Independent Contractor Misclassification and Compliance News May 2023

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. Wisconsin Finds Amazon Delivery Drivers Were Employees for Unemployment Purposes

The Wisconsin Court of Appeals issued a decision in which it concluded that Amazon delivery drivers were misclassified as independent contractors and should have been considered employees under Wisconsin’s unemployment insurance liability purposes.

Wisconsin’s Department of Workforce Development had determined that the delivery drivers were employees and that Amazon owed unemployment taxes. The Wisconsin statute says Amazon had to meet at least six of the following nine factors to treat the drivers as independent contractors.

1. The individual advertises or otherwise affirmatively holds himself or herself out as being in business.
2. The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.
3. The individual operates under multiple contracts with one or more employing units to perform specific services.
4. The individual incurs the main expenses related to the services that he or she performs under contract.
5. The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.
6. The services performed by the individual do not directly relate to the employing unit retaining the services.
7. The individual may realize a profit or suffer a loss under contracts to perform such services.
8. The individual has recurring business liabilities or obligations.
9. The individual is not economically dependent upon a particular employing unit with respect to the services being performed.

The court reviewed each of the factors in detail and concluded that Amazon was able to demonstrate that it met these factors:

• The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.
• The individual incurs the main expenses related to the services that he or she performs under contract.
• The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.
• The individual may realize a profit or suffer a loss under contracts to perform such services.
• The individual has recurring business liabilities or obligations.

But Amazon was not able to demonstrate meeting these factors:

• The individual advertises or otherwise affirmatively holds himself or herself out as being in business.
• The individual operates under multiple contracts with one or more employing units to perform specific services.
• The services performed by the individual do not directly relate to the employing unit retaining the services.
• The individual is not economically dependent upon a particular employing unit with respect to the services being performed.

Wisconsin’s Department of Workforce Development assessed Amazon over $200,000 in delinquent unemployment insurance taxes and related penalties and interest which Amazon will be required to pay unless Amazon chooses to appeal this decision.

2. United States Department of Labor Continues to Focus on Protecting Professional Caregivers

In 2021, the United States Department of Labor (DOL) launched an initiative to ensure that employers pay professional caregivers according to the Fair Labor Standards Act (FLSA). Since 2021, the DOL has completed more than 1,600 investigations and identified violations in 80 percent of its reviews.

The investigations recovered more than $28.6 million in back wages and damages for nearly 25,000 workers and let to civil penalties for employers of more than $1.3 million.  The DOL recently found that a Florida nurse registry staffing service misclassified caregivers as independent contractors. The agency provides staffing including registered nurses, certified nursing assistants, home health aides and companions. The DOL recovered $260,000 in back wages for 61 caregivers.

3. Senators Reintroduce Bill to Test Portable Benefits

United States Senators Kevin Cramer (R-ND), Mark Warner (D-VA), and Todd Young (R-IN) recently introduced the Portable Benefits for Independent Workers Pilot Program Act. The legislation would enhance independent workers’ access to certain retirement plans and health insurance protections typically offered to full-time employees. It would also establish a $20 million grant fund within the U.S. Department of Labor (DOL) to incentivize states, localities, and nonprofits work with portable benefits models.

The bill attempts to address the issue that independent contractors, part-time workers, temporary workers, and contingent workers have found it difficult and expensive to access benefits and protections traditionally provided to full-time employees.

The Portable Benefits for Independent Workers Pilot Program Act attempts to address these challenges by expanding accessibility for gig economy workers to receive number of work-related benefits and protections including retirement savings, workers compensation, life or disability insurance, sick leave, training and educational benefits, and health care. The bill would also direct the Secretary of Labor to provide grants to support innovation and experimentation regarding portable benefits, with the goal of establishing scalable, efficient benefit models.

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.