Category Archives: Gig Economy

06.08.26
by

Dogs, Guns, and Arbitration: How the Flowers Foods Supreme Court Decision Affects Independent Contractor Agreements

A dog in Nebraska shot a woman in the arm last month in a convenience store parking lot.

Police were called to the scene after a shotgun blast from a parked truck struck a woman walking by. The culprit turned out to be a dog, who triggered the blast when moving around in the truck. There was a loaded shotgun in the truck, and the dog had not been properly trained in the responsible use of firearms.

The woman was not seriously injured. It is unknown whether the dog expressed remorse or is otherwise a very good boy.

The lesson here, of course, is to think ahead. And that applies both to firearm-loving dog owners and to businesses using independent contractors.

On May 28, the Supreme Court issued an opinion clarifying the scope of the transportation exception to the Federal Arbitration Act (FAA). The FAA does not apply to transportation workers engaged in interstate commerce. In Flowers Foods v. Brock, the Court held that a driver may fall within the exception even if he does not cross state lines or interact with a vehicle that does. So long as the driver’s task is in the flow of interstate transportation of goods, then the worker could fall within the exemption, which means the FAA would not apply and the worker might be able to sidestep an otherwise-valid arbitration agreement.

A previous Supreme Court decision held that the transportation worker exception can apply to independent contractors.

So where does this leave businesses that enter into arbitration agreements with independent contractors who transport their goods?

There are several unresolved legal questions, but as things stand now, businesses should strive to enter into business-to-business agreements. They should contract with entities to transport goods, not individuals. If the entity is a small entity, such as a single member LLC, the agreement should contain clauses that place full responsibility for directing and controlling the work on the small entity. Even if the larger business directs the small entity, any direction to the individual worker should come from the small entity to its worker.

The Supreme Court has not yet addressed whether the transportation exception would apply in this situation, but this seems to be the best approach for now. (Even if the FAA doesn’t apply, state arbitration law might still be sufficient to save the arbitration agreement.)

Businesses who engage independent contractors to transport goods should be extra vigilant in ensuring that all business contracts are with entities, not individual independent contractors, if they want their arbitration agreements to have a reasonable shot at being enforceable.

It’s easy when engaging an independent contractor to assume that both parties are happy with independent contractor status, as opposed to employment, but misclassification lawsuits tend to arise when the relationship goes south, not when everyone is happily engaged. One of the main benefits of having a well-written independent contractor agreement is to address what happens if there are disagreements later, including unforeseen disputes.

When the parties want those disputes to be resolved through arbitration, they need to draft the agreement in a way that it will be enforceable. For contracts that involve transportation of goods, the FAA transportation exception must be taken into consideration when drafting.

Advanced preparation when entering into the contract is critical to protecting the right to arbitrate later. It’s all about looking ahead and being prepared. Come to think of it, advanced preparation and thinking ahead are valuable in just about any context — including when leaving a dog alone with a shotgun.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2026 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
05.26.26
by

Scissors Fiasco Avoided! New Jersey DOL Adopts Softer Version of Independent Contractor Rule Than Originally Proposed

I flew to Washington, DC, last week and needed to bring scissors so I could cut and rewrap a bandage on my hand. The smallest scissors I could find were in a tiny Swiss Army knife that’s been in a drawer, unused for 20 years.

I took a chance and brought the tiny SWAK, but it was seized by TSA because of the knife part.

So I had to buy scissors when I got to DC. I went to a drug store and found a $4 pair of kids’ scissors (ages 4+) and brought them to the counter to pay.

No kidding, the scissors were fastened to the paper backing with little nylon straps, so the only way to release the scissors was to cut the straps. To cut the straps, I would need scissors. And I couldn’t buy a second pair of scissors because they too would have been secured by the little nylon straps.

Quite the conundrum. Fortunately, the checkout guy recognized the problem and pulled out his own scissors to cut the straps so I could use my scissors.

There’s a good lesson for retailers on how packaging matters.

The New Jersey Department of Labor also had a packaging problem, but its problem was with the ABC Test the state uses for determining who is an independent contractor. The ABC Test had been sold to the public with the usual three prongs (listed below) but no guidance, no exceptions, and no examples of how to interpret the prongs.

A new regulation, recently adopted by the NJDOL, takes effect October 1, 2026. It provides interpretive guidance for New Jersey’s ABC Test.

The NJDOL published a proposed set of regulations last year, and the business community went berserk. The proposed rule would have adopted interpretations of the three prongs that are inconsistent with case law and inconsistent with how businesses interact with legitimate independent contractors. The proposed rule sought to stack the deck to make it very hard to maintain an independent contractor relationship.

Fortunately, the final rule removed many of the troubling provisions.

The ABC Test requires each of these three prongs to be present for an independent contractor relationship to exist:

A) Worker has been and will continue to be free from control or direction over the performance of services, both under the worker’s contract of service and in fact; 

B) Work performed is either outside the usual course of the business for which the work is being performed, or the work is performed outside of all the places of business of the enterprise; and 

C) Worker is customarily engaged in an independently established trade, occupation, profession or business. 

Interpreting prong A, the proposed rule would have changed the meaning of control in several ways troubling to businesses. The proposed rule would have found evidence of control any time a hiring party required the contractor to use electronic devices. After an outcry from the business community, this term was deleted.

The proposed rule also would have found evidence of control any time a hiring party insisted that its contractors follow applicable law. This term was substantially softened. The final rule says that directives issued “solely” to comply with applicable law are not, “standing alone,” evidence of control. Companies that include various requirements in their independent contractor agreements that are designed to ensure compliance with the law should be careful to draft these provisions narrowly, with a focus limited to what is necessary to ensure legal compliance.

Interpreting prong B, the proposed rule would have vastly expanded the meaning of “places of business” to include just about anywhere work is performed. If adopted, the effect would have been to fundamentally change prong B, making it very difficult to show that any work is “performed outside of all the places of business of the enterprise.” The final rule deleted the proposed interpretation. The final rule also added the important clarification that when work is performed at the contractor’s residence, the residence is not an employer’s “place of business.” Seems obvious, but it’s good they added it.

When the proposed rules were released last year, it looked like the NJDOL was trying to repackage the ABC Test in a way that would have made it nearly unusable — like my $4 scissors. Fortunately, the final rule adheres more closely to the way the ABC factors are traditionally interpreted. I’m not saying I agree with the final version; it still has its warts and still leans toward making it harder to classify workers as independent contractors. But it is a lot better for businesses than the proposed rule would have been.

Companies that retain independent contractors in New Jersey should be aware of the new regulations and should stress-test their contractor relationships to make sure they are in compliance. Changes can often be made to contractor relationships that will better protect contractor status.

With the new regulation taking effect in October, now is a great time to proactively review those relationships. Agreements may need to be revised, and factual aspects of the relationship may need to be changed.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2026 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
03.09.26
by

Proposed DOL Rule Would Simplify Independent Contractor Status, But Only a Little Bit

I was in Italy two weeks ago and visited Vatican City. Passport control at the Rome airport was annoyingly slow, but getting in and out of Vatican City – a sovereign nation – was surprisingly easy. Here is a photo of border control at the Vatican.

Navigating the border between independent contractor and employee status is usually more Rome airport than Vatican City, but a proposed new regulation from the Department of Labor (DOL) would make it a bit easier to support independent contractor status under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA).

The proposed rule would adopt a five-factor “economic reality” test, consistent with the test adopted during the first Trump administration. The defining feature of this test is that it highlights two core factors. If these two factors are met, the worker would almost always be an independent contractor under the FLSA and FMLA.

Click here to read more, originally posted on the BakerHostetler blog, Employment Law Spotlight.

01.20.26
by

No Cordwainers Allowed: California Grants Non-Employee Drivers the Right to Organize

The first labor union in the United States was the the Federal Society of Journeymen Cordwainers, founded in 1794. What is a cordwainer? I had to look that up too, so I’ll save you the trouble.

It’s a shoemaker who makes new shoes from new leather, in contrast to a cobbler who repairs shoes. There aren’t a lot of cordwainers around anymore that I know of. Or maybe there are but they go by a name that sounds less weenie-ish.

There are, however, a lot of rideshare drivers. And the State of California thinks they would like to organize too.

But there’s a problem with that. The National Labor Relations Act protects employees, not contractors. When independent businesses band together to set prices, that’s called price fixing, and it presents all sorts of antitrust problems.

A new California law tries to get around these pesky legal problems.

The Transportation Network Company Drivers Labor Relations Act, AB 1340, allows rideshare drivers the right to collectively bargain, using a process to be overseen by the Public Employment Relations Board (PERB).

Rideshare companies must submit a list of eligible drivers every quarter, and these companies are required to negotiate in good faith with the yet-to-be-formed drivers’ group.

But they’re not “unions,” I suppose, even thought they walk like a union and quack like a union.

The statute is long and detailed. It has lots of procedures.

In 1805, the cordwainers’ union was alleged to be a coercive and violent organization, allegations that arose after a cordwainer on strike threw a potato at a scab. The potato broke a window.

Let’s hope the whole rideshare law thingie goes more smoothly, and we’ll see how this actually works in practice. A possible bad omen: The statute says nothing about the unauthorized use of potatoes.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2026 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
10.13.25
by

DOL Reminds Employers that Joint Employment Comes in Two Flavors – Vertical and Horizontal

Foie gras ice cream anyone?

We all know that ice cream comes in many flavors. But some are particularly unusual. For example, a French company sells ice cream with flavors like foie gras, caviar, mustard, and truffle. Presumably, those come in separate scoops.

A U.S. company sells deviled egg custard with smoked back team ice cream. That’s a firm no for me. A New York gelateria offers wasabi. Again, pass.

Less fun fact: Joint employment also comes in two flavors — vertical and horizontal.

Vertical joint employment is when the employee of one company performs services for the benefit of a second company, like in a staffing agency scenario. That’s probably what you think of when you consider joint employment.

But there’s also horizontal joint employment, and that flavor was the subject of a recent DOL opinion letter (FLSA 2025-05). The letter reminds us that even under the current administration, the concept of joint employment is alive and well.

Horizontal joint employment occurs when an employee works for two separate companies in the same week, but those companies share ownership, management, scheduling responsibility, or other significant areas of coordination.

Under the facts addressed in the opinion letter, a hostess worked at both a restaurant and a members-only club. She worked fewer than 40 hours per week at each, but worked more than 40 hours per week combined.

The restaurant and the club were on the same property, shared a kitchen, shared some managers, coordinated schedules, and were “operationally integrated with each other,” as the DOL put it. The employee also sometimes performed work for the club while clocked in at the restaurant.

While the locations were run by separately incorporated entities and had separate upper management teams, the overlap in operations was enough for the Acting Wage and Hour Administrator to conclude that the employee was jointly employed. That means her hours had to be combined for purposes of determining her eligibility for overtime. If she worked more than 40 hours combined for the two entities, she would be due an overtime premium. The two joint employers would have to determine how to allocate the premiums between them, and if they failed to do so, both would be jointly liable.

This opinion letter is a good reminder not to overlook the potential for horizontal joint employment. It’s a lesser known flavor of joint employment, but just as loaded with cream and sugar.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
07.21.25
by

Just Like the Dress: Why Balancing Tests for Worker Classification Can Be So Unpredictable

Remember the dress that broke the internet?

In 2015, this image was widely circulated on Facebook, with some people seeing the dress as white and gold, others seeing it as blue and black. Whichever camp you are in, you probably cannot understand how anyone could possibly think the dress is the other set of colors.

You can read more here if you want a refresher. But essentially it all comes down to neuroscience and differences in how people perceive color.

The core takeaway, though, was that two people could view the same object and reach opposite conclusions.

And so it goes with independent contractor misclassification disputes. A recent Fourth Circuit decision highlights the problem with the tools we use to assess whether a worker is properly classified. When a balancing test is used, different fact-finders can view the same evidence and reach opposite conclusions. And that’s exactly what happened here.

The case, Chavez-DeRemer vs. Medical Staffing of America d/b/a Steadfast, involved a staffing firm that provided independent contractor nurses to hospitals and medical clinics, as needed. The DOL launched an investigation in 2018, alleging that 1,100 nurses should have been classified by Steadfast as its employees under the Fair Labor Standards Act (FLSA). The DOL filed a lawsuit in federal court in Norfolk. After a bench trial, the judge ruled that under the FLSA’s six-factor Economic Realities Test, the nurses were employees. The judge awarded more than $9 million in damages.

Steadfast appealed. Last week, in a 2-1 decision, the Fourth Circuit affirmed. Two judges agreed with the trial court, finding that the evidence supported employee status under the Economic Realities Test.

The dissenting judge disagreed vehemently. As in, how-can-you-possibly-think-the-dress-is-blue-and-black vehemently. The dissenting judge excoriated the majority for cherry-picking facts and ignoring the realities of the relationship.

All three judges, of course, were evaluating the same facts and the same record. All three judges were applying the same six-factor Economic Realities Test. Yet, they reached very different conclusions.

If this is depressing, it should be. It shows how unpredictable balancing tests can be.

The outcome is an important reminder of how important it is, when building independent contractor relationships, to consider every relevant factor and to nudge as many factors as possible to the independent contractor side of the scale.

There is no way to predict which facts a judge will find most persuasive and no way to predict how a judge will weigh the factors, especially since it is pretty much inevitable that there will be at least some factions on each side of the scale.

I see the dress as white and gold. I can’t understand how anyone would think it’s black and blue. Those people are insane.

Actually they’re not insane. (Well maybe they’re insane.)

In the Medical Staffing case, the dissenting judge couldn’t see how the other two judges could have possibly reached the conclusion that the nurses were misclassified. Businesses using independent contractor models need to be prepared that no matter how supportable they think their classification decision is, a judge or agency might reach the opposite conclusion, even from the same facts.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
07.07.25
by

Bee Aware: New Law Increases Fines for Worker Misclassification in Colorado

When police in Spain pulled over a 70-year-old van driver for not wearing a seatbelt and driving erratically, they thought it would be a routine stop. The man had other ideas. After being asked to take and retake a breathalyzer test, the man threatened to kill the police officers, which is generally a thing you should not do when pulled over.

The man, who I should now mention was a beekeeper, went to the back of the van and released swarms of bees, which proceeded to attack the policemen, stinging them several times. The policemen fled to a nearby restaurant, and the beekeeper casually drove away. He was later arrested, bee that as it may.

The policemen that day didn’t know what they were getting into when they pulled over the van driver. But businesses in Colorado who misclassify workers as independent contractors should now bee on notice that they may get stung — financially — for their misdeeds.

Colorado has amended its wage and hour laws to add a mandatory fine for willful or repeated misclassification of employees as non-employees. Under the new law, an employer found to have misclassified an employee as a nonemployee must pay a fine in the following amounts, in addition to any other relief that may be awarded:

  • For a willful violation, $5,000;
  • For a violation not remedied within 60 days after the division’s finding, $10,000;
  • For a second or subsequent willful violation within 5 years, $25,000; or
  • For a second or subsequent willful violation not remedied within 60 days after the division’s finding, $50,000.

Colo. Rev. Stat. 8-4-113(1)(a)(I.5).

Misclassifying workers as independent contractors has always carried the risk that you’re not complying with employment laws. As states continue to crack down on the misclassification, we can expect to see more laws with mandatory fines, on top of the usual risk of backpay awards.

Businesses using independent contractors in Colorado and other states with fines should pay extra attention. The fines do not vary by size of the engagement, and they are per-violation fines.

Bee careful out there.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
06.30.25
by

Have a Seat: Alabama Passes Portable Benefit Bill for Contractors

I started to look up fun facts about Alabama and learned that the world’s largest office chair is in Anniston, Alabama. I was content with that find, but then I fell down a rabbit hole when I found this website, which lists other roadside attractions in the category of Oversized Chairs.

There’s a giant ladderback chair in Sebastopol, California. There’s a big chair you can drive under at the Los Angeles Merchandise Mart. Homer, Alaska has a big Adirondack-style chair, in case you’re headed out that way.

Whatever your destination, you may want to sit down and relax. I have some good news for a change.

Alabama passed a new law creating a portable benefit system for independent contractors. Unlike other portable benefit systems, this one allows for 100% tax deductibility for both contractors and the paying party for all contributions to the account.

Under the Portable Benefits Act (SB 86), contractors can create a portable benefit account through a third party. The account can be used to fund health insurance, life insurance, or other benefits. Starting in January 2026, funds contributed by the contractor are excluded from taxable income. Funds contributed by the party that retained the contractor are 100% tax-deductible.

The tax consequences here apply only to Alabama law, not federal tax law; but this is a solid step in the right direction for solo and small business owners.

The push by unions and some deep blue states to reclassify contractors as employees is motivated mainly by the desire to give contractors the same protections and benefits received by employees. If contractors have portable benefit accounts that can be funded tax-free, that certainly helps them and removes some of the incentive to reclassify.

There have been portable benefit bills passed in a few other states, with varying scopes. Utah and Tennessee, for example, have portable benefit programs, but neither offers 100% tax-deductibility.

There have been some efforts at the federal level to pass a nationwide portable benefits bill, but nothing is close to being passed.

In the meantime, this is good news for Alabama contractors and the companies that engage them. Y’all deserve to relax and enjoy a cocktail in an oversized comfortable chair. I’d recommend the big chair in Anniston, Alabama. California and Alaska are a bit too far a drive.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
06.09.25
by

Different Strokes: Be Careful With Choice of Law Clauses in IC Agreements

The phrase “Different strokes for different folks” originated in the 1960s and seems to have been popularized by Muhammad Ali. Describing his knock-out punches against Sonny Liston and Floyd Patterson, he said, “I got different strokes for different folks.”

In 1979, Ali appeared in the sitcom “Diff’rent Strokes,” which was probably named for the Ali quote and which was actually spelled that way and I can’t find anything that explains why. I guess when it comes to punctuation, different strokes for different folks?

Today’s post is a variation on that theme: Different states for different fates.

When drafting independent contractor agreements, choice of law matters. Choose carefully and thoughtfully. And remember three things:

First, state laws differ significantly on several subjects that might be relevant to your IC agreement — for when someone is considered an employee, for when non-competes can be enforced, for when non-solicitation agreements can be enforced, and for other terms that are likely to be in your contractor agreements. Don’t choose the law of a state that is less likely to enforce the clauses you want to include. If you can avoid California law for example, do yourself a favor and avoid California law.

Second, the state you choose needs to have some nexus to the parties or their relationship. Examples of a nexus that can justify use of a state’s law may be that one party is based there, or the work is being performed there, or (maybe) that one party is incorporated there. But there needs to be some connection.

Third, for worker classification disputes, the law of the state where the work is performed might apply anyway, since if a worker works in State A and the laws of State A would consider that person to be an employee, the parties cannot agree to contract out of the law of State A. But don’t concede so easily. Aim to apply the law of a favorable jurisdiction, even if there’s a chance that a court or arbitrator might disregard the choice of law clause in a classification dispute. Besides, there are going to be many other clauses in your agreement for which you’ll want the most favorable state law to apply.

For employment relationships, it is unlawful in some states (and unenforceable in others) to require application of the law of a state where the work is not performed, but it’s much less clear when and whether such laws apply to non-employment relationships.

The bottom line: Be strategic and thoughtful when inserting a choice of law provision in an independent contractor agreement. Depending on what law is applied to a particular issue or contract clause, the result and enforceability of that term may be different. Or diff’rent.

And the wrong choice of law could mean a knock-out punch for a clause you’d like to enforce.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 
05.19.25
by

What Animals! New Jersey Proposes to Toughen Independent Contractor Test

In medieval Europe, it was not uncommon to put animals on trial for various crimes. In France, Italy, Switzerland, and elsewhere, courts tried pigs, dogs, rats, grasshoppers, and snails for crimes against people, property, and God. 

Examples include cases brought against vermin who dared to ransack stores of grain and prosecutions for pigs having maimed or killed people.

There’s a whole book about the practice, Chronological List of the Prosecution of Animals from the Ninth to the Twentieth Century, by E.P. Evans. I typed the name of the book in the search bar at Amazon. Apparently it is not available, and the site instead recommended that I purchase a DVD of Ransom, starring Mel Gibson. (?)

No, thank you.

I also say no, thank you to New Jersey Department of Labor and Workforce Development (NJ DLWD), which has proposed new independent contractor classification regulations.

The regulations would re-interpret NJ’s ABC Test in a way that would make it much harder to maintain IC status. The regulations would apply to the NJ Wage Payment Law, the Unemployment Compensation Law, and the Earned Sick Leave Law.

For years New Jersey has used an ABC Test, but with the standard version of part B, unlike California and Massachusetts, which have a strict version of part B.

To satisfy a standard ABC Test, like in NJ, the party engaging the contractor must prove (all three):

  1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
  2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

The regulations would largely re-interpret part B to make it more like the strict version, which can be met only if the work is performed “outside the course of the business for which such service is performed.”

The regulation would essentially eviscerate the second option — that the work is performed outside of all the places of business of the enterprise for which such service is performed — and make it nearly impossible to satisfy this alternative.

For example, under the regulations, the retaining party’s “place of business” could include any place where the work is typically performed, even customer’s homes.

The regulations would also make parts A and C harder to meet. In part A, for example, the regulations would declare that control exerted to make sure a contractor follows the law is relevant control that can convert the worker to an employee. But control exerted to ensure compliance with a law is control imposed by the government, which passed the law, not by the company retaining the contractor. This re-imagining of part A would be inconsistent with a multitude of court decisions that have addressed this issue.

I say no, thank you, because the regulation is not consistent with New Jersey law and is not consistent with how other courts around the country have interpreted the ABC factors. The NJ DLWD is supposed to apply the law, not change it. The NJ DLWD is not a legislative body and is not a court.

Nonetheless, it seems like there’s a good chance this will pass.

A 60-day public comment period began with the publication of the proposed rule on May 5. Companies that will be impacted by the rule should consider submitting comments. Page 1 of the proposed regulations explains how.

Misclassification in New Jersey is serious business. The state has been aggressive about pursuing legal action against companies that systemically misclassify workers as ICs. (But so far, no cases against pigs, dogs, rats, grasshoppers or snails. I think.)

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge