Independent Contractor Misclassification and Compliance News: August, 2020

By MBO Partners | August 31, 2020

misclassification and compliance news

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. California vs. Uber and Lyft

One of the biggest stories this month is the ongoing battle between the state of California and Uber and Lyft. In May, California attorney general Xavier Becerra along with city attorney’s office in San Diego, San Francisco, and Los Angeles sued Uber and Lyft saying their drivers were misclassified as independent contractors they should be employees under the state’s AB5 law.

Uber and Lyft have worked to get a valid question on the November ballot that will allow these companies to avoid classifying drivers as employees as required by AB5.

On August 10th, the California judge issued an order requiring Uber and Lyft to classify their drivers as employees under AB5. The judge delayed the order for 10 days to allow Uber and Lyft to appeal. As the order was set to expire, Uber and Lyft announced they would be suspending service in California. Just as the deadline was about to expire, the California Court of Appeals issued an order extending the deadline until their appeal could be adjudicated. As part of the order extending the deadline, Uber and Lyft must submit statements from the chief executive officers saying they have plans to comply with the injunction if the ballot question fails.

Oral arguments on the appeal are scheduled for October 13, 2020.

Ultimately, the outcome of this battle is likely going to be determined by what happens with the ballot question in November. If the people of California vote with Uber and Lyft, then Uber and Lyft will continue to be able to classify their drivers as independent contractors. If the people of California reject the ballot question, and Uber and Lyft we’ll have to treat their drivers as employees.

2. Uber and Lyft fight in California Prompts Discussions of Alternatives

The fight between the state of California and Uber and Lyft has prompted a number of commentators to propose alternative solutions. In a New York Times editorial, the CEO of Uber proposed having a third classification of worker. Michael Mandel and Eric Stapp offer recommendations for providing benefits to independent professionals without having them lose the flexibility they value. In Forbes, Ike Brennan argues for one national standard for classifying workers as employees or independent contractors.

MBO has put forth its own proposal for a national standard with its proposal to create a Certified Self Employed (CSE) federally recognized safe-harbor worker classification.  

3. United States Department of Labor Rule on Misclassification has Stalled

Last month, we reported that the United States Department of Labor was considering adopting a regulation with criteria for classifying workers as employees or independent contractors under the Fair Labor Standards Act (FLSA). This month, Bloomberg Law reported that the process has stalled amidst internal disagreements within the Department of Labor. At this point, it seems unlikely the Department of Labor will be able to complete the process for adopting a regulation in time for it to be effective if a new president is chosen.

4. Minneapolis Requires Written Agreement with Freelancers

On July 31st, the Minneapolis City Council approved an ordinance relating to the use of freelance workers in Minneapolis. The ordinance goes into effect on January 1st, 2021, and provides that

  • businesses must have a written agreement with freelancers, and
  • businesses must pay freelancers in accordance with the written agreement

In 2017, New York City adopted the Freelancer Isn’t Free Act Which also imposes requirements on businesses who use freelancers. It’ll be interesting to see other cities follow New York’s and Minneapolis’s lead in this area.

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