Few industries are immune from class actions alleging IC misclassification of workers paid on a 1099 basis. One industry that has not yet been besieged by these types of lawsuits is travel, but that may be changing. While some companies in this industry employ travel advisors on a W-2 employee basis, a host of others engage such professionals as 1099 contractors. That can be risky — unless the travel business takes effective steps to enhance its compliance with laws classifying workers as employees or ICs — as seen in the first case summarized below among key legal developments last month. A number of companies using an IC business model in the travel industry (as well as an array of other industries) have resorted to a process such as IC Diagnostics (TM) to minimize exposure to IC misclassification liability in a customized and sustainable manner. This type of process can also be used to defend against lawsuits for IC misclassification and offers a number of special defenses, even in states with a strict test for IC status.
In the Courts (3 cases)
MASSACHUSETTS TRAVEL COMPANY SUED IN CLASS ACTION FOR IC MISCLASSIFICATION. A travel advisor has filed a proposed class action in a Massachusetts state court against vacation planning company, Practically Perfect Vacations, Inc., claiming violations of state law due to allegedly misclassifying her and about 50 similarly situated travel advisors as independent contractors and not employees. The company, which describes itself as providing “expert travel planners specializing in Disney,” is accused of failing to pay the advisors at least the minimum wage for all hours worked on a timely basis, charging the travel advisors unlawful fees for the right to work for the company, and failing to accrue and pay them for sick time. According to the class action complaint, the company engages travel advisors through independent contractor agreements to provide travel agent services. The complaint alleges that the agents are not free from control over the performance of their services, are required by the company to use the company’s network number to book all travel, must comply with all company rules, guidelines, and instructions, must complete yearly online training sessions, are required to sell travel services exclusively through the company, and are charged an agency fee. While the test for IC status in Massachusetts is very challenging for any business to meet, travel companies like the defendant may have alternative arguments to advance in defending against this type of lawsuit. Manoli v. Practically Perfect Vacations, Inc., No. 2583-CV-00161 (Mass. Super. Ct. Feb. 20, 2025).
ILLINOIS LOGISTICS COMPANY SUED BY DRIVER IN IC MISCLASSIFICATION CLASS ACTION. A logistics company offering long haul and last mile transportation services faces a proposed class and collective action lawsuit brought in an Illinois federal court by a truck driver alleging the company violated the Illinois wage and hour law and the federal Fair Labor Standards Act. The driver claims that Maybach International Group LLC. In addition, the driver accuses the company of violating the Illinois consumer protection laws due to its alleged misrepresentations about the compensation it pays to the drivers for performing transportation services, and for unlawfully taking deductions from the drivers’ compensation for expenses such as fuel, insurance, and equipment lease payments. According to the class and collective complaint, the company provides instructions to the drivers regarding how to perform the transportation services to be provided; has employees that have the same or similar duties and responsibilities as the IC drivers; requires the drivers to follow certain standards, practices, and policies while providing services for the company; monitor the drivers’ services; and supplies the drivers with equipment necessary to perform transportation services for the company. Gray v. Maybach Int’l Group, LLC, No. 1:25-cv-01252 (N.D. Ill. Feb. 5, 2025).
SNACK FOODS COMPANY AND PARENT CORPORATION ARE SUED FOR IC MISCLASSIFICATION IN CONNECTICUT BY DSD DISTRIBUTOR. A direct-store-delivery (DSD) distributor filed an IC misclassification class and collective action complaint in a Connecticut federal court against a snack food company and its parent corporation. The lawsuit claims the companies violated the federal Fair Labor Standards Act, the Connecticut Minimum Wage Law, and the Connecticut Wage Payment Law as a result of the alleged misclassification of DSD distributors as independent contractors and not employees. The complaint alleges that the companies exert control and direction over the distributors in connection with the performance of their services.
Specifically, the plaintiff claims that a document issued by the companies titled “Suggested Operating Guidelines & Schedule of Charges” is not a collection of suggestions but rather mandatory directions as to how to perform the services. The distributor also asserts in the complaint that, among other things, the companies unilaterally established the procedures by which distributors must place orders for snack-food products on consignment from the companies, and assign managers to ride along with distributors as they service their respective territories and thereby monitor the distributors’ performance. As we detailed in our blog post of August 6, 2024, this case is but one of a number of DSD distributor lawsuits and administrative proceedings that have been brought over the years, some of which have resulted in determinations that distributors have been properly classified as independent contractors. Similar lawsuits have been filed by distributors against these companies in the last year, as we reported most recently in our December 10, 2024, blog post. It is likely that the companies will make a motion to compel arbitration under applicable arbitration provisions between the parties. Moskowitz v. Campbell Soup Co., No. 3:25-cv-00227 (D. Conn. Feb. 13, 2025).
Regulatory and Administrative Developments (2 matters)
HOME CARE COMPANY ASSESSED $2.3 MILLION IN PENALTIES FOR IC MISCLASSIFICATION BY CALIFORNIA AGENCY. The California Labor Commissioner’s Office has assessed a home care company over $2.3 million in penalties for misclassifying caregivers as independent contractors. The Labor Commissioner alleges that the home care company, Amity In-Home Care Services, failed to properly pay workers overtime wages, provide workers’ compensation insurance, and issue proper wage statements to the home care workers. As noted in a News Release issued on February 20, 2025, by the California Department of Industrial Relations, the company is charged with violating multiple labor laws resulting in an assessment of;
- $422,000 in unpaid minimum wages,
- $425,000 in unpaid overtime wages,
- $165,000 in meal and rest period premiums,
- $27,000 in wage statement penalties,
- $108,000 in “waiting time” penalties for late payment of wages,
- $550,000 in penalties for willful worker misclassification,
- $81,000 in penalties for failure to provide workers’ compensation coverage to the workers,
- $422,000 in liquidated damages, and
- another $19,000 in other civil penalties.
The News Release reported that this is the first enforcement action under a new California law that permits the Labor Commissioner to collect and pay the penalties directly to the workers involved instead of paying such amounts solely to the state.
AUDITS BY MARYLAND JOINT ENFORCEMENT TASK FORCE UNCOVER OVER 5,300 MISCLASSIFIED WORKERS. The Maryland Joint Enforcement Task Force on Workplace Fraud issued its 2024 Annual Report last month. The Task Force is charged with coordinating investigations and enforcement of workplace fraud in Maryland. In 2024, the report notes, the Task Force discovered over 5,300 misclassified workers in the state, including 736 workers in the home health care industry, 224 in landscaping, 169 in janitorial services, 1,012 in construction, and 159 in security. The Task Force also reported that the Maryland Division of Unemployment Insurance uncovered over $36 million in unreported taxable wages paid to workers, and the Comptroller assessed over $3 million in tax, interest, and penalties on businesses for misclassifying workers and failing to report their wages to the Unemployment Division.
