Micromobility company Lime, which offers its customers the opportunity to share electric scooters and bicycles through its mobile app, has been attacked by plaintiffs’ attorneys in class action and representative litigation that attack one of the core components of its business model. Lime hires drivers to charge the batteries of electric scooters and bicycles for their customers. It treats the drivers as independent contractors. As detailed below, the same day a state court denied Lime’s efforts to settle four related representative lawsuits for $ 5 million, it was re-sued in the same court in a proposed class action lawsuit. The contentious attack Lime witnessed reflects the challenges other companies with an independent business model for contractors have faced: multiple lawsuits.
Perhaps the best way to avoid multiple IC misclassification lawsuits is for companies to improve state and state IC compliance and include state-of-the-art arbitration clauses in their IC agreements. Many savvy companies use a process like IC Diagnostics (TM) to improve their IC compliance by restructuring, re-documenting, and / or re-implementing their IC relationships in a bespoke and sustainable manner. As part of the process, companies have effectively formulated arbitration clauses in class action exemptions to avoid class action lawsuits. While representative lawsuits in California under the Private Attorneys General Act (PAGA) are not arbitral, nor are there government proceedings or audits, class actions remain the “worst nightmare” for companies using ICs. A well-worded arbitration clause can usually avoid or minimize class actions. When combined with an IC agreement that reflects a higher level of compliance, many companies using ICs can also minimize the risk of PAGA lawsuits and government / administrative proceedings.
In the courts (5 cases)
The court rejects a settlement of $ 5 million between Limette and drivers. A California state court has denied a proposed settlement of $ 5 million PAGA agency claims in four related litigation over the misclassification of independent contractors of drivers providing services to Lime. In the legal proceedings, it was alleged that Neutron Holdings, Inc., d / b / a Lime, misrepresented drivers as independent contractors and allowed them to operate in violation of various provisions of the California Labor Code and Wage Regulations, including those requiring minimum wages, overtime not paid. and lunch breaks. When the court denied the motion unscathed, it concluded that it had concerns that an inadequate discovery had been made prior to the settlement, that the maximum damage calculations were inaccurate and incomplete, and that the circumstances of the settlement negotiations, which were being held by a The plaintiffs led it to question the credibility of the settlement. The court was concerned that the[s]The settlement is not the product of the group negotiation process that all parties to the originally agreed coordinated action agreed to. “And” shows a “smell of mendacity,” a lack of negotiation on market terms and a likely reverse auction. “Wage and Hourly Cases from Neutron Holdings, No. CJC-19-005044 (Super. Ct. San Francisco County, California, February 18, 2021)
LIME INJURED AGAIN FOR INDEPENDENT CORRECTION OF THE CONTRACTOR. On the same day, a court denied Lime’s offer to settle the four PAGA lawsuits noted above. Lime has been sued by drivers at the same location for misclassification claims made by independent contractors under California Labor Law and Wages. In her class action lawsuit in a California court, the drivers allege Lime failed to properly classify her as an employee. According to the complaint, drivers were required to adhere to the company’s code of conduct, policies, practices and procedures, including performing their duties, charging scooters and interacting with customers. had to sign a take-it-or-leave contract; had her compensation set by the company; did not operate separate businesses separate from the company; and were closely monitored by the company. Drivers say they owe compensation for overtime, meal and rest time bonuses, reimbursement of business expenses and unproductive time such as waiting to pick up or drop off scooters and plan their routes. Wallace v Neutron Holdings Inc., No. CGC-21-589622 (Super. Ct. San Francisco County, California, February 18, 2021).
NEW JERSEY SUPREME COURT DECIDES IC EXCEPTIONAL STATUS OF INSURANCE AGENCIES. The New Jersey Supreme Court agreed to answer a question that was upheld by the U.S. Third Circuit Court of Appeals in August 2020 regarding independent contractor status for insurance agents. The certified question comes from the 2015 New Jersey Supreme Court decision in Hargrove v Sleepy’s, LLC, which was the subject of a post on this blog. At Sleepy’s, the state’s highest court decided to borrow and use the ABC test set out in the New Jersey Unemployment Compensation Act as the standard for determining IC status under New Jersey wage payment laws. However, the New Jersey Unemployment Compensation Act has dozens of exemptions from the ABC test, including one that includes insurance agents receiving compensation based solely on commissions.
The Supreme Court at Sleepy’s has not considered whether the ABC test exceptions in the Unemployment Compensation Act apply to claims under New Jersey’s wage payment laws. This prompted the New Jersey Supreme Court to answer the question now: Does the Unemployment Compensation Act define “employment” for “[s]Service carried out. . . “Compensated in full on a commission basis by agents of insurance companies” also apply to determinations of whether those agents are employees or independent contractors for the purposes of the New Jersey Wage Payment Law.
That question arises from a plaintiff’s appeal against a New Jersey District Court decision approving a motion to summarize the judgment of the defendant Northwestern Mutual Life Insurance Co. As noted in one of our blog posts, the district court found an insurance agent who claimed that a Northwestern employee had been duly classified as an IC by the airline company as part of the ABC test. Although the District Court did not see the need to clarify whether the insurance agent was exempt from the ABC test, the Third District has asked the New Jersey Supreme Court to rule on that very issue. Walfish v Northwestern Mutual Life Insurance Co., No. 084836 (Sup. Ct. NJ, February 12, 2021) and Walfish v Northwestern Mutual Life Insurance Co., No. 19-2105 (3d Cir. August 11, 2020)).
HAIR SALON DENIES SUMMARY JUDGMENT OF IC MISCLASSIFICATION CLAIMS. A hairdresser suing two hairdressing salons for violations of the FLSA and New York Labor Acts for alleged misclassification as independent contractors prevailed at an important stage in a federal lawsuit when the court approved the salons’ motion for summary Declined assessment. The court concluded that there were real questions of fact regarding the status of a worker or an independent contractor that warranted legal proceedings on those questions of fact. Specifically, the court found that although the salons came up with an agreement describing the stylist as an independent contractor setting his own service tariff and managing his own schedule, the stylist provided evidence that he did not sign that agreement ; that text messages showing that the stylist set his own hours showed that this flexibility only affected one appointment over the course of a year; and although the stylist advertised on social media platforms, the bulk of the ads ran when the stylist wasn’t working with the two salons. As a result, the case will go to trial over the stylist’s claims. Dong Yuan v Hair Lounge Inc., No. 18-cv-11905 (SDNY, February 8, 2021).
CLASS CERTIFICATION IN FRANCHISEE’S IC MISCLASSIFICATION LAWSUIT DENIED. A California federal district court denied class certification requests from 7-Eleven franchisees, claiming they were misleadingly classified as ICs and owed unpaid reimbursements under the California Labor Code and No. 7 Payroll Ordinance. The plaintiffs have each concluded a franchise agreement with 7-Eleven. The franchisees stated that they had to complete mandatory training. Keep stores open 24 hours a day or you will be fined. Use the 7-Eleven system for bookkeeping, order placement and handling of day-to-day activities. and provide 7-Eleven with daily financial data. In addition, they claim that 7-Eleven controls access to the stores’ bank accounts. selects and negotiates contracts with armored cars to provide bank deposits; maintains a camera system to monitor all transactions in stores; and requires franchisees to use standard advertising and promotions. When the court denied the franchisees’ application for class certification in relation to their labor law claim, it concluded that the franchisees failed to adequately explain why the Frequently Asked Questions prevailed on the Borello test. Classification of the subcontracting claim has also been denied “in view of the individual issues required to demonstrate that franchisees are not released executives for subcontracting purposes …”. The court determined whether certain tasks are optional or not optional in certain contexts, simply “yes” or “no” throughout the class. “The court continued,” In order to examine the exact activities of each franchisee week after week to determine if they are actually released executives, the court would have to conduct several hundred mini-lawsuits on each of them [franchisee’s] actual work performance. “ Haitayan v 7-Eleven, Inc., No. 17-cv-07454 (CD Cal. February 8, 2021).