Independent Contractor Misclassification and Compliance News January 2025

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we bring you the latest news stories from around the web.

Staffing Firm Sues Rival Staffing Firm for Misclassifying Workers

A hospitality staffing firm, The Party Staff, Inc., (“The Party Staff”) initiated a lawsuit against a rival staffing firm under the California Unfair Competition Law alleging the rival firm had regularly misclassified its workers as independent contractors. In doing so, they were able to offer lower prices and undercut The Party Staff because the rival firm did not have to pay minimum wage or overtime, maintain workers’ compensation insurance, or pay payroll taxes.

The California Unfair Competition law prohibits unlawful, unfair, or fraudulent business acts or practices. This law has been previously relied upon by a limousine service that sued Uber. The limo service alleged that Uber secured unlawful cost savings by misclassifying its drivers as independent contractors instead of employees. The parties filed competing motions which were appealed. The appellate court said that worker misclassification can violate the policy or spirit of antitrust laws because it significantly threatens or harms competition.

The court relied upon Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 913, 232 Cal.Rptr.3d 1, 416 P.3d 1 (2018) and noted that the California Supreme Court said that there were significant economic incentives for a business to misclassify workers and that the “incentives include the unfair competitive advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees.” Ultimately, the limousine company withdrew its complaint.

The Party Staff’s lawsuit is a novel approach to challenging misclassification, and it will be interesting to see if they are successful and if others adopt a similar approach.

California Court Says Joint Employers Are Not Vicariously Liable for Each Other’s Actions

A recent California case said that joint employers are not vicariously liable for each other’s actions. In the contingent worker industry, clients are frequently concerned that they will be considered joint employers. This case is more in a series of cases in which courts have said that a joint employer is not vicariously liable for the acts or omissions of the other joint employer. Clients should take comfort in knowing that even if they are determined to be a joint employer, they are only liable for their own actions and are not liable for the actions of the staffing firm or other joint employer.

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.