You’ve been waiting quite a long time for a critical ruling from the 9th Circuit Court of Appeals on the very fabric of the gig economy model – and you’re going to have wait even longer. The appeals court just announced late last week that the Lawson v. Grubhub case has been put on hold while it waits to hear from the California Supreme Court on whether the new ABC test should be applied retroactively to the case, or whether the appeal would apply the older flexible misclassification test that had been in place at the time the trial took place.
A federal appeals court decided last week that ride-share drivers engaging in interstate commerce while performing work for Uber should not be subject to the company’s arbitration agreement because of a recent Supreme Court ruling broadly interpreting a federal law exemption that applies to independent contractors. This September 11 ruling threatens to upend a pivotal tool that many businesses use to better manage workplace litigation and requires all gig businesses operating near state borders to take notice.
With just a one-page, single-paragraph Order, the 9th Circuit Court of Appeals yesterday provided the faintest glimmer of hope for gig economy businesses everywhere – but especially for those in California. The federal appeals court withdrew its May 2 decision that had extended the Dynamex decision on a retroactive basis, meaning that the ABC test might not necessarily be as broadly applied as we recently thought. Instead, the 9th Circuit decided to send the issue to the California Supreme Court, asking the state’s high court to conclude once and for all whether the ABC test should be applied to alleged misclassification controversies that arose before the Dynamex decision was ever issued. (For a quick primer on the Dynamex case and the ABC test, read here.)
According to Bloomberg Law’s weekly “Punching In” column (an absolute must-read each week) that published today, some congressional leaders are not too pleased with the Labor Department after it published an opinion letter a few weeks ago confirming that certain workers for an unnamed gig economy company were properly classified as independent contractors. As we wrote about back on April 29 when the opinion letter was released, that letter offered up the federal government’s official interpretation on whether a certain business model or practice complies with the law, providing us with a solid understanding of how the current USDOL views the misclassification question and will approach it from an enforcement perspective. And the news was very good for gig businesses: “while not a magic bullet that will cure all that ails the modern gig economy industry, [the] development is a welcome one—and a preview as to how today’s USDOL will treat misclassification concerns that fall into their laps from gig economy (and other) businesses,” we said at the time.
There’s no way to sugarcoat this one. Today the 9th Circuit handed a big loss to gig economy companies by concluding that last year’s Dynamex decision from the California Supreme Court and its wide-reaching ABC test should be applied retroactively. That means that the ABC test – which makes it very difficult for gig economy businesses to properly classify their workers as independent contractors rather than employees – will be applied to federal cases when evaluating relationships that businesses thought were to be adjudged under a much more flexible standard.
In a major positive development for gig economy businesses, the U.S. Department of Labor today issued an opinion letter today confirming that certain workers providing workers for a virtual marketplace company are, indeed, independent contractors.
Great news for gig economy businesses from an Illinois federal court: a judge recently ruled that Grubhub’s delivery drivers were not operating in “interstate commerce,” and therefore were not excluded from the company’s mandatory arbitration agreement. The March 28 ruling is one of the first decisions on this subject following January’s Supreme Court ruling casting this issue into doubt. While the fight is not over, round one goes to gig economy companies.
Last week, we shared with you the news of Uber’s proposed $20 million settlement to resolve a long-running misclassification claim – the parties agreed to the deal, and they just needed the approval of a federal court judge (read the entire post here). Of course, nothing is finalized until it’s signed, and the parties to this particular claim know that all too well; after all, they thought they had a $100 million settlement in place in April 2016 before the same judge nixed the proposed deal as not being “fair, adequate, and reasonable” to the class of drivers. This week, that judge signaled there could be another fly in the ointment, and its name is Dynamex.
The $100 million settlement announced Monday by a transportation company to resolve a long-running misclassification claim might be the direct result of a January Supreme Court decision, and might be a troubling harbinger of things to come for many gig economy businesses. Swift Transportation paid the massive sum to a group of drivers who claimed they were improperly classified as “owner-operator” contractors when they should have been treated as employees, but only agreed to the deal after it became clear that recent legal precedent from the SCOTUS meant that they could not resolve the dispute in arbitration. What does this settlement signal for gig economy businesses in general?
Ever since Uber became part of our everyday world, the mandatory arbitration agreement it requires its independent contractor drivers to sign has been under constant scrutiny—and attack. A recent decision, however, fell in the gig economy company’s favor, presenting a good lesson for all gig economy companies.