Perhaps the most significant development involving independent contractor compliance and misclassification issues in December 2021 received relatively scant attention: a detailed empirical study based on survey results of a cross-section of Americans entitled “The State of Gig Work in 2021.” The study was undertaken by Pew Research Center, a non-partisan think tank. One of its most important conclusions involves the self-perception of gig workers: “65% see themselves as independent contractors, while 28% view themselves as employees.” Another key conclusion is that almost twice as many Americans support maintaining the status quo in government regulation of companies using gig economy workers. These and other results of the study are likely to influence federal and state legislators who may consider changing existing laws governing independent contractors. The study confirms that an overwhelming percentage of freelancers and other gig workers want legislators and government agencies to take a hands-off approach and leave existing independent contractor laws intact. These and other conclusions of the study are discussed in more depth below.
What were some of the other key legal developments last month? As described below, the NLRB is proposing to change its test for independent contractor status, although any such modification is likely to be reversed by the courts; the gig economy platform, DoorDash, is paying up to $100 million to settle independent contractor misclassification cases in two states; and a tool company is paying nearly $16 million to settle with its franchisee distributors that claim they are employees who have been misclassified as independent contractors.
RESEARCH CENTER STUDY OF GIG WORK FINDS THAT “AMERICANS PREFER THE STATUS QUO REGARDING GOVERNMENT INVOLVEMENT IN REGULATING [GIG ECONOMY] COMPANIES.” On December 8, 2021, the Pew Research Center released its non-partisan study entitled “The State of Gig Work in 2021,” an update of its 2016 research study. The study initially finds that as many as 16% of all working-age Americans have earned money through an online gig platform, and in the case of younger adult Americans (those aged 18 to 29), the number is 30%. It next found that the overwhelming percentage of gig workers (68%) perform gig work “on the side,” whereas only 31% perform such work as “their primary way of earning a living.” The study then finds that 41% of gig workers work less than 10 hours a week and only 8% of gig workers work more than 30 hours a week.
One of the most significant conclusions of the study, based on survey results from over 10,000 U.S. adults, is the perception of American adults in general and gig workers in particular about the classification of gig workers. 62% of survey participants “say the most appropriate way to describe ride-hailing drivers is as independent contractors” while “[s]maller shares (35%) say these drivers are best described as employees.” The study continues: “Gig platform workers’ self-perception follows a similar pattern – 65% see themselves as independent contractors, while 28% view themselves as employees.”
Perhaps the most important findings of the study address policy matters: “Americans prefer the status quo regarding government involvement in regulating [gig economy] companies.” The study finds that almost twice as many Americans “do not support changes in government regulation – they say the government should regulate companies that offer ride-hailing apps such as Uber or Lyft the same as they are now.” This final conclusion of the study should be meaningful to legislators thinking about current or future bills that would change independent contractor laws with bills intended to either curtail or invalidate otherwise legitimate independent contractor relationships (as supported by Democratic legislators) or to increase and endorse such relationships (as endorsed by Republican legislators). It is plain that the public in general and gig workers in particular (who themselves represent a rather sizeable segment of the electorate) want legislators to leave intact the status quo in this area of the law.
DOORDASH SETTLES IC MISCLASSIFICATION CLASS ACTION WITH DRIVERS FOR $100 MILLION. DoorDash, an on-demand food delivery service, and delivery drivers and have reached a $100 million proposed settlement of the drivers’ IC misclassification claims in California and Massachusetts. The settlement covers as many as 900,000 drivers. The proposed settlement, which awaits court approval, would resolve eight different lawsuits filed between 2017 and 2020, all alleging that DoorDash violated the two states’ wage and hour laws by allegedly misclassifying the drivers as independent contractors and not employees. The terms of the proposed settlement include attorneys’ fees not to exceed $28 million, and PAGA payments of $12.5 million that will be divided between the California Labor and Workforce Development Agency (75%) and the drivers (25%). Each responding settlement class member will receive a payment calculated in proportion to each driver’s delivery miles. Marko v. DoorDash, No. BC659841 (Cal. Super. Ct. Dec. 22, 2021).
NLRB TO RECONSIDER INDEPENDENT CONTRACTOR TEST. The National Labor Relations Board has issued an order inviting the public to file briefs addressing whether the Board should adopt a new independent contractor test for determining worker status. As discussed in detail in our blog post of December 13, 2021, the case that precipitated this unusual move by the Board involves the independent contractor status of workers providing makeup and hairstyle services to the Atlanta Opera. The order, issued by the Democratic-appointed majority of the NLRB, seeks public input as to whether the Board should (a) adhere to the independent contractor standard articulated by the then-Republican appointed Board majority in the 2019 Supershuttle DFW decision, (b) return to the standard issued by the then-Democratic majority in the Board’s 2014 FedEx Home Delivery ruling, either in its entirety or with modification, or (c) fashion a new standard. The Board has a checkered history beginning in 2009 in its decisions regarding a test for independent contractor status, with back-and-forth decisions depending on the political composition of the Board. The U.S. Court of Appeals for the D.C. Circuit has twice reversed the NLRB’s decisions, and if the Board chooses to disregard the D.C. Circuit’s decisions, it is highly likely that the D.C. Circuit will again reverse the NLRB. Nonetheless, as a practical matter, decisions by the Board only address the test for independent contractor status under the National Labor Relations Act. They have no application at all to independent contractor status under the FLSA, which governs minimum wage and overtime pay; the federal non-discrimination laws like Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act; and ERISA, the federal law governing pensions and employee benefits – each of which has its own test for independent contractor status. The Atlanta Opera, Inc., 371 NLRB No. 45 (Dec. 27, 2021).
TOOL COMPANY TO PAY $15.8 MILLION IN SETTLEMENT OF IC MISCLASSIFICATION CLASS ACTION BY FRANCHISEE DISTRIBUTORS. Marco Tools Corporation manufactures professional automotive tools. It distributes its products through a network of independent franchisees. A former tool distributor sued the company on behalf of a class of franchisees claiming that he and others were misclassified as independent contractors or franchisees rather than employees and were denied overtime compensation, meal and rest breaks, and expense reimbursement for the cost of operating their mobile stores in violation of California wage and hour laws. According to the complaint, the franchisees perform work within the company’s usual course of business; are not engaged in an independent trade, occupation or business; are prohibited from selling any competing products, tools, or equipment; must follow the company’s business systems, standards, and specifications, including requirements for weekly sales calls and manner of dress; are required to complete a training program; and are subject to termination of their relationship by the company for “virtually any reason.” A class of approximately 273 franchisees was certified by a California federal court in February 2021. The franchisees have now settled their misclassification action for $15.8 million. Each class member can expect to receive about $35,000. Fleming v. Match Tools Corp., No. 3:19-cv-00463 (N.D. Cal. Dec. 13, 2021).
MASSACHUSETTS HIGH COURT REJECTS STATE’S ABC TEST FOR JOINT EMPLOYMENT STATUS OF CELLPHONE SALESPERSONS ENGAGED AS INDEPENDENT CONTRACTORS. The Massachusetts Supreme Judicial Court has ruled that the FLSA test for joint employment status, not the Massachusetts ABC test for independent contractor status, should be applied to determine whether cellphone salespersons, who were classified as independent contractors by the subcontractor that engaged them, were jointly employed by the company that contracted for their services. The salespersons claimed that they were misclassified and denied minimum wage and overtime pay under Massachusetts wage and hour laws. The plaintiffs asked the court to determine whether the company that engaged the subcontractor was a joint employer of the salespersons, and proposed that the court determine joint employment status under the Massachusetts ABC test for independent contractor status The court rejected that argument and instead adopted the joint employment test used under the FLSA, from which the Massachusetts wage laws derive. The court stated that consideration must be given to the totality of the circumstances of the relationship between the parties, guided by the four factors used under the FLSA’s test for joint employment: whether the entity had the power to hire and fire the individual, supervised and controlled the individual’s work schedules or conditions of employment, determined the rate and method of payment, and maintained employment records.
This court decision was the subject of a December 13, 2021 article by Chris Villani in Law360 that quoted the publisher of this blog: “This decision is a firm rebuke to those who would tinker with prevailing law of joint employment in the U.S. Those who tried to use the ABC independent contractor test in Massachusetts for joint employer purposes were told by the state’s highest court that they missed the boat.” The court held that, after consideration of the four FLSA factors, the record did “not support the conclusion that the [salespersons] had a reasonable expectation of proving that [the contractor] Credico exercised the type of control over their employment necessary to conclude it was their joint employer.” Jinks v. Credico (USA) LLC, No. SJC-13106 (Sup. Jud. Ct. Mass. Dec. 13, 2021).
OIL AND GAS EXPLORATION COMPANY SUED BY DRILLING CONSULTANTS IN IC MISCLASSIFICATION CLASS ACTION. A drilling consultant has filed a collective action complaint on behalf of himself and others against a West Virginia oil and gas exploration company alleging overtime compensation violations under the FLSA due to the drillers’ alleged misclassification as independent contractors and not employees. The plaintiff claims that the drillers were impermissibly paid a flat daily rate by the company with no overtime compensation for hours in excess of 40 in a workweek. According to the complaint, the company exercised control over all aspects of the work; did not require any substantial investment by the drillers to perform the work; determined the drillers’ opportunity for profit and loss; dictated the hours and locations the drillers worked, tools used, and rates of pay; enforced mandatory compliance with company policies and procedures; and prohibited the drillers from working on other jobs for other companies while working on the company’s projects. Rogers v. Tug Hill Operating, LLC, No. 5:21-cv-199 (N. D. W. Va. Dec. 3, 2021).
$15 MILLION JUDGMENT ENTERED AGAINST ADULT CLUB IN DANCERS IC MISCLASSIFICATION CLASS ACTION. A class of exotic dancers in Florida will receive $15 million in back pay from a gentlemen’s club, Fly Low, Inc. d/b/a King of Diamonds Miami, after a state court grants a motion by the dancers seeking liquidated damages, following a jury verdict in an IC misclassification lawsuit. Twenty-seven dancers sued the club and its owner in August 2018 alleging that the club violated Florida’s wage laws when it misclassified the dancers as independent contractors and not employees. Following a jury trial in September 2021, a verdict was returned in favor of the dancers; the jury also found that the club owner “recklessly disregarded” the issue of whether exotic dancers should be treated as employees and that they should have been paid at least the minimum wage. Each of the dancers will receive back pay awards ranging from $20,000 to $266,000, plus the same amount in liquidated damages. Bain v. Fly Low, Inc., 2018-029725-CA-01 (Fla. Cir. Ct. 11th Cir. Dec. 2, 2021).
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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