This past month, three of the longest-running class actions alleging independent contractor (IC) misclassification are finally ending. In all three cases, the companies, after vigorously defending themselves for close to a decade, have chosen to resolve their cases rather than continue to litigate, and have now settled their cases for substantial seven-figure amounts: $24.75 million in one of the cases, and $5.75 million and $2.1 million in the other two. The costs of defending and then settling class action lawsuits for IC misclassification are not limited to the amount paid in a settlement agreement; another sizeable cost for companies are the legal fees paid to their own legal counsel, which can amount to seven-figure sums. These cases, summarized below, illustrate how important it is for businesses using ICs to enhance their compliance with state and federal laws governing ICs and thereby minimize the likelihood of being sued in the first place. Many businesses have chosen to use a process such as IC Diagnostics (TM) to structure, document, and implement their IC relationships in a manner that maximizes their IC compliance in a customized and sustained manner, consistent with their business model. Plaintiffs’ class action attorneys and government agencies often choose not to initiate legal proceedings against those businesses that have taken an effective, proactive approach to IC compliance.
Court Cases (4 cases)
GRUBHUB TO PAY OVER $24 MILLION IN CLASS ACTION SETTLEMENT WITH CALIFORNIA DELIVERY WORKERS. For the past 10 years, GrubHub, a global online food delivery marketplace, has been vigorously defending itself in a California class action lawsuit brought by a delivery driver alleging IC misclassification in California. See our prior blog posts of February 8, 2018, and April 4, 2023. But the lawsuit is finally coming to a close, as GrubHub and the driver, as the class representative, have reached a $24.75 million settlement covering a class of 60,000 food delivery drivers in California. The lawsuit alleged that, in classifying the drivers as ICs, GrubHub violated California’s minimum wage, overtime, and employee reimbursement laws covering employees. The proposed agreement includes a payment of $1.5 million to the California Labor and Workforce Development Agency under the state’s Private Attorneys General Act. But notably, the agreement is only a monetary settlement and does not require GrubHub to reclassify delivery drivers, whom GrubHub continues to maintain have been properly classified as ICs under California law. Lawson v. Grubhub Inc., No. 3:15-cv-05128 (N.D. Cal. Aug. 13, 2025)
EAST COAST LOGISTICS COMPANY SETTLES 10-YEAR IC MISCLASSIFICATION CLASS ACTION FOR $5.75 MILLION. Two logistics/transportation companies, National Freight, Inc. and NFI Interactive Logistics, Inc., have entered into a settlement agreement with drivers in an IC misclassification lawsuit filed in 2015 under the New Jersey Wage Payment Law. The settlement, which is subject to court approval, follows 10 years of litigation, including a motion for class certification, summary judgment motions, and five mediations. See our prior blog posts of July 11, 2018, August 20, 2020, and July 5, 2022, for a detailed procedural history of this case. The plaintiffs, owner-operator truck drivers from Pennsylvania and Rhode Island who made deliveries to stores throughout many East Coast states on behalf of NFI, claimed that the company violated the New Jersey Wage Payment Law by making deductions from its delivery drivers’ compensation for items such as fuel, occupational accident insurance, physical damage insurance, equipment, and fines. About $3.75 million of the $5.75 million proposed settlement amount will be paid to the participating class with each of the 119 class members receiving an average of $31,000 to $50,000 depending on their length of service. Approximately $2 million is earmarked for attorneys’ fees and litigation and administrative costs. Portillo v. National Freight Inc., No. 1:15-cv-07908 (D.N.J. Aug. 15, 2025).
LOGISTICS COMPANY IN ILLINOIS SETTLES NINE-YEAR LITIGATION FOR IC MISCLASSIFICATION FOR $2.1 MILLION. An Illinois federal court has preliminarily approved a $2.1 million class action settlement between a logistics company and delivery drivers that alleged they had been misclassified as ICs under an Illinois wage and hour law. Two delivery drivers initially brought the action on behalf of themselves, and others similarly situated alleging that Diakon Logistics, a company that coordinates delivery and installation of merchandise for retailers nationwide, misclassified them as ICs instead of treating them as employees under the Illinois Wage Payment and Collection Act. The drivers alleged that, as a result of being misclassified, the company violated that Illinois law by making unlawful deductions from the drivers’ wages. On March 31, 2025, a federal court agreed that the drivers had been misclassified, as we noted in our blog post of May 12, 2025. After nine years of litigation, including a motion for class certification, competing summary judgment motions, and an appeal to the U.S. Court of Appeals for the Seventh Circuit, the company settled the case, agreeing to pay each class member at least $130 for every week they provided services to the company. A fairness hearing is scheduled for October 31, 2025. Johnson v. Diakon Logistics, No. 1:16-cv-06776 (N.D. Ill. Aug. 8, 2025).
WORKERS’ RIGHTS ORGANIZATION FILES UNFAIR COMPETITION CLAIMS AGAINST GIG STAFFING COMPANIES CLASSIFYING WORKERS AS CONTRACTORS. A nonprofit workers’ rights organization, Fair Work Alliance, has sued a group of staffing companies claiming unfair competition and tortious interference with business and contractual relationships due to the staffing companies’ alleged misclassification of workers as ICs and not employees. According to the complaint, which was removed from state to federal court in Ohio, the Fair Work Alliance initiated this action “on behalf of a leading W2 [hospitality and light industrial] staffing platform that connects businesses with W2 employees.” Those workers are classified as employees by their hiring entity company which “bears the typical costs of being an employer, such as paying minimum wage and overtime and complying with other state and federal protections, maintaining workers’ compensation insurance, and paying significant payroll taxes, and bearing administrative payroll costs associated with collecting and maintaining employee tax forms.” The Fair Work Alliance claims that gig economy staffing platforms allegedly misclassify their workers as ICs and by doing so “have been able to save significantly on their labor costs, which in turn has allowed them to unlawfully undercut competitors, such as the plaintiff [hiring entity], who follow the law.” The complaint also alleges that “investors backing those staffing platforms have engaged in racketeering by encouraging them to profit from this misclassification,” that the companies exercise a high degree of control over the performance of work by the hospitality workers, and that the Fair Work Alliance’s client’s revenue has been significantly impacted. Fair Work Alliance v. Instawork, No. 25-cv-00551 (S.D. Ohio Aug. 6, 2025).
Administrative and Regulatory Initiatives (2 matters)
ONLINE GROCERY STORE IN MASSACHUSETTS SETTLES IC MISCLASSIFICATION CASE COVERING DRIVERS. Massachusetts Attorney General (AG) Andrea Joy Campbell and related online grocery delivery companies and their president have reached an $865,000 settlement resolving alleged violations of Massachusetts state wage and hour and earned sick time laws due to the alleged misclassification of approximately 160 drivers as ICs instead of employees. In a press release issued on August 5, 2025, the AG’s Office announced its settlement with Weee! Logistics LLC, Weee! OD Foods LLC, and their president individually. Weee! is an online-only supermarket, self-described as “America’s Largest Online Asian Supermarket,” and engages delivery drivers to complete online delivery services. According to the press release, the AG’s Office began investigating this matter upon receiving a complaint from the Chinese Progressive Association and “found that in violation of Massachusetts’ wage and hour laws, Weee! misclassified its delivery drivers as independent contractors, preventing drivers from obtaining employee-related legal protections,” and failed to provide them with legally required sick time. Under the settlement, in addition to agreeing to issue restitution checks to the affected drivers, Weee! has agreed to classify its drivers as employees and comply with all relevant wage and hour laws.
PUBLISHER OF THIS BLOG QUOTED ON NEW JERSEY PROPOSED REGULATION EXPANDING THE STATE’S TEST FOR IC STATUS. The publisher of this blog was quoted at length in an article appearing in the August 12, 2025 issue of FreightWaves on the New Jersey Department of Labor and Industry’s proposed regulation regarding the so-called ABC test for IC status in New Jersey. The article quoted sections from comments that were submitted by this blog’s publisher to the Department of Labor on July 31, 2025, critiquing the proposed regulation. See our blog post dated August 8, 2025, for a verbatim re-print of the comments, as well as our blog post on April 30, 2025, titled “New Jersey May Soon Become Even Less Favorable to [the Use of] Independent Contractors Than the Golden State.” The FreightWaves article noted our view that “if finalized in their final form, [the proposed regulations]would create a hostile and unworkable legal environment in this State for legitimate ICs and the companies that engage legitimate ICs, which would likely prompt freelancers and other New Jersey-based ICs to lose work opportunities and cause many businesses in New Jersey that use ICs to cease operating their businesses in the State – similar to what has occurred when California enacted Assembly Bill 5, which codified the ABC test in that state back in 2020.”
Legislative Developments (2 matters)
COLORADO ENACTS PENALTIES FOR IC MISCLASSIFICATION. An amendment to the Colorado Wage Act that took effect August 6, 2025, provides graduated penalties for employers that misclassify workers as ICs. Under Colorado House Bill 25-1001, an employer that misclassifies an employee as a nonemployee in a way that may affect a wage and hour payment or reporting obligation under a state, federal, or local law, rule, or regulation shall pay a fine in the following amounts: $5,000 for a willful violation; $10,000 for a violation not remedied within 60 days after the Division’s finding of misclassification; $25,000 for a second or subsequent willful violation within five years; or $50,000 for a second subsequent willful violation not remedied within 60 days after the Division’s finding of misclassification. Among other things, the law also amends the definition of “employer” for purposes of wage and hour laws to include an individual who owns or controls at least 25% of the ownership interest in an employer; prohibits an employer from making a payroll deduction below a worker’s applicable minimum wage; and enhances retaliation protections.
CALIFORNIA LAW WILL ALLOW UNIONS TO REPRESENT IC RIDESHARE DRIVERS. California Governor Newsom and the state legislature have struck a deal to support landmark legislation in partnership with ride-sharing companies and the union SEIU California, creating a means for over 800,000 gig workers to unionize while remaining ICs. As described in a news release from the governor’s office on August 29, 2015, AB 1340, called the Transportation Network Company Drivers Labor Relations Act, establishes a legal framework for over 800,000 California rideshare drivers to have the choice to join a union and negotiate for better wages, benefits, and protections. It also specifically provides: “A sectoral agreement shall not contain a provision that . . . (3) Alters or purports to alter the legal status of [Transportation Network Company] drivers as independent contractors . . . .” Another related bill, SB 371, will reduce the cost of providing rideshare services for Californians as it will no longer require that rideshare drivers carry $1 million in coverage for accidents caused by other drivers who are uninsured or under-insured, a cost currently passed on to riders. That amount would be reduced to $60,000 in uninsured motorist coverage per individual and $300,000 per accident. The legislation is novel and may be challenged on antitrust and labor law preemption grounds.
