From the Independent Contractor Misclassification and Compliance Blog, Richard Reibstein reviews the top 5 independent contractor legal developments in 2017 including the Trump administration leveling the playing field for companies using independent contractors, and the decline in the number of legislative initiatives to limit the use of independent contractors. In addition, Richard discusses state court decisions in favor of independent contractor status and multi-million dollar settlements for misclassification cases. Richard writes:
# 1. Two state Supreme Court decisions show that the courts are more willing to recognize IC status.
Although many businesses understand that there is a dizzying array of state and federal tests for independent contractor status, businesses in 2017 continued a trend over the past 10 years where they are making greater use of independent contractors despite the uncertainties in the law and the risk of misclassification. One of the most challenging tests for IC status is the so-called ABC test, which is most prevalent among state unemployment and workers’ compensation laws. About half of the states have ABC laws governing IC status, but each state interprets their laws differently than other states. Two state Supreme Courts in 2017 fine-tuned their ABC tests to make the use of ICs more attainable for companies.
In March 2017, the Connecticut Supreme Court concluded that a business does not fail the “C” prong of the ABC test, which requires that a worker is “customarily engaged in an independently established trade, occupation, profession or business,” simply because the worker chooses to provide services only to a single company, especially where the contractor has the freedom to provide services to other companies.
In June 2017, the Vermont Supreme Court held that a Limited Liability Company (LLC) is a distinct legal entity; therefore, an owner of an LLC is not an individual under the ABC test when the state seeks to assess unemployment taxes upon a business. These types of decisions by the highest courts in two states signal a greater recognition that state IC laws should not be applied mechanically with a pre-ordained determination that the workers in question are employees.
# 5. IC Misclassification class actions continue to produce multi-million-dollar settlements
Although the landscape of independent contractor law is becoming more hospitable for many companies, the bulk of businesses that use ICs remain targets for class and collective actions under state and federal wage payment laws, minimum wage and overtime laws, and employee expense laws. 2017 saw a host of large settlements, including (to name just a few):
- court approval of a $27 million settlement between Lyft and drivers who use that app;
- an $8.75 million settlement between Postmates and couriers who make deliveries using that company’s app;
- a $5 million settlement between nine San Francisco nightclubs and exotic dancers;
- a $4.65 million settlement between Instacart and shoppers who shop, purchase, and deliver groceries to customers at their homes and businesses through Instacart’s app; and
- a $1.48 million settlement between Atlas Van Lines and truck and moving drivers.