Wage and Hour Defense Blog

On July 25, 2024, the California Supreme Court issued its long-awaited ruling in Castellanos et al., v. State of California and Protect App-Based Drivers and Services, et al., upholding the 2020 voter initiative known as Proposition 22 the allows certain gig economy companies to classify drivers as independent contractors.

In 2019, California Assembly Bill 5, also known as AB5, expanded the landmark California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court, and made the "ABC" test law. 

On January 9, 2024, the United States Department of Labor’s (DOL) Wage and Hour Division (WHD) announced a final rule regarding how to determine whether a worker qualifies as an employee or may be considered an independent contractor under the Fair Labor Standards Act (FLSA).  Designed to combat misclassification, the final rule rescinds DOL’s Trump-era Independent Contractor Rule issued in January 2021 and restores the non-exhaustive six-factor test courts have long used to evaluate whether or not independent contractors were properly classified.  The test considers:

On October 25, 2022, the Department of Labor extended the comment period for its new proposed rule regarding independent contractor status under the Fair Labor Standards Act. While the comment period was originally set to expire on November 28, 2022, interested parties will now have until December 13, 2022 to submit comments.

In light of the federal court ruling reinstating the Trump-era independent contractor regulation (discussed here), on October 13, 2022, the Department of Labor published a Notice of Proposed Rulemaking regarding independent contractor status under the Fair Labor Standards Act.

Over the past few years, lower courts in Massachusetts have grappled with determining whether the “ABC test” under the independent-contractor statute provides the proper framework for assessing joint-employment liability. The Supreme Judicial Court (SJC) has finally answered that question.  On December 13, 2021, in Jinks v. Credico (USA) LLC, the SJC held that the independent-contractor statute’s “ABC test” does not apply and instead adopted the Fair Labor Standards Act’s (FLSA) “totality of the circumstances” approach to joint employment.

Credico was a client broker for independent direct marketing companies. It contracted with DFW Consultants, Inc. (DFW) to provide sales and marketing services for its clients in Massachusetts. To provide those services, DFW hired three of the plaintiffs – Kyana Jinks, Antwione Taylor, and Lee Tremblay – as salespeople. DFW classified Jinks and Taylor as independent contractors and Tremblay as an employee.

Misclassifying workers as independent contractors rather than employees is a costly mistake.  Among the many issues arising from misclassification is potential liability under federal and state minimum wage and overtime laws.  As the laws continue to change and develop, so do the risks to contracting entities.

Federal Changes

As we previously discussed, in early January 2021, the U.S. Department of Labor issued a Final Rule regarding independent contractor status under the Fair Labor Standards Act.  On May 5, 2021, in line with the policy goals of the new administration, the Department issued a Final Rule withdrawing the January Final Rule.  The withdrawal went into effect on May 6, 2021, upon the publication in the Federal Register (86 FR 24303).  The January independent contractor rule was originally to go into effect in March, before the Department issued a notice of proposed rulemaking proposing to ...

In November 2020, California voters approved Proposition 22, removing businesses that operate on-demand rideshare and food delivery platforms from the scope of AB 5, California’s controversial independent contractor law.  But before voters approved Proposition 22, the Attorney General of California filed suit against two such businesses, seeking injunctive relief, restitution, and penalties.

As we wrote about here, in August 2020, a California Superior Court judge issued a preliminary injunction prohibiting those businesses from treating drivers who use their ...

On January 19, 2021, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued an Opinion Letter applying the Department’s recently-issued Final Rule concerning Independent Contractor Status under the Fair Labor Standards Act (the “Final Rule”).  This Opinion Letter provides helpful guidance to businesses, especially those in highly-regulated industries, on how to properly structure their relationships with independent contractors under the Fair Labor Standards Act (“FLSA”).

As background, the FLSA’s minimum wage and overtime pay ...

On January 6, 2021, the U.S. Department of Labor released its much-anticipated Final Rule addressing independent contractor status under the Fair Labor Standards Act.  The Department indicates that the rulemaking should appear in the Federal Register on January 7, 2021, with an effective date 60 days thereafter.

The Final Rule is, in substance, very similar to the Proposed Rule the Department issued in September 2020 (and discussed here).  Under the Final Rule, the key points are as follows:

• The “ultimate inquiry” is whether an individual is “economically dependent” on ...

On September 22, 2020, the U.S. Department of Labor (“DOL”) released its highly anticipated proposed rule for distinguishing independent contractors from employees under the Fair Labor Standards Act (“FLSA”).

When evaluating independent contractor status under the FLSA, courts have traditionally applied what is known as the “economic realities” test. The test varies slightly from circuit to circuit, and, perhaps, court to court, but courts generally consider the following factors on a non-exclusive basis: (i) the degree of control that the putative employer ...

As we wrote about in more detail here, the ongoing coronavirus pandemic has brought increased attention to the legal and practical distinctions between employees (who are entitled to various compensation and employment benefits under the law) and independent contractors (who generally are not).  The pandemic has also prompted lawmakers at the federal, state, and local level to explore further legislation designed to provide independent contractors with greater protections under the law.

The Seattle City Council has now passed two ordinances—the “Gig Worker Premium Pay ...

It’s no secret that many employers have employees sign arbitration agreements with class and collective action waivers in the hopes of avoiding the massive wage-hour lawsuits that have become so prevalent in the past two decades.

Nor is it any secret that, following the U.S. Supreme Court’s decision in Epic Systems affirming that such agreements can be valid, even more employers have chosen to use them with their workforces.

But, in discussing with clients whether to implement such agreements, lawyers worth their salt have always told their clients this: “Be careful what you ...

As we have written here, the day before California’s controversial AB 5 was set to go into effect, U.S. District Court Judge Roger Benitez issued a temporary restraining order to block enforcement of the law as to approximately 70,000 independent truckers.

Subsequently, Judge Benitez granted a preliminary injunction to prevent enforcement of the statute to those truckers.

In reaching his decision, Judge Benitez concluded that, as to independent truckers, the Federal Aviation Administration Authorization Act preempts AB 5.

The preliminary injunction is a significant ...

As we recently wrote here, just hours before California’s controversial AB 5 went into effect, a federal court in San Diego issued a temporary restraining order (“TRO”) to enjoin enforcement of the independent contractor statute as to approximately 70,000 independent truckers, many of whom have invested substantial sums of money to purchase their own trucks and to work as “owner-operators.”

Now, days after a state court judge ruled that the statute does not apply to independent truckers, the federal court has extended the TRO while it decides whether to enter a ...

Following the challenges to AB 5, California’s controversial new independent contractor law, can be a difficult endeavor.  Every day seems to bring a new development.

We have written before about the hasty passage of the statute, about a ballot initiative to escape the scope of the law by ride-share and delivery companies, and challenges by independent truckers, freelance journalists and photographers, and ride-share and delivery companies.

While many were focused on whether a federal judge, who had already issued a temporary restraining order to enjoin enforcement of the new ...

As we wrote here recently, organizations representing freelance journalists and photographers filed suit seeking to enjoin enforcement of California’s controversial independent contractor statute, AB 5, as to them.

While they are not the only ones challenging the new law, their suit is not off to a promising start.

While a federal judge issued a temporary restraining order (“TRO”) to enjoin AB 5 as it applies to independent truckers,  U.S. District Court Judge Philip Gutierrez in Los Angeles denied the freelance journalists and photographers’ request for a TRO on January ...

On January 1, 2020, California’s new independent contractor statute, known as AB 5, went into effect.  The law codifies the use of an “ABC” test to determine if an individual may be classified as an independent contractor.

The hastily passed and controversial statute has been challenged by a number of groups as being unconstitutional and/or preempted by federal law, including ride-share and delivery companies and freelance writers.

Just hours before AB 5 went into effect, a California federal court in San Diego enjoined enforcement of the statute as to some individuals – ...

AB 5, California’s hastily passed and controversial independent contractor statute, which codifies the use of an “ABC test,” is set to go into effect on January 1, 2020.

Already, the California Trucking Association has filed suit challenging the statute.

As have freelance writers and photographers.

Now, it’s ride-share and delivery companies’ turn to file suit.

Those companies have already commenced the process to create a ballot initiative that would allow voters to decide whether to exempt ride-share and delivery drivers from the “ABC test.”

Now, on December ...

Over the past six months, Congress has made two notable attempts to amend the Fair Labor Standards Act of 1938 (the “FLSA”).  In July, U.S. Representative Elise Stefanik (R-NY) introduced The Modern Worker Empowerment Act (“MWEA”) with the stated aim of harmonizing the FLSA’s definition of employee with the common law.  And last month, Senator Brian Schatz (D-HI) introduced the Treating Workers with Dignity Act of 2019 (“TWDA”), which would amend the FLSA to require certain compensated breaks.

Modern Worker Empowerment Act

Subject to certain exclusions, the FLSA ...

As businesses throughout the State of California continue to grapple with the potential implications of AB5, a new law designed to make it more difficult for companies to treat workers as independent contractors, the California Trucking Association (“CTA”) is taking legal action.

As we previously wrote here, AB5 codified and expanded the “ABC test” adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be classified as employees or as independent contractors.

To satisfy the ABC ...

Earlier this year, in New Prime, Inc. v. Oliveira, 586 U.S. __, 139 S. Ct 532 (2019), the United States Supreme Court held that the Federal Arbitration Act (“FAA”) does not apply to arbitration agreements with independent contractors who are engaged in interstate commerce.  The Supreme Court did not address whether such agreements could be enforced through other laws.

Now, two different panels of the New Jersey Appellate Division have rendered decisions addressing this unresolved issue.  Those panels, however, reached different conclusions regarding whether the arbitration ...

In April 2018, the California Supreme Court issued its long-awaited opinion in Dynamex Operations West, Inc. v. Superior Court, dramatically changing the standard for determining whether workers in California should be classified as employees or as independent contractors for purposes of the wage orders adopted by California’s Industrial Welfare Commission (“IWC”). In so doing, the Court held that there is a presumption that individuals are employees, and that an entity classifying an individual as an independent contractor bears the burden of ...

Our colleagues Patrick G. Brady and James J. Sawczyn, at Epstein Becker Green, have a post on the Retail Labor and Employment Law blog that will be of interest to many of our readers: “New Jersey’s Appellate Division Finds Part C of the “ABC” Independent Contractor Test Does Not Require an Independent Business”

Following is an excerpt:

In a potentially significant decision following the New Jersey Supreme Court’s ruling in Hargrove v. Sleepy’s, LLC, 220 N.J. 289 (2015), a New Jersey appellate panel held, in Garden State Fireworks, Inc. v. New Jersey Department of Labor ...

In Moon et al v. Breathless, Inc., the Third Circuit reviewed the dismissal of a class and collective action under the Fair Labor Standards Act, the New Jersey Wage and Hour Law and the New Jersey Wage Payment Law.  The District Court for the District of New Jersey had dismissed the named plaintiff’s claims based on an arbitration clause in the written agreement between the her and Breathless, the club where she worked as a dancer.

In her lawsuit, the plaintiff alleged that she and other dancers were misclassified as independent contractors, and that Breathless unlawfully failed to pay ...

The Administrator of the Wage Hour Division of U.S. Department of Labor has issued an Administrator’s Interpretation of the FLSA’s definition of “employ.” And the conclusion is one that not only could have a significant impact on the way companies do business, but lead to numerous class and collective actions alleging that workers have been misclassified as independent contractors.

Addressing the misclassification of employees as independent contractors, the Administrator’s Interpretation notes that the FLSA’s defines the term “employ” as “to suffer ...