Independent Contractors

On January 10, 2024, the U.S. Department of Labor (DOL) published its final independent contractor rule in the Federal Registrar in an attempt to provide greater clarity and consistency on how to classify a worker as an employee or independent contractor under the Fair Labor Standards Act (FLSA).

For decades, federal courts have analyzed the question using a multifactor, totality-of-the-circumstances economic reality test, with no factor or factors being dispositive. However, a rule that was published on January 7, 2021, known as the 2021 IC Rule, set forth “core factors” where some factors should be given additional weight over others. The 2021 IC Rule was criticized for not being supported by the DOL’s historical position and not fully aligned with the FLSA’s text.Continue Reading Navigating the labor landscape: Department of Labor announces final rule on independent contractors

Although New York has had an employment-related whistleblower statute for decades, many employers may not have been aware of it. That is because the statute itself – N.Y. Labor Law section 740 – has been fairly limited in its scope and application. Indeed, it has only protected employees who disclose employer activity that violates laws relating to public health and safety or to health care fraud. Disclosures of other unlawful activities have not been protected by section 740.

That will no longer be the case, however, starting next year. Late last month, New York Governor Kathy Hochul signed a bill that will amend and effectively overhaul section 740. The amended law, which is scheduled to take effect on January 26, 2022, drastically expands the breadth and scope of section 740 by making it significantly easier for New York workers to bring a claim, lengthening the statute of limitations, and imposing a notice requirement on employers.

Overview of key updates to section 740

  • Independent contractors can bring claims too: As a starting point, under the amended law, not only will current and former employees be able to assert legal claims against the employer, but so too will independent contractors.
  • Broad expansion of protected activity: Perhaps the most noteworthy aspect of the amendment is how it expands the types of employee activities that are protected under section 740 of the Labor Law.

Previously, section 740 was a narrow statute that primarily barred employers from taking retaliatory action against employees only where the employee had disclosed or threatened to disclose to a supervisor or public body, or had objected to or refused to participate in “an activity, policy or practice of the employer that is in violation of law, rule or regulation which violation creates and presents a substantial and specific danger to the public health or safety, or which constitutes health care fraud.” The prior version of the law thus required that an actual legal violation have occurred – i.e., an employee’s reasonable belief that a violation had occurred was insufficient – and was intended to curb only activities that posed a substantial and specific danger to public health or safety or that constituted health care fraud.

The amended statute, however, broadly expands this scope of protected activity. Specifically, the law now bars employers from taking retaliatory action where the employee discloses or threatens to disclose to a supervisor or public body, or objects to or refuses to participate in “an activity that the employee reasonably believes is in violation of law, rule or regulation or that the employee reasonably believes poses a substantial and specific danger to the public health or safety.” The new definition, therefore, essentially protects, and bars employers from retaliating against, workers who report any actual, or reasonably perceived by the employee, violation of any law, rule, regulation, executive order, or judicial or administrative decision, ruling, or order at all, regarding of its subject matter. To say that this is a dramatic expansion of Section 740 would be an understatement.Continue Reading New York enacts sweeping expansion of state’s whistleblower law

Independent contractors have long been excluded from the protections afforded by traditional workplace anti-discrimination laws. That is no longer the case in New York State and City. In recent months, legislators in both Albany and Manhattan have extended substantial workplace-related protections – once only afforded to traditional employees – to freelancers, consultants, and the like (that is, independent contractors). We will discuss these measures below.

New York State

Effective October 2019, the antidiscrimination provisions of the New York State Human Rights Law (NYSHRL) now protect nonemployees, such as contractors, subcontractors, vendors, consultants, temporary workers, “gig” workers, and other non-employee persons providing services pursuant to a contract. In practice, this means that independent contractors may now pursue claims of workplace discrimination, harassment, and retaliation under the NYSHRL. This change is particularly impactful when considered in conjunction with the recently lowered standard for proving claims of harassment.

At present, these laws only apply to entities with four or more employees. However, effective February 8, 2020, the protections will cover all businesses operating within the state.
Continue Reading New York State and City expand Human Rights Law protections to freelancers and independent contractors

Today more than ever, U.S. businesses supplement their workforce with independent contractors as a solution to competitive and customer pressures. The use of contractors is entirely legal. But the correct classification of workers as contractors, as opposed to employees, is a complex analysis with frameworks that differ across a variety of governing laws. Employers, therefore, sometimes get this wrong. Recognizing the likelihood that workers are sometimes misclassified as contractors, on August 29, 2019, the National Labor Relations Board (the NLRB or Board) issued an important opinion for businesses when it held that misclassification of employees as contractors is not a violation of federal labor law.

NLRB pro-business opinion

Velox Express, Inc. is in the medical courier business. It supplements its driver workforce with independent contractors. Velox terminated its contract with one such driver, Jeannie Edge, when Edge began voicing concerns on behalf of herself and other drivers that Velox had misclassified them as contractors instead of employees. Edge filed an unfair labor practice charge claiming that the driver misclassifications violated the National Labor Relations Act (the Act). The administrative law judge agreed. In Velox Express, Inc. and Jeannie Edge, the Board, which has a three-member Republican majority, affirmed the judge’s ruling that Velox misclassified Edge and other drivers as independent contractors under the Act, but held that the misclassification, in and of itself, did not violate the Act. 368 NLRB No. 61.

Section 8(a)(1) of the Act provides that it is an unfair labor practice for an employer “to interfere with, restrain, or coerce employees” from exercising their legal right to engage in protected concerted activity under the Act. The Board explained that an employer’s mistaken classification of employees as independent contractors does not interfere with or threaten any workers’ right to engage in protected activity under the Act, even if independent contractors cannot join a union. Id. at 6. The Board’s rationale was that when workers are classified as independent contractors, they still retain the right to disagree with their classification and engage in protected activity, which is exactly what Edge did. The employer violates the Act only if it responds to the protected activities with threats, promises, and interrogations. Id. at 6. The Board held that “[e]rroneously communicating to workers that they are independent contractors does not, in and of itself, contain any threat of reprisal or force or promise of benefit.” Id.
Continue Reading On the eve of Labor Day, a win for business from the NLRB

In a recent decision involving SuperShuttle drivers, the National Labor Relations Board (NLRB or Board) overruled a 2014 decision making it less likely a worker would be deemed an independent contractor, returning to the more employer-friendly common law test to determine independent contractor status.

In 2014, the Board purported to clarify the standard for evaluating whether a worker is an independent contractor (see FedEx Home Delivery, 361 NLRB 610 (2014)). In FedEx, the Board articulated a new factor in the contractor analysis – whether “putative independent contractor is … rendering services as part of an independent business” (Id.) In doing so, the Board diminished the significance of the putative contractor’s entrepreneurial opportunity in the independent contractor analysis by making it one aspect of the newly created “independent business” prong (Id. at 619).

Last week, the Board overruled FedEx and returned to the traditional common law test. SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019). Under that test, “entrepreneurial control, like employer control, is a principle by which to evaluate the overall effect of the common-law factors on a putative contractor’s independence to pursue economic gain” (Id. at *9). The Board held that the test articulated in FedEx “fundamentally shifted the independent contractor analysis … to one of economic realities, i.e., a test that greatly diminishes the significance of entrepreneurial opportunity and selectively overemphasizes the significance of ‘right to control’ factors relevant to perceived economic dependency” (Id. at *7-8).Continue Reading NLRB returns to more employer-friendly independent contractor test

On Tuesday, January 15, 2019, the U.S. Supreme Court found that truck drivers classified as independent contractors cannot be compelled to arbitrate their claims under the Federal Arbitration Act (FAA). See New Prime, Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019).

This decision has significant ramifications for transportation industry companies that previously utilized arbitration agreements with their independent contractor drivers. Given the court’s ruling, those independent contractor drivers can no longer be compelled to arbitrate their claims under the FAA.

The plaintiff, Dominic Oliveira, worked as an independent contractor driver for a trucking company, New Prime Inc. As part of his contract with New Prime, Olivera agreed to arbitrate all disputes. In contradiction to this agreement, Oliveira brought a claim in court against New Prime on behalf of himself and thousands of other independent contractor drivers. Oliveira alleged that he and the other drivers were misclassified as independent contractors, and that they were actually employees of the company.Continue Reading High court finds independent contractor truck drivers excluded from FAA

As we previously reported, the New York City “Freelance Isn’t Free” Act (the Act) took effect on May 15, 2017. The Act requires virtually all entities that engage an independent contractor in NYC for $800 or more in services to execute a written agreement with the contractor before work begins.  The Act additionally bars wage theft and retaliation against contractors, and imposes substantial penalties on businesses that fail to comply with its nuanced requirements.

As part of the Act’s implementation, the NYC Department of Consumer Affairs, the agency tasked with enforcing the new law, recently issued rules (the Rules) clarifying the Act’s provisions. Specifically, the Rules:

  • Invalidate contractual provisions that purport to waive or limit an independent contractor’s right to participate in or receive relief from a collective or class action – thereby preventing employers from using collective/class action waivers in independent contractor agreements – or to disclose the terms of the contract at issue to the NYC Office of Labor Standards

Continue Reading NYC Agency Publishes Rules for New Independent Contractor Law

On May 15, a new law takes effect in New York City that will require written agreements between many, if not most, independent contractors and the entities that engage them.  As we previously reported, the “Freelance Isn’t Free” Act (the Act) requires that virtually all entities that engage a “freelance worker” for $800 or

On October 27, the New York City Council, long known for pushing the envelope when it comes to employment legislation, passed a first-of-its-kind bill, known as the “Freelance Isn’t Free” Act, that requires written agreements between certain independent contractors and the entities that engage them (the Act).  The Act also bars wage theft and

The New York City Council, long-known for pushing the envelope when it comes to employment legislation, is at it again. The legislature is poised, in the near future, to pass a first-of-its-kind bill that would require written agreements between independent contractors and the entities that engage them (the Bill). The Bill would also impose substantial penalties on businesses that fail to comply with this and other requirements surrounding the independent contractor relationship.

Specifically, the Bill would require most entities that engage an independent contractor for $200 or more in services to execute a written agreement with the contractor before the contracted-for work begins. Such agreement must be written in plain language, in a dialect understood by both parties, and include, at a minimum:
Continue Reading NYC Mulls Bill Requiring Written Independent Contractor Agreements