Category Archives: Non-Employee Workers

04.13.26
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Hold That Spot! Misclassification Ruling Tags Parking Spotholders As Employees

According to the NYC Department of Transportation, there are just under 3 million free, on-street parking spots in New York City, Of course, they’re all taken, and if you want one, you’ll be circling for blocks.

But not if you have a parking spot holder. Can you really hire someone to do that? You most certainly can. but if you, you’d better properly classify those spotholders.

After a four-day bench trial, a federal judge ruled that 329 parking spot holders in New York City were employees, not independent contractors, of the two small companies that engaged them. These individuals were engaged for the sole purpose of holding parking spots so that the two companies’ primary client, a large utility company, could perform services around the city. The case was decided under the Fair Labor Standards Act (FLSA).

Not only is paid spotholding an actual thing, it’s quite a lucrative thing. Between 2016 and 2021, the two small companies who were defendants in this case were paid $80 million to be the exclusive spotholder for the utility company. That’s not a typo. And yes, I agree, we are all in the wrong line of work.

The companies’ contracts required them to comply with the FLSA, but the companies’ accountant recommended classifying the spotholders as independent contractors, a classification he felt confident would be permitted under the Internal Revenue Code.

This case, of course, is not about federal tax law compliance, and many of you know that the test for who is my employee is different under the Internal Revenue Code than under the FLSA. Even if the workers were contractors under federal tax law, that wouldn’t mean they are contractors under the FLSA.

And alas, they were not — at least according to this ruling.

The judge applied a five-part economic realities test. She found that the companies exercised substantial control over how the spotholding work was performed. The judge seemed particularly moved by testimony that the workers could not take bathroom breaks without permission and, if permission was denied, they would sometimes pee in bags. That’s a swing and a miss. Strike one.

She found that the spotholders had no opportunity for profit or loss. The only way to earn more was to work more. The spotholders invested no capital in their work. Together, that makes strike two.

The judge found that the spotholders had no special skills. Insulting perhaps, but probably true. That’s the third factor in the FLSA economic realities test, and that’s strike three.

The judge also found that the relationship was indefinite in nature. That’s another missed factor and another strike.

And she ruled that the work was indispensable to the companies’ spotholding business. That’s another strike (strike five, I guess). All five factors pointed toward employee status.

The court ordered the companies to pay $3 million in back wages for unpaid overtime, plus another $3 million in liquidated damages.

There’s one other fact worth noting here. The case was not brought by an enterprising plaintiff’s lawyer. It was brought by the US Department of Labor. Even though we have a Republican administration that tends to be pro-business, but that doesn’t mean the DOL will ignore what it perceives to be misclassification.

And that put companies in a tough spot.

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

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02.02.26
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The Leech & Vampire Business: The Law — Not the Parties — Decide Who is an Employee

In the early 1800s, Parisian doctor François Broussais popularized the use of leeches for bloodletting. Vampires, apparently, were going out of fashion, and besides, leeches can eat 10 times their weight in blood, which seems more efficient than vampires anyway.

By the 1830s, France was importing 40 million leeches a year for medical use. Someone was getting rich from the leech trade.

Almost 200 years later, the use of leeches is reserved for freaking out kids on camping trips. We have better ways of treating illness now, but blood collection is still important.

In fact, there is a whole industry based on blood collection (or, for those daring enough to proceed without spellcheck, phlebotomy).

If phlebotomy is your business, then your phlebotomists are your employees, ruled a district court in Michigan a few weeks ago. The case involved a group of blood collectors who were classified as independent contractors. They signed IC agreements and were paid in gross.

They sued under the Fair Labor Standards Act (FLSA), alleging that under the law, they were really employees and should have been paid overtime. The court agreed, with no trial, granting summary judgment to the plaintiffs. Ouch.

The court applied an Economic Realities Test, and found that the factors decisively pointed toward employee status for the phlebotomists. Key facts that weighed in favor of employee status included:

  • The permanency of the relationship: They worked regularly for the defendant for months at a time.
  • Skill required: No special certification is needed to draw blood (see, e.g., resumes of leeches, vampires).
  • Lack of investment in equipment: The phlebotomists didn’t bring or invest in their own equipment.
  • Opportunity for profit or loss based on managerial skill: Nope. They were paid based on hours worked.
  • Right to Control: The work was largely directed by the defendant, and the phlebotomists were required to sign non-compete agreements, which prevented them from operating their own businesses in phlebotomy.
  • Integral part of the business. Well, duh. It’s a phlebotomy business.

The case is a good reminder that it doesn’t matter what the parties call the relationship. The law dictates whether a worker is an employee or an independent contractor, and you can’t agree to contract out of the law.

What a bloody mess.

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

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01.20.26
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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.

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

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10.27.25
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Beware of Bright Shiny Objects: Home Health Care Company Gets Whacked in Misclassification Claim

Alabama jewelry store owner Slater Jones owns a two-carat diamond. That might not seem surprising, but stay with me here. Jones keeps the diamond in his eye. Literally, in his eye.

You see, Jones lost his right eye to illness. Rather than living with a boring old prosthetic eye that looks like, well, an eye, Jones engaged eye prosthetic expert John Lin to create a custom artificial eye from a diamond.

Having a diamond for an eye may seem a bit gaudy, but I guess if you’re in the jewelry business, you may as well just go for it.

Those in the home health care business, on the other hand, should not just go for it — especially if “it” is classifying in-home health aides as independent contractors.

In a settlement finalized earlier this month, California Attorney General Rob Bonta secured a $9.5 million settlement against the individual owners of a home health care company for misclassifying its workers in violation of California law. In this case, the owners appears to have operated the home health agency as a d/b/a without having incorporated. Oopsie. The settlement included another $1.5 million against a different incorporated home health care entity and its family of owners.

The settlement also prohibited all of the defendants from classifying their aides as independent contractors in the future.

We have seen a lot of recent cases brought against home health care companies that classify their workers as independent contractors. This settlement is a stern warning that home health care companies choosing that model need to be extremely cautious.

Because this case was brought by the State, some of the protections we often recommend, like individual arbitration agreements with class action waivers, provide no protection. This case and the settlement also serve as a reminder that individuals can be held liable for intentional misclassification.

The claims brought against the agencies focused largely on California’s Unfair Competition Law (UCL). Misclassification allegations under the UCL typically claim that the wrongdoer gained an improper advantage in the marketplace by unlawfully classifying employees as independent contractors.

Treating in-home aides as contractors may seem like a bright shiny object worth pursuing. But that sparkle you see is no diamond. It’s just the gleam in the eye of the State Attorney General, preparing to count the cash from another misclassification settlement.

Classify wisely, my friends.

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

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09.29.25
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Clearing the Fog? New Joint Employer Test Is Being Considered for Franchisors

I took last week off work to visit Asheville. The first morning, we woke up at 5 am for a sunrise hike at Craggy Pinnacle, along the Blue Ridge Parkway. This was our view at the top.

Fortunately, the fog burned off after an hour or so. We waited and were rewarded with some spectacular views. Our 7-month old puppy Louie was just happy there were other dogs at the top to play with. Here he is, admiring the view.

The lesson, of course, is to be patient and sometime the fog will clear. (Or check the weather report?)

Franchisors are hoping for the same reward, through the proposed American Franchise Act, introduced in the House in September and now before the House Committee on Education and Workforce.

The bill, which has at least some bipartisan support, would change the definition of joint employment under the NLRA and FLSA for franchisee-franchisor relationships.

The bill would establish that a franchisor can be a joint employer only if it exercises “substantial direct and immediate control” over one or more “essential terms and conditions of employment of the employees of the franchisee.”

“Essential terms and conditions of employment” means wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

To be a joint employer, the franchisor would have to control these terms with respect to individual employees. Setting baseline standards and brand guidelines would not create joint employment.

The risk of joint employment liability is an ongoing concern for franchisors. The franchise business model requires a level of control to ensure brand consistency and a uniform customer experience across locations. The American Franchise Act, if passed, would help to protect the franchise model and establish clear guidelines for what level of control is needed to create a joint employment relationship.

We’ll see if Congress decides to lift the fog.

Here’s a better view from the hike:

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

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08.04.25
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Gone the Way of Westarctica: Tax Bill Changes 1099 Reporting Rules

(AI mapmaking is fun!)

Harshvardhan Jain served ably as the Indian ambassador to Westarctica. And Seborga. And Ladonia. He drove fancy cars with diplomatic plates, and he worked out of an embassy in Ghaziabad, India.

Now I know what you’re thinking. Ghaziabad must be a made-up place name, right? Sorry, no, Ghaziabad is a real place. But Westarctica, Seborga, and Ladonia are not. Jain was arrested recently for operating fake embassies for made-up nations, using his high-falutin’ status to defraud potential business partners. Allegedly.

Goodbye to Westarctica. We hardly knew you.

Same sentiments to the tax rule requiring businesses to issue an IRS Form 1099 to contractors receiving $600 or more in a tax year. Under the One Big Beautiful Bill, the threshold for issuing 1099s has been raised to $2000. The change goes into effect for 2026.

The effect will likely be that fewer contractors pay taxes on their earnings. Many contractors will figure that no one at the IRS is watching. And for the most part, they’ll probably be right.

The change is in Section 6041 of the Internal Revenue Code. If you look it up, you’ll see it. But don’t bother looking for Seborga on a map. You won’t see that anywhere — except maybe on Harshvarhan Jain’s business cards.

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

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07.21.25
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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.

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

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06.30.25
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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.

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

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06.23.25
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Higher or No Hire? Don’t Forget This Minnesota Law When Working with Staffing Agencies

I searched in Apple Music for songs titled “Higher,” and it’s a pretty common song title. There are songs called “Higher” by Creed, Tems, Citizen Cope, TEC, burns Boy, Rihanna, DJ Khaled, Lemaitre, Chris Stapleton Michael Buble, Eminem and more. I stopped the list because you get the idea. If you want “Higher,” just search for songs, and you’ll have many to choose from.

But if instead you want “Hire,” and you’re in Minnesota, your options are much fewer. Or, actually, your options are much fewer if you want “No Hire.” Let me explain.

A Minnesota law enacted last summer bans service providers, including staffing agencies, from doing anything to “restrict, restrain, or prohibit” the hiring of its employees or independent contractors. That means a clause prohibiting direct hire is no longer allowed. The law also bans clauses that would prevent soliciting such workers for direct hire.

The law took effect July 1, 2024, and it applies to earlier contracts too, rendering these clauses void.

There are a few limited exceptions, such as for vendors providing professional business consulting for computer software development. But that’s a pretty narrow lane to try to drive your truck through. Reminds me of some tunnels I drove through in Northern Italy last fall. Not much room to maneuver. Especially when there’s a bus in the tunnel. They shouldn’t let buses in those tunnels.

A possible workaround is to impose direct hire fees, but those fees may be seen as “restrict[ing]” or “restrain[ing]” hiring. It’s unclear whether Minnesota courts will view direct hire fees as an unlawful restriction or restraint under this new law.

If your business provides or uses staffing services in Minnesota, check your contract. Same thing for contracts with other vendors who supply labor, such as consultants. If the contract prohibits direct hire of the vendor or staffing agency’s employees, that clause is probably now void.

And there are no good songs about laws that void contract clauses. I checked.

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

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06.09.25
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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.

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

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