and not workers. On attraction, the Eighth Circuit reversed and concluded that “issues of material fact remain as to the working relationship between Travelon and its drivers.” The courtroom famous that Travelon had provided proof from which a rational trier of truth might discover that three components within the financial realities check – “control,” “profits and losses,” and “integral to business” – weigh in favor of the drivers being unbiased contractors.” The Eighth Circuit additionally discovered that there was competing proof about whether or not the drivers might reject journey assignments, the extent of management the corporate had over the drivers’ hours, whether or not the drivers might present companies unbiased of their work with the corporate, and whether or not the companies rendered by the employees are integral to the enterprise of the corporate. The appeals courtroom directed the district courtroom, on remand, to resolve “these competing narratives” earlier than it makes its authorized conclusion as as to if an employment relationship existed between the Company and its drivers. Walsh v. Alpha & Omega USA Inc., No. 21-02961 (eighth Cir. July 14, 2022).
LOW NUMBER OF CLASS MEMBERS RESULTS IN DENIAL OF CLASS ACTION CERTIFICATION IN IC MISCLASSIFICATION CASE. Goya Foods succeeded in defeating a movement for class certification by two Pennsylvania gross sales representatives in an unbiased contractor misclassification lawsuit filed in New Jersey federal courtroom. Goya makes use of a workforce of gross sales representatives who’ve executed dealer agreements to distribute its merchandise to supermarkets, grocery shops, and eating places. Some of the gross sales representatives had additionally signed arbitration amendments to the agreements. According to the grievance, the gross sales representatives claimed that Goya unlawfully misclassified them as unbiased contractors and took illegal deductions from their pay in violation of the Pennsylvania Wage Payment and Collection Act. In denying plaintiffs’ movement for class certification, the courtroom concluded that the gross sales representatives didn’t fulfill the “numerosity” requirement for class motion certification. At its most doable measurement, the proposed class would have amounted to 37 members, together with the 2 plaintiffs. Further, the courtroom famous that as a result of 16 of the gross sales representatives signed arbitration agreements, the variety of doable class members could be as little as 21. The courtroom acknowledged that even assuming that the 16 gross sales representatives who had signed arbitration agreements had been included within the proposed class, “joinder [of all the proposed class members as individual plaintiffs] is not impracticable here.” Ortiz v. Goya Foods Inc., No. 2:19-cv-19003 (D.N.J. Aug. 3, 2022).
DISMISSAL OF IC MISCLASSIFICATION CLASS ACTION BY TRUCKERS IS REVERSED ON APPEAL. The U.S. Court of Appeals for the Seventh Circuit has reinstated a category motion introduced by a trucker alleging {that a} freight hauling firm misclassified him and different equally located drivers as unbiased contractors. Schneider National Inc. engaged plaintiff as an owner-operator driver who leased a truck from the corporate and supplied companies beneath an unbiased contractor (owner-operator) settlement. The plaintiff claimed, amongst different issues, that the corporate violated the minimal wage provisions of the Fair Labor Standards Act and Wisconsin’s state wage and hour regulation. The district courtroom granted the corporate’s movement to dismiss all claims, however on attraction the Seventh Circuit reversed. It concluded that the district courtroom erred by solely contemplating the written phrases of the contract and not the financial actuality of the working relationship when figuring out whether or not the plaintiff and different drivers had been unbiased contractors or workers. The appeals courtroom additional concluded that the plaintiff’s allegations in regards to the financial actuality of his working relationship with the corporate acknowledged a viable declare beneath the FLSA and Wisconsin state regulation. In reaching its conclusion concerning the FLSA declare, the Seventh Circuit thought of the plaintiff’s allegations that he couldn’t rent further drivers to help with shipments; had no actual potential to train selection over his schedule and routes; couldn’t train his managerial talent to extend income by deciding on extra worthwhile masses or by driving for different carriers when the corporate provided shipments with unfavorable phrases; had a disproportionately small stake within the trucking operation in comparison with the corporate; and engaged in companies that had been an integral a part of the Company’s enterprise. The courtroom acknowledged, “[the plaintiff] alleges facts allowing the plausible inference that he was so controlled by and dependent on the Company that he must be considered an employee as a matter of economic reality.” Brant v. Schneider National Inc., No. 21-2122 (seventh Cir. Aug. 3, 2022). .
SHUTTLE DRIVERS IN ILLINOIS GAIN CLASS CERTIFICATION IN IC MISCLASSIFICATION ACTION. An Illinois federal district courtroom has licensed a category of over 60 shuttle drivers who allege federal, state, and native wage and hour violations by Bosman Trucking, Inc. due their classification as unbiased contractors and not workers. The courtroom discovered that the “numerosity” requirement for class certification was met as a result of there have been greater than 60 previous and current shuttle and spotter drivers. The courtroom discovered the “commonality” requirement was happy as a result of the category representatives and the proposed class members all offered an identical wage and hour claims beneath the FLSA, Illinois Minimum Wage Law, and Chicago Minimum Wage Ordinance, and all have allegedly been topic to related or an identical work insurance policies, procedures, guidelines and duties. The “typicality” requirement was additionally met based on the courtroom the place the category representatives and all class members are suing to implement the provisions of native, state and federal wage and hour statutes arising from related or an identical wage and hour practices of the trucking firm. Finally, the courtroom discovered the “adequacy” requirement was met as a result of the category representatives have demonstrated ample curiosity within the end result of the litigation and have successfully and vigorously prosecuted the motion. Johnson v. Bosman Trucking Inc., No. 1:19-cv-02066 (N.D. Ill. Aug. 8, 2022).
CHOICE OF LAW PROVISION IN INDEPENDENT CONTRACTOR AGREEMENT IS NO GUARANTEE THAT STATE’S LAWS WILL BE APPLIED. Diakon Logistics, Inc. coordinates supply and set up of merchandise for retailers nationwide. Diakon, whose headquarters is in Virginia, engages truck drivers as unbiased contractors to carry out these supply companies. Two drivers, who had been Illinois residents, supplied such companies from a retailer’s warehouse in Illinois and delivered items to properties in Illinois. The two drivers filed a lawsuit in an Illinois federal courtroom alleging violations of that state’s Wage Payment and Collection Act on account of their alleged misclassification as unbiased contractors. Both drivers had signed unbiased contractor agreements containing a choice-of-law provision deciding on Virginia regulation to control the events’ relations. A dispute arose over whether or not Illinois or Virginia regulation utilized. Although the district courtroom determined that Virginia regulation utilized, the U.S. Court of Appeals for the Seventh Circuit reversed that call and concluded: “[P]laintiffs’ claims to undiminished wages arise from their work in Illinois, not from their contracts. The [Illinois Wage Payment and Collection] Act governs payment for work in Illinois regardless of what state’s law governs other aspects of the parties’ relations.” The editor of this weblog was quoted in an August 29, 2022 article by Jon Steingart in Law360 Employment Authority about this case: “One key lesson from this Seventh Circuit decision is, don’t assume your choice of law provisions will govern in an independent contractor misclassification lawsuit. The court’s decision that Illinois law applies is especially significant because Illinois is also one of the few states whose test for independent contractor status is extremely challenging to meet for many industries.” Johnson v. Diakon Logistics Inc., No. 21-2886 (seventh Cir. Aug. 17, 2022).
Legislative Initiatives
BIPARTISAN BILL IN CONGRESS WOULD RECOGNIZE INDEPENDENT CONTRACTOR STATUS AS A CHOICE OF WORKER. The Worker Flexibility and Choice Act (HB 8442) was launched in Congress on July 20, 2022. The invoice, launched on a bipartisan foundation, would set up a brand new work association that mixes flexibility of unbiased contractor work with sure office protections and alternatives for advantages. As introduced in a press launch that day from Rep. Elise Stefanik (R-NY), one of many invoice’s co-sponsors, the invoice seeks to “empower individuals with the choice to determine how they wish to engage in the modern economy, while providing legal certainty that will expand economic opportunities through independent work and allow businesses to offer workplace benefits without undermining the flexibility of the work arrangement.” The relationship between the employee and the enterprise could be clearly outlined via a “worker flexibility agreement” that will make sure the employee retains the liberty and flexibility to simply accept or reject presents to offer their companies, giving them management over when, the place, and how a lot they want to work; promote employee freedom with out infringing on sure office rights, together with protections towards discrimination, retaliation, and harassment; permit the employee to have interaction with and present companies for a number of entities at any given time; and present the employee a written abstract of any well being, pension, coaching, different advantages they might be eligible to obtain. Under a employee flexibility settlement, the employee wouldn’t be handled as an worker for federal tax functions or beneath the FLSA. In addition, a employee’s option to work flexibly beneath an settlement could be protected by a provision within the regulation that supersedes and preempts state and native wage and hour and tax legal guidelines that will in any other case require the employee to be handled as an worker. Rep. Stefanik acknowledged in her press launch: “The bipartisan Worker Flexibility and Choice Act will empower workers to choose the type of work that best fits their needs, while allowing businesses to offer workplace benefits traditionally only available to employees….” The different co-sponsors are Reps. Henry Cuellar (D-TX) and Michelle Steel (R-CA). While the invoice is a bipartisan initiative, it has little probability of passage on this Congress.
Regulatory Actions
NLRB AND FTC ENTER INTO MEMORANDUM OF UNDERSTANDING FOCUSING ON IC’S IN THE GIG ECONOMY, BUT NOT LIKELY TO BE CONSEQUENTIAL. The National Labor Relations Board and Federal Trade Commission have entered right into a Memorandum of Understanding on July 19, 2022 that’s meant to “better root out practices that harm workers on the ‘gig economy’ and other labor markets, to enhance the enforcement of federal laws and regulations administered by the agencies, and to promote inter-agency collaboration through information sharing, cross-agency training and coordinated outreach.” The MOU supplied that the NLRB and FTC “recognize that continued and enhanced coordination and cooperation concerning common regulatory interest will help protect workers against unfair methods of competition, unfair or deceptive acts or practices, and unfair labor practices.” Common areas of regulatory curiosity embody labor market developments regarding the gig economic system, claims and disclosures about earnings and prices related to gig and different work, and the classification and therapy of employees. In a information launch issued by the NLRB on July 19, NLRB General Counsel Jennifer A. Abruzzo stated: “Workers in this country have the right under federal law to act collectively to improve their working conditions. When businesses interfere with those rights, either through unfair labor practices, or anti-competitive conduct, it hurts our entire nation. This MOU is critical to advancing a whole of government approach to combating unlawful conduct that harms workers.” There have been a lot of articles and commentaries about this MOU, with most suggesting that the FTC will refer instances to the NLRB. However, the NLRB’s Office of General Counsel doesn’t have any investigative authority and can solely act in response to unfair labor observe prices or union election petitions filed with the NLRB, not with referrals from different businesses just like the FTC. Further, previous MOUs between businesses such because the U.S. Labor Department, state labor commissioners, the IRS, the NLRB, and different governmental businesses have produced little in the way in which of concrete outcomes made identified to the general public.