Independent Contractor Misclassification and Compliance News June 2021

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’ll bring you the latest news stories from around the web.

1. Highly-Skilled Directional Driller Was Independent Contractor

In a recent case, the court said that a directional driller who claimed that he was entitled to overtime under the Fair Labor Standards Act (FLSA) was an independent contractor and dismissed the case. Marcus Hargrave was a highly-skilled directional driller who worked for a company that used both employees and contractors to provide services to its clients. Hargrave had worked as a contractor for years and took advantage of tax provisions that benefit contractors.

The court found that the company did not control his particular work and that the high level of skill required, the temporary nature of the engagements, and the opportunity for profit and loss led to the conclusion that he was an independent contractor.

While some might want to use this case as the basis for classifying workers in other fields as independent contractors with similar circumstances, caution would be advisable. It is far from clear that other courts will adopt this line of reasoning for other professions, particularly in circumstances where a company uses both employees and contractors in the same roles. This case is a useful resource if you are involved in litigation, but it is probably not a good basis for making classification decisions.

2. Seattle Approves Bill Protecting Independent Contractors

The Seattle City Council passed a bill that would protect freelancers and independent contractors. The bill requires businesses to provide written notice of the terms and conditions of the job before the independent contractor starts work. The business would also have to pay the independent contractor pursuant to a written agreement (either the pre-contract disclosure or subsequent contract) and provide a written disclosure of the payment including pay basis and tips, if any. The bill has been sent to the mayor for her signature.

If signed by the mayor, Seattle would join New York and Minneapolis in protecting freelancers by requiring written disclosures and/or agreements and requirement payments with particular timeframes unless otherwise agreed to in the contracts.

3. Company Must Prove Worker Signed Arbitration Agreement

In a recent case in California, the court did not enforce an arbitration agreement when there was conflicting evidence about whether an employee electronically signed an arbitration agreement. The company said that the agreement was signed electronically by the employee and the employee had input her first name, last name, social security number, company ID, and pin (which was the same for all employees) and then signed the agreement. The employee said that she didn’t touch the computer and that the company completed the onboarding process (including agreeing to arbitration agreements) for other employees.

The court said that the employee was not assigned a unique username and password—which would ensure the employee would have been the only person to sign the arbitration agreement. The court concluded that the company did not show that the employee was the only person who could have electronically signed the arbitration agreement and therefore did not enforce it.

Arbitration agreements are key part of any strategy to avoid class action lawsuits alleging misclassification of workers. Companies that have workers electronically sign arbitration agreements should makes sure that the users have unique usernames and passwords to be able to show that the worker would have been the only person who could sign the agreement.

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.