In the Courts (5 cases)

Novelty Manufacturer Sued for IC Misclassification in New York by Designers. A company that manufactures backpacks, lunch kits, beverage bottles, and novelty accessories under license by entertainment companies has been sued in a proposed class and collective action in a New York federal court for IC misclassification. The complaint alleges that the company and its owner misclassified designers as ICs instead of employees. The designers claim that, by so doing, the company and its owner violated the federal Fair Labor Standards Act (FLSA) and New York Labor Law because the designers were not paid overtime compensation for hours worked over 40 in a workweek. The complaint claims that the company controlled and assigned the designers’ work; set or controlled their schedules; required them to work certain hours; mandated office attendance; provided company email accounts; and restricted the designers’ ability to reject engagements or perform outside work. The designer has also sued the company for retaliation under the New York Labor Law and the New York Freelance Isn’t Free Act because he was suspended and his contract was then terminated following his alleged complaints to the company about perceived labor violations. Hahn v. Fast Forward LLC, No.  1:26-cv-08158 (S.D.N.Y. Sept. 18, 2026).

AI Company Sued for IC Misclassification by Data Trainers. Class action lawsuits for IC misclassification against AI companies operating with ICs are becoming more prevalent. We recently reported on this surge in a post in June of this year. Last month, a data trainer classified as an IC by an AI company filed a class action lawsuit under the California Labor Code and a representative claim under the California Private Attorneys General Act (PAGA). The company engaged the data trainers to perform AI data labeling and data annotation work. The complaint alleges that the company “exercised complete control over the manner in which the aggrieved employees were to complete projects and the time in which projects needed to be completed.”  Specifically, the trainer claimed that the company required the trainers to use specific software and platforms to perform assigned tasks, monitored their work product and conduct through remote tools, prohibited and policed the methods and AI tools that the trainers were to use, and required them to complete mandatory training and onboarding requirements as a condition of performing paid work. The lawsuit asserts that the company failed to pay minimum wage and overtime premiums, provide rest and meal periods, provide accurate itemized statements for each pay period, and properly compensate the trainers for necessary expenditures such as internet and cell phone usage fees. Kroul v. Stryder Corp. dba Handshake AI, No. 26ST CV 27952 (Super. Ct. Los Angeles County, Cal. Sept. 2, 2026). 

Mental Health Treatment Center Sued for IC Misclassification by Nurse Practitioner.  A network of treatment centers offering mental health services has been sued for IC misclassification in a proposed collective action by a nurse practitioner alleging that the mental health care network operating the center violated the FLSA’s overtime requirements as well as the provisions of Virginia wage and hour laws by classifying nurses and other health care professionals as ICs instead of employees and, as a result, unlawfully failed to pay overtime compensation for hours worked over 40 in a workweek. The plaintiff claims that the network instructs the staff how to perform their work; sets the workers’ schedules and rates of pay; requires the workers to follow policies and work rules; assigns the medical staff to particular locations; provides the tools, computers, and other health care equipment; prohibits the workers from assigning or subcontracting their work; and mandates that the staff sign non-compete agreements. Abrams v. Neuronetics Inc., No. 3:26-cv-01004 (E.D. Va. Sept. 23, 2026). 

Virginia Security Company and Its Owner Found to Have Misclassified Guards as ICs.  A federal court in Virginia has granted a motion for partial summary judgment in favor of security guards who claim they were misclassified by a security service company and its owner as ICs and not employees. The lawsuit had been brought under the FLSA and Virginia wage and hour laws.  The security company provides security guards classified by the company as ICs for dozens of clients in Virginia, Maryland, and the District of Columbia. The security guards claim that the company and its owner allegedly failed to pay overtime compensation for hours worked over 40 in a work week due to its misclassification of the guards as ICs. Among other things, the court found that the guards could not hire their own employees or subcontract their shifts to others; could not grow their operation or income except by being promoted; needed to receive permission from the company to work for other security firms; had no input into their rate of pay; and were subject to regulations imposed by the company concerning guards’ performance, onsite conduct, as well as penalties assessed for late arrivals, failure to wear company-branded uniforms, and disclosure of confidential information.  Applying the economic realities test under the FLSA for determining independent contractor status in the Fourth Circuit, the court found that “the undisputed facts show that there are hardly any aspects of a guard’s performance over which DMV does not exercise control.” The court therefore concluded that the guards were employees and not ICs. The case continues for a determination of damages. Rangel v. DMV Protection, LLC, No. 25-cv-01288 (E.D. Va. Sept. 11, 2026).

Snack Food Manufacturer Prevails in IC Misclassification Lawsuit by Distributors. A company and its snack food division have been granted summary judgment by a New York federal court dismissing a distributor’s proposed class and collective action alleging that the company had misclassified him and other distributors as ICs instead of employees. The class and collective action complaint asserted that due to the alleged misclassification of the distributors as ICs, the company and its snack division violated the overtime compensation of the FLSA and New York Labor Law. In granting the motion in favor of the company, the court applied the Second Circuit’s five-part economic realities test and concluded that four factors supported IC status: the degree of control exercised by the company over the workers; the workers’ opportunity for profit or loss and their investment in the business; the degree of skill and independent initiative required to perform the work; and the permanence or duration of the working relationship. As to the final factor – the extent to which the work is an integral part of the company’s business – the court concluded that this factor was “essentially neutral.”  The court then applied a five-part test for IC status under the NY Labor Law, concluding that all five factors supported IC status. Regel v. Campbell Soup Company, No. 24-cv- 6541 (S.D.N.Y. Sept. 29, 2026).

Written by Richard Reibstein, Publisher
Compiled and edited by Janet Barsky, Managing Editor