Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

The Ninth Circuit Court of Appeals recently rejected a Texas corporation’s argument that drivers who performed services for the company were independent contractors—and therefore not subject to the requirements of the California Labor Code—because their contracts with the company contained a Texas choice of law provision. In Narayan v. EGL, Inc., the Ninth Circuit reversed the district court’s decision to grant the company’s motion for summary judgment and instead remanded the case for trial. In so holding, the Ninth Circuit demonstrated the heavy burden imposed on companies seeking to establish an independent contractor relationship, even when the company has a written contract designating the workers as independent contractors.

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On May 12, 2010, Wisconsin Governor Jim Doyle signed into law two pieces of legislation regarding the misclassification of employees. Senate Bill 672, which will become effective January 1, 2011, requires the Department of Workforce Development (DWD) to establish a system ensuring the proper classification of workers under unemployment insurance, worker’s compensation and labor standards laws. Specifically, the DWD is required to educate employers, employees and the public about the proper classification of persons performing services for an employer; receive and investigate complaints alleging misclassification; conduct investigations on its own initiative; inform other state or local agencies of misclassification of employees; and appoint attorneys to conduct hearings and issue decisions as appeal tribunals.

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On May 5, 2010, Connecticut Governor Jodi Rell signed into law "An Act Implementing the Recommendations of the Joint Enforcement Commission on Employee Misclassification." The legislation will increase the state's civil penalty for independent contractor misclassification, currently $300 per violation, to $300 per day per violation. It also will expand criminal liability for employers who knowingly misclassify workers with the intent to injure, defraud or deceive the state because of their failure to pay workers' compensation or second injury fund assessments. The new act is scheduled to become effective on October 1, 2010. Nothing in the legislation reconciles the conflicting interpretations of independent contractor status under state and federal law. To continue reading about this development, see Littler’s ASAP Stiffer Penalties on the Horizon for Independent Contractor Misclassification in Connecticut? by GJ Stillson MacDonnell and Stephen Rosenberg.

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Legislation introduced in both the House and Senate would impose new record-keeping requirements on employers that hire independent contractors, and impose stricter penalties for misclassification. Introduced by Rep. Lynn Woolsey (D-CA) and Sen. Sherrod Brown (D-OH), the Employee Misclassification Prevention Act (H.R. 5107, S. 3254) would amend the Fair Labor Standards Act (FLSA) to require employers to keep records on and notify workers of their employment or independent contractor classification and their right to challenge that classification. For more information on the legislation and its implications for employers, continue reading at Littler's D.C. Employment Law Update blog.

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The fiscal year 2011 federal budget (pdf) released on Monday contains provisions to combat misclassification of employees as independent contractors. Included in this $3.8 trillion spending measure is a proposal to be jointly administered by the Departments of Labor and the Treasury to eliminate legal incentives for employers to misclassify their employees. Continue reading about this development on Littler's Washington D.C. Employment Law Update blog.

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On August 21, 2009, the Massachusetts Supreme Judicial Court unanimously ruled that a worker who has been misclassified as an independent contractor may seek damages from his former employer even if the employer establishes that the worker would have been paid less had he been classified as an employee.

The plaintiff in Somers v. Converged Access , 454 Mass. 582 (2009) worked for a software company as a quality assurance engineer. He was classified as an independent contractor and, as a result, did not receive overtime, vacation pay, or benefits. The company paid him at a rate of $65 per hour. The plaintiff initially agreed to work for a sixty-day term. He later agreed to a ninety-day extension of that term.

The plaintiff subsequently applied for a permanent quality assurance engineer position. After the company did not select him for the position, the plaintiff brought suit claiming, among other things, that he had been misclassified as an independent contractor.

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