Independent Contractor Misclassification and Compliance News November 2022

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. Minnesota and the District of Columbia Sue Shipt, Alleging Misclassification of Workers

The attorneys generals in Minnesota and the District of Columbia announced that they had initiated lawsuits against Shipt alleging that Shipt had misclassified workers as independent contractors. Shipt is a service that delivers groceries and other products to customers. Shipt uses shoppers who shop and deliver the items that people order. 

These lawsuits are more in a long line of suits alleging delivery drivers are misclassified as independent contractors. Similar companies that have experienced challenges to their classification of workers including Uber, Lyft, Doordash, Grubhub, and Postmates. 

The United States Department of Labor (DOL) proposed a rule in October that establishes a test for classifying workers as employees or independent contractors. Part of the proposed rule seems to be focused on the classification of drivers. The DOL noted that “the use of a personal vehicle that the worker already owns to perform work—or that the worker leases as required by the employer to perform work—is generally not an investment that is capital or entrepreneurial in nature.”  

The investment in a business is often the mark of an independent contractor. With this comment, the DOL is signaling that, in its opinion, having a car does not amount to an investment in a business (indicating the driver is an independent contractor). In addition, the DOL observed that court decisions found that drivers did not possess “specialized skills”—specialized skills are a characteristic of independent contractors. 

The DOL is now receiving comments on the proposed rule, and it may change before it becomes effective. Even after it becomes effective, the impact of the rule may be minimal. The effect of an interpretive rule like this proposed rule depends on its ability to persuade a court. If a court does find the DOL’s interpretation persuasive, the rule may not have any effect.  

2. Caregivers Misclassified as Independent Contractors

Similar to drivers, companies that hire caregivers are often involved in litigation alleging that the caregivers were misclassified as independent contractors. In November, there were two more cases in which caregivers were misclassified.  

In Mason v. Helping Our Seniors, LLC, a central question was whether the company was an employer, and subject to employment discrimination laws, because it had fewer than 15 employers and all the caregivers it used were independent contractors. The court said that the caregivers were misclassified as independent contractors based on the economic reality test—whether the workers were, as a matter of economic reality, dependent on the company or were in-fact, independent.  

In another case, the DOL investigated and alleged that an assisted living provider misclassified direct care workers and direct care leads as independent contractors. The assisted living provider entered into a consent judgement in which it paid more than $1 million in back wages.  

Companies that use caregivers and classify them as independent contractors would be well advised to carefully review the classification.  

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.