The most noteworthy legal development last month in the area of independent contractor (IC) compliance and misclassification law was the $19 million assessment paid to the New Jersey Department of Labor and Workforce Development (NJDOL) by a ride-sharing platform connecting passengers with drivers via a mobile app. As we note below, the payment was for contributions to the state for unemployment insurance and disability benefits for drivers, based on the state’s application of its strict ABC test for IC status. While the company made the payment, it maintains that it classifies drivers properly as ICs under the state’s ABC test. Notably, the NJDOL did not require the company to reclassify its drivers as employees. This type of result is not uncommon: payment by an app-based company accused of IC misclassification to resolve a legal dispute, but without any requirement to reclassify the gig workers as employees. Indeed, the first case on which we report below included a settlement by an app-based business with only minor tweaks to its business model, implicitly confirming the gig workers’ IC status. While this appears to be a solid business approach to resolving a legal challenge, is there a way for companies using an IC business model to insulate themselves from any exposure to liability and the attendant legal fees incurred in defending attacks on their worker classification? One approach many app-based businesses have used is a process such as IC Diagnostics (TM), which enhances compliance with IC laws in a customized and sustained manner while maintaining a company’s business model.
Cases (5 cases)
APP-BASED DELIVERY COMPANY SETTLES IC MISCLASSIFICATION CASE WITH MINNESOTA. Minnesota Attorney General (AG) Keith Ellison, has reached a settlement with app-based same day shopping and delivery company, Shipt, resolving a lawsuit brought by his office alleging IC misclassification of delivery workers referred to as “Shoppers.” A news release issued by the AG’s office on September 26, 2025, announced that the company will pay $800,000 to the state of Minnesota and agreed to improve working conditions for Shoppers by providing them with a written statement explaining which provision of the company’s contract was violated before deactivating a Shopper from the company’s app; formalizing an appeal process for Shoppers to challenge a deactivation decision; continuing to provide Shoppers with certain insurance at no cost; instituting an electronic process by which Shoppers can request forgiveness of customer ratings and late delivery; not retaining any portion of gratuities given to Shoppers; providing Shoppers with timely chat support through the company’s app; not retaliating against any Shopper for cooperating with the AG; and maintaining policies prohibiting discrimination in any way against a Shopper. Nothing in the release appears to suggest that Minnesota required Shipt to reclassify Shoppers as employees. State of Minnesota v. Shipt, Inc., No. 27-CV-22-15991 (Dist. Ct. Hennepin County 4th Jud. Dist. Minn. Oct. 27, 2022).
SECOND IC MISCLASSIFICATION ATTACK ON TV REALITY SHOW. A contestant on the Netflix reality TV series “Love is Blind” has filed a class action lawsuit in California state court against Netflix and other production companies alleging Private Attorneys General Act (PAGA) claims and violations of California wage and hour laws due to misclassification of reality show participants as ICs instead of employees. The plaintiff brought the action on behalf of himself and any individuals such as contestants, participants, or cast members who applied for and/or participated in all non-scripted content (reality shows) produced on behalf of Netflix and Kinetic Content within a specific time period. According to the class action complaint, the companies exercised substantial control over every aspect of the cast’s lives during production, including among other things, the cast’s time, access to food and drinks, sleeping arrangements, and contact with family and friends and other persons outside of production. The complaint further asserts that “[a]s a result of Defendants’ encouraging the cast to perform work in a hazardous work environment while in an altered mental state, Defendants failed to provide a safe and healthful place of employment.” This case is not the first challenge to the cast’s worker classification. As discussed in our blog post of December 14, 2024, the National Labor Relations Board’s regional director issued a complaint against the companies that created and produce the “Love is Blind” TV series, contending that the contestants on the show were misclassified as ICs instead of employees. Richardson v. Kinetic Content, LLC, No. 25STcv27096 (Super. Ct. Los Angeles County Sept. 15, 2025).
MARYLAND FEDERAL COURT GRANTS SUMMARY JUDGMENT AGAINST COMPANY ENGAGING HOME HEALTH AIDES AS CONTRACTORS. A Maryland federal district court has granted partial summary judgment to the U.S. Department of Labor (DOL), finding that a home health care company misclassified home health aides as ICs. The court, however, did not grant summary judgment on the status of licensed practical nurses providing services to the home health company’s clients. The DOL had initiated an action against Jerry’s Caring Hands, Inc. and its owner alleging minimum wage, overtime, and record-keeping violations under the Fair Labor Standards Act due to the misclassification of home health aides (HHAs) and licensed practical nurses (LPNs). The company provides home health care services to the elderly and disabled population around the Baltimore area. In granting the motion for summary judgment regarding the employee status of the HHAs, the court applied the six-part economic realities test and concluded that the company exercised a high degree of control over the HHAs; the HHAs’ profits or losses were not dependent on their managerial capacities or skills; there was minimal investment required of the HHAs; some if not most of the HHAs are not skilled workers; the HHAs did not work in a temporary, project-related capacity typically associated with independent contracting; and the HHAs’ services were integral to the company’s work. Chavez-DeRemer v. Jerry’s Caring Hands Inc., No. 1:24-cv-00213 (D. Md. Sept. 19, 2025).
ROOFING COMPANY ASSERTS “REVERSE” IC MISCLASSIFICATION DEFENSE IN WORKERS’ COMPENSATION CLAIM. A roof installation company sued in New York for personal injuries suffered by a roofing worker for an on-the-job injury has taken an unusual litigation approach. In an odd twist, the company’s workers’ compensation carrier sought a ruling with the Workers’ Compensation Board (the Board) that the claimant was not an IC but rather was an employee, thereby limiting the worker’s remedy to the relatively modest compensation amount awarded in New York for workers’ comp injuries. Following a hearing before the Board at which claimant maintained that he was an IC and not an employee, the Workers’ Compensation Law Judge applied the presumption of employment in the New York Construction Industry Fair Play Act, concluding that claimant was an employee of the roofing company and not an IC. That decision was affirmed on an administrative appeal. The claimant then appealed to the Third Department Appellate Division. Under the Construction Industry Fair Play Act, there is a statutory presumption that a person performing services for a construction contractor shall be classified as an employee unless it is demonstrated that such person is either an IC, in accordance with a three-prong ABC test, or is a separate business entity, which can only be established by satisfying 12 specific criteria enumerated in the law. The Third Department concluded that, although the Board had properly determined that the roofing company did not satisfy the 12-factor criteria to support the separate business entity test, the Board’s decision did not address the three-part ABC test. It therefore remanded the case to the Board to determine whether application of the ABC test rebutted the presumption of an employer-employee relationship. This type of defense can, however, backfire on companies, which may be at risk of establishing in a separate legal proceeding that workers have been misclassified as ICs – and unwittingly end up owing unpaid overtime and employee benefits. Trickey v. Black River Plumbing, Heating & Air Conditioning, Inc. and Workers’ Compensation Board, No. CV-24-0287 (3d Dep’t App. Div. Sept. 25, 2025).
CANNABIS BROKERAGE COMPANY SUED FOR IC MISCLASSIFICATION. Cannabis10X, self-described as “the first international cannabis-only business brokerage” has been sued by a plaintiff engaged as a broker to generate leads and sell cannabis franchises to prospective franchisees. The broker sued the Florida-based company in a Massachusetts federal court asserting violations of the Massachusetts IC statute and wage laws, due to his alleged misclassification as an IC and not an employee. In support of his misclassification claims, the broker contends that the company paid him no base wages or benefits, required him to pay quarterly fees for the use of the company’s technical services and properties, determined the rate and method of his compensation, made the unilateral decision to hire and fire him, established policies and practices to be used by him for generating leads and making sales, provided training, was permitted to immediately terminate his relationship with the company for violating company policies, and required him to adhere to nonsolicitation and noncompete provisions. The broker also claims in his complaint that the company “later terminated [him] without paying him any compensation for the hundreds of hours he had worked as a ‘broker’ for the company.” It is anticipated that the company will vigorously defend the case and, if the parties had entered into an arbitration agreement, seek to compel arbitration of the broker’s claims. Quinn v. Cannabis10XLLC, No. 1:25-cv-12829 (D. Mass Sept. 30, 2025).
Administrative and Regulatory Initiatives (1 matter)
RIDE-SHARING COMPANY PAYS $19 MILLION ASSESSMENT TO NEW JERSEY FOR ALLEGED IC MISCLASSIFICATION OF DRIVERS. The New Jersey Department of Labor and Workforce Development (NJDOL) has assessed Lyft more than $19 million following an audit that found it had misclassified over 100,000 New Jersey drivers as ICs instead of employees. According to a news release issued September 18, 2025, by the NJDOL, “[a]n audit was triggered when Lyft drivers filed for unemployment insurance (UI) and disability benefits, revealing that Lyft had not made contributions to the state funds on their behalf.” The audit, covering the four-year period of 2014 to 2017, resulted in an assessment of $10.8 million in past due contributions, plus penalties and interest of over $8.5 million. The news release reported that in 2022, Lyft contested the NJDOL’s findings and awaited a hearing before New Jersey’s Office of Administrative Law (OAL). Lyft initially paid the $10.8 million assessed for contributions to stop the accumulation of interest, while continuing to contest the assessment. In August 2025, shortly before the OAL hearing date, Lyft withdrew its request for a hearing and paid the remaining balance of over $8.5 million in penalties and interest. Lyft stated, “While we disagree with the NJDOL’s findings, we will not be pursuing further challenges to the assessment.”
Other Noteworthy News
THIS BLOG’S PUBLISHER QUOTED ON ENACTMENT OF NEW YORK CITY LAWS AFFECTING GIG WORKERS. The New York City Council on September 10, 2025, voted to override Mayor Adams’ veto of two pieces of legislation that extend the same wage and workplace protections to contracted grocery delivery workers that food delivery workers currently enjoy in New York City. As described in a September 10, 2025, press release from the City Council, one of the bills (Introduction 1133-A) will require the Department of Consumer and Worker Protection (DCWP) to study the working conditions of such delivery workers, and promulgate rules establishing for them a minimum pay rate. The other bill (Introduction 1135-A) will require third-party grocery delivery services to pay delivery workers a minimum pay rate that would meet or exceed that set by DCWP. Neither of the bills require that the delivery workers be re-classified as employees instead of ICs. In a September 5, 2025, article titled “Grocery Workers at Center of Latest NYC Wage Debate” by Max Kutner for Law360, the publisher of this blog was quoted that the grocery delivery legislation “like the restaurant delivery law, presupposes that these individuals are validly classified as independent contractors.” The quote by this publisher continued: “The companies that provide grocery store deliveries, like those that provide restaurant deliveries, have succeeded in large measure in getting legislators to acknowledge that it is better to try to improve the lot of these individuals by increasing their compensation, rather than by litigating their classification.”
