Articles Posted in Department of Labor & Independent Contractors

Published on: a major victory for businesses, the NYS Appellate Division ruled that Postmates Inc. did not misclassify couriers as independent contractors.  On or about June 21, 2018, the court’s decision, In the Matter of the Claim of Luis A. Vega (Respondent), Postmates Inc., (Appellant) and Commissioner of Labor (Respondent), reversed the Unemployment Insurance Appeal Board’s decision, which had found that Postmates Inc. was liable for unemployment insurance contributions to Mr. Vega and all others similarly situated.  Not only would the Unemployment Insurance Appeal Board’s decision have had a significant monetary impact, it would have affected the company’s business model moving forward. The Company would have to change the classification of the delivery couriers moving forward. This could have caused many domino effects. If you have any questions regarding a Department of Labor Audit or proper classification of your workers, contact our office to speak with an employment law attorney for a confidential consultation at (800) 893-9645.


This case started when a courier, Mr. Vega, filed a claim for unemployment insurance benefits after his contractor relationship with Postmates was terminated due to negative consider feedback and/or fraudulent activity.  Postmates runs a web-based platform which enables customers to request pick-up and delivery service from local restaurants or stores. Mr. Vega provided services as a courier to Postmates. Mr. Vega’s unemployment insurance benefit claim initially was denied by an Administrative Law Judge but upon appeal, the Unemployment Insurance Appeal Board determined that an employer-employee relationship existed and deemed Postmates liable for additional unemployment insurance contributions on remuneration paid to Mr. Vega and all those similarly situated. Postmates filed an appeal and prevailed at the Appellate Division.

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It is important for employers to understand their obligations under the federal and state labor laws before any action is commenced. Proactive steps in this area can be significant. Our Award Winning NY Employment Lawyer routinely counsels businesses on best practices and compliance issues. A sample New York State Department of Labor notice is included below to show what can happen if a business does not comply with the required legal provisions.

Dear Business Owner:

This letter is in regards to your business, ABC Corp. The New York State Department of Labor (NYSDOL) has completed an investigation in order to determine your compliance with the NYS Labor Law from September 2012 through August 2016.

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NY Department of Labor Audit and Misclassification of Worker Lawyer Blog Series Award Winning Employment Law Attorney is often asked about the proper classification of workers and prior blogs have discussed this topic in general. Today’s blog post will discuss the status of tour guides and whether a worker should be treated as an employee or a contractor. Each case is unique and these cases are very fact specific so you are urged to consult an employment law attorney regarding your particular circumstances. In New York, there are many companies who use tour guides as part of escorted journeys as part of their business model (on a bike, bus or by walking) or for discrete special events. If a Company makes an error in classifying its workers and treated them as contractors instead of as employees, the unintended consequences can be tremendous. For example, companies may be subject to claims by the workers for overtime pay, employee benefits, employee compensation and claims for inappropriate tax treatment. Furthermore, the company may face fines and penalties from state and federal governmental agencies. This is an area where the government agencies are increasing their enforcement efforts so it is important for companies to understand their compliance obligations proactively before an Department of Labor (“DOL”) audit or other action is commenced.

The DOL has stated that the following are strong indicators (but not dispositive) that a tour guide is a contractor:

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New York State Department of Labor Misclassification of Workers Blog Series was the issue in the recent New York Third Department Appellate Division decision In the Matter of TMR Security Consultants Inc., [Commissioner of Labor] Decided December 29, 2016. This is another key case in a new series of decisions beneficial for companies. We have discussed prior DOL decisions in our blog. This is an area that is evolving and the cases are very fact specific. An adverse determination can have significant consequences including a future claim for unpaid overtime pay. If you have any concerns or questions, contact our Award Winning New York Employment Lawyer to understand your rights and options.

On June 9, 2015, the Unemployment Insurance Appeal Board found that TMR Security Consultants had misclassified its security officers as independent contractors instead of employees. As a result, TMR was responsible for not only making unemployment insurance contributions for the claimant but also for all similarly situated workers; not only can that be expensive, it can also raise other collateral legal issues. TMR appealed that decision to the Appellate Division, which reversed and determined that the workers were independent contractors for multiple reasons (e.g., the Company did not direct or control the workers, the workers could work for competitors, the workers were licensed, etc.). Selections from the Court’s decision are included below:

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That was the question In The Matter of Gregory A. Mitchell v. The Nation Co. LTD Partners, [Commissioner of Labor], 2016 WL 7469461 (Ny. Sup. Ct. App. Div. Dec. 29, 2016). The Appellate Division for the Third Department reversed the determination of Unemployment Insurance Appeal Board which found that Mr. Mitchell (and all similarly situated workers) should have been classified as employees. This is a significant victory for companies and continues the trend started in the appellate court’s recent decision In The Matter of Yoga Vide NYC, Inc. [Commissioner of Labor], 28 NY3d 1013 (2016) case. Our prior blog post on that case can be found here.

The Mitchell Case

The Nation, a well-known print and online media property, contracted to work with Mr. Mitchell in February 2010. At that time, Mr. Mitchell was an established media critic and well-regarded author in his field. The parties agreed that he would write and manage a new daily blog focused on the media for the Nation. The parties signed an independent contractor agreement wherein Mr. Mitchell was identified as a freelance writer; he was paid an annual “freelance payment” of $46,800, which was paid in monthly installments. This payment was for Mr. Mitchell’s work on the blog and he was paid an additional sum for any work on the magazine’s print edition. Mr. Mitchell’s contract was renewed on an annual basis and he continued blogging for the Nation for over 4 years until June 2014.

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Our New York Misclassification Attorney discusses a recent court decision that addresses that question.

Independent Contractor Misclassification
A group of FedEx Ground drivers (“Plaintiffs”) alleged that they were misclassified as independent contractors instead of employees in Padovano v. FedEx Ground Package System, Inc. (the “Company”). The Plaintiffs argued that appellate courts throughout the country previously ruled that the drivers at issue have been found to be employees. Nonetheless, the Company filed a Motion to Dismiss the claims based, in part, on the fact that the Company and the Plantiffs signed independent contractor agreements. The Court denied the Company’s motion last week.

The Workers’ Claims

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Our New York Worker Misclassification Attorney Discusses the Recent Yoga Vida Case

Yoga Vida is a yoga studio in New York City and it used two different types of instructors – staff instructors who were treated as employees and non-staff instructors who were treated as independents. As you can guess, the crux of the legal battle in this case was whether the non-staff instructors were correctly classified as contractors or should have been treated as employees. The Company was fortunate enough to have the resources to fight the long battle because the Unemployment Insurance Appeal Board and the Appellate Division both found that the non-staff instructors were misclassified. As a result, the Company was responsible for certain state payroll contributions and could have been responsible for providing employee benefits. The Company filed an appeal to the Court of Appeals.

On October 25, 2016, the Court of Appeals reversed the prior determinations and found that the non-staff instructors were actually independent contractors because, in part, the evidence did not find that the Company exercised control over the results produced and the means used to achieve the results. In short, the Court found that the Company did not exercise sufficient control and direction over the workers. Some of the key factors that the Court found compelling:

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Our Award Winning New York Employment Lawyer has spoken to employees and employers regarding the legal implications of non-payment of wages under federal and state law. One of the topic that arises often is whether an individual is personally liable for failure to pay wages in accordance with the law. The short answer, in general, is that an individual can be liable and considered an “employer” depending on the circumstances. A recent decision issued on November 10, 2016 in the Eastern District of New York, Awan v. Durrani, 14-CV-4562 (SIL) discussed this issue and relevant part of the decision is quoted below:

“[A]n employer may include an individual owner who exercises a sufficient level of operational control in the company’s employment of employees.” Kalloo v. Unlimited Mech. Co. of NY, Inc., 977 F. Supp. 2d 187, 201 (E.D.N.Y. (citing Irizarry v. Catsimatidis, 722 F.3d 99, 104-11 (2d Cir. 2013)); accord Switzoor,

2013 WL 4838826, at *6 (observing that “[a] person may not be held individually liable for a company’s FLSA violations simply because he was an executive of that company”). In determining whether an individual is an employer, courts consider “whether the individual: ‘(1) had the power to hire and fire employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.’” Gillianv. Starjam Rest. Corp., No. 10 Civ. 6056, 2011 WL 4639842, at *4 (S.D.N.Y. Oct. 4, 2011); see Gayle v. Harry’s Nurses Registry, Inc., No. 07-CV-4672, 2009 WL 605790, at *9 (E.D.N.Y. Mar. 9, 2009) (quoting Keun–Jae Moon v. Joon Gab Kwon, 248 F. Supp. 2d 201, 237 (S.D.N.Y. 2002) (quoting Donavan v. Agnew, 712 F.2d 1509 (1st Cir. 1983))) (“The overwhelming weight of authority is that a corporate officer with operational control of a corporation’s covered enterprise is an employer along with the corporation, jointly and severally liab[le] under the FLSA for unpaid wages.”).”

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Delivery company found to be liable for unemployment insurance contributions for misclassified independent contractors

Thumbnail image for Thumbnail image for Female.Freelancer.Employee.Checkbox.DPC.2.28.16.jpgSpeedy Media Associates LLC’s business was to deliver, among other things, newspapers, magazines and beverages. Speedy hired employees but it also used independent contractors to deliver its products. Although the independent contractors signed a written independent contractor agreement, the Department of Labor found that an independent contractor was eligible for unemployment insurance benefits. As part of that decision, the DOL found that Speedy was responsible for making unemployment insurance contributions for all similarly situated misclassified independent contractors going back three years. Speedy filed an appeal to the Appellate Division.
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Thumbnail image for Thumbnail image for Female.Freelancer.Employee.Checkbox.DPC.2.28.16.jpgThe US Department of Labor has stated that the misclassification of employees as independent contractors is a primary enforcement initiative. In fact, the Secretary of the Labor Department, Thomas Perez, has referred to misclassification of workers as a “workplace fraud” and a practice that cheats the state out of revenue and deprives workers of basic rights including protection under employment discrimination statutes. As evidence of the government’s interest in stopping this practice, the federal agency’s budget in investigating misclassification cases is for FY 2016 is $14 million dollars and it has been working with many states as part of a joint task force. New York is part of the joint task force. The federal agency has recovered over 200 million dollars in 2014.

Employers and businesses in New York State should carefully evaluated their workforces to determine if they have properly classified their workers properly before an audit, investigation or lawsuit is commenced. Our NY Independent Contractor Misclassification Lawyer can assist you in your evaluation.
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