The Seventh Circuit Court of Appeals ruled last week that a contractual choice of law provision was irrelevant to whether workers were employees or independent contractors and to whether pay deductions were lawful.
A national logistics firm incorporated in Delaware with its principal place of business in Virginia, engaged drivers to pick up merchandise from warehouses in Illinois and deliver those products to customers in Illinois, Indiana and Missouri. The drivers signed “Service Agreements” through which they agreed: their relationship was governed by Virginia law; they were independent contractors; and that their pay was subject to certain specified deductions.
Two of the drivers, both of whom reside in Illinois, filed a class action suit in federal court in Illinois, claiming that they, and other similarly situated drivers, were employees, not independent contractors, and that the deductions made from their pay in accordance with the terms of the Service Agreements violated the Illinois Wage Payment and Collections Act (IWPCA).
Relying on the choice of law provision, the district court found the IWPCA inapplicable, and dismissed the action. The appellate court reversed. As the 7th Circuit observed, it is understandable that a national firm wants one state’s laws to govern its labor force, particularly when workers cross state lines in carrying out their duties, but whether a worker is an employee or an independent contractor is a matter of law, not a matter upon which...
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