Independent Contractor Misclassification and Compliance News July 2022

By MBO Partners | July 29, 2022

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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. Class Action Lawsuits Alleging Misclassification of Independent Contractors Become More Difficult in Ninth Circuit

The Ninth Circuit Court of Appeals recently made it harder to bring class action lawsuits alleging the misclassification of independent contractors. To bring a class action lawsuit, the plaintiffs generally must show that “questions of law or fact common to class members predominate over any questions affecting only individual members.” In this case, the court said that there were not common facts that established liability.  

In Bowerman v. Field Asset Services, Inc., No. 18-6303(9th Cir. 2022), the court said that the plaintiffs failed to show by common evidence that there was any liability or the amount of damages resulting from the liability. The court said that liability would require highly individualized inquiries on whether any worker ever worked overtime or ever incurred reimbursable business expenses. The court said that if the plaintiffs cannot prove that damages resulted from the company’s actions, then a class action was not appropriate.  

This is a boost for businesses that engage with independent contractors. The court’s decision makes it harder for independent contractors to bring class action lawsuits alleging misclassification because many determinations of whether there was any liability would require an individual inquiry which will make the cases not appropriate for a class action lawsuit.  

2. United State Supreme Court Declines to Hear Challenge to California’s Independent Contractor Law

In 2019, California enacted AB5, a bill that said to determine if a worker was an employee or independent contractor, the ABC test must be used. The ABC test says that a worker in an employee unless the hiring business can demonstrate all the following:  

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact. 

(B) The person performs work that is outside the usual course of the hiring entity’s business. 

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. 

Immediately after it became effective, the California Trucking Association challenged its application to the trucking industry because the Federal Aviation Administration Authorization Act (the “FAAAA”) preempted AB5. The FAAA specifically preempts state laws that affect prices, routes, or services.  The FAAA does not preempt generally applicable statutes like labor laws.  

The Ninth Circuit Court of Appeals said that the FAAA did not preempt AB5 and the trucking association appealed to the United States Supreme Court.  

The United State Supreme Court decided not to hear the appeal and the Ninth Circuit’s decision, that AB5 applies to the trucking industry. The trucking industry in California will not need to comply with AB5 and it is likely that most truckers will be found to be employees and not independent contractors.  

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. 

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