The DOL Wants You to Know Its Opinions (Here’s Why That’s Good News!)

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Everybody has an opinion, so why not share?

This week, Labor Secretary Alex Acosta announced that the WHD will resume its prior practice of issuing opinion letters to advise on difficult wage and hour issues. This is good news for companies and employees because it increases predictability.

An opinion letter is an official, written opinion by the WHD of how a particular law applies to a specific set of circumstances presented by an employer or employee. The benefit to the general public is that opinion letters are published and may be relied upon.

The practice of issuing opinion letters had persisted for more than 70 years before being discontinued in 2010, when the WHD began issuing occassional general guidance memos instead.

The return of the opinion letter means more predictability and less “Gotcha!

If the proper public role of the DOL is to promote voluntary compliance (as it should be!) and not merely to sack wrongdoers, then this announcement is a big step in the right direction.

This announcement comes shortly after Secretary Acosta’s recent decision to withdraw the WHD’s 2015 and 2016 general guidance memos on independent contractor misclassification and joint employment. Presumably, these would be topics that are now ripe for new opinion letters.

With a new Labor Secretary, employers can expect a shift toward more business-friendly interpretations that respect the existence of independent contractor relationships and decrease the incidence of joint employment findings. As discussed here, the determination of Independent Contractor vs. Employee under the wage and hour laws (e.g., the Fair Labor Standards Act) is made using an Economic Realities Test.

Employers can click here or here to see whether prior opinion letters have been published on any particular wage and hour topic.

 

©Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment.

What Role Does the EEOC Play in Independent Contractor Misclassification?

IMG_1081The EEOC’s jurisdiction is limited to claims brought under certain federal anti-discrimination laws. The reach of these laws, however, is limited to employees. It is not a violation of Title VII, for example, to discriminate against an independent contractor.

So the EEOC has nothing to do with issues of independent contracor misclassification, right? Wrong.

Because the EEOC’s jurisdiction is limited to claims brought by employees, the Commission is incentivized to reclassify independent contractors as employees — especially when the Commission thinks that a company’s conduct was untoward.

In October 2016, shortly before the election, the EEOC published its Strategic Enforcement Plan for 2017-21. Lo and behold (is it ever just “lo”?), Priority #3 is “Addressing Selected Emerging and Developing Issues,” among which the EEOC lists:

Clarifying the employment relationship and the application of workplace civil rights protections in light of the increasing complexity of employment relationships and structures, including temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.

In other words, the EEOC wants a seat at the Independent Contractor Misclassification Table. It wants a chance to decide who is a contractor and who is an employee, because every chance to find misclassification is a chance to apply the laws that the Commission is charged with enforcing. No employment? No EEOC.

Am I cynical? You bet! But the EEOC has empirically interpreted its mission to include expanding employee protections. In this case, that means expanding who is an employee.

On January 25, 2017, President Trump named Commissioner Victoria A. Lipnic Acting Chair of the EEOC. She began her service as a Commissioner of the EEOC in April 2010, having been confirmed by the Senate for an initial term ending on July 1, 2015. In November 2015, she was confirmed by the Senate for a second term ending on July 1, 2020.

To date, there is no indication of any change in the Strategic Enforcement Plan for 2017-21.

Expect the EEOC to take a more active role in trying to determine who is an independent contractor and who is an employee.

California May Tip The Scales, When It Comes to Tipping Independent Contractor Drivers

IMG_1078Should ride-hailing services (like Uber and Lyft) be required to offer a tip option if you pay by credit card? A proposed California law says yes.

A.B. 1099, passed by the California Assembly and headed to the State Senate, would require modification of these mobile apps to support credit card tipping. The bill, in its current form, takes no position as to whether these drivers are independent contractors or employees, instead calling them “workers,” but the proposed law is another attempt to legislate controls on the gig economy, rather than letting free market forces play out.

Gov. Jerry Brown has not taken a posiiton on the bill, and it may or may not survive in the California Senate.

California has been a hotbed of litigation for ride-hailing and delivery driving companies, and this latest development shows that State Governments are not afraid to further constrain how companies that use independent contractor drivers run their businesses.

In fact, we saw similar scale-tipping recently in Florida (see blog post here), but that was in an effort to protect ride hailing companies and these companies’ efforts to protect the classification of their drivers as independent contractors.

Keep an eye out for more legislation, especially at the state level, in an attempt to recalibrate the market forces that have brought us the gig economy.

When an Employee Double-Dips On a Paycheck, Who Pays?

Remember this?

Suppose the chip is a check, and the employee tries to cash it twice? Who would you rather be, Costanza or Timmy?

Staffing agency clients are increasingly pointing to a fraud committed by disloyal short-term employees. They cash a paycheck on their mobile app, then deposit the paper check a second time for duplicate payment. The check clears twice. Who must pay?

While this problem can arise in many scenarios, including with regular W-2 employees, it seems to be occurring more frequently with staffing agency employees, PEOs, temps, and other short-term workers. So let’s take a look.

I found a few good blog posts covering this subject (for those wanting more detail, try here or here), but here’s the bottom line:

The Check 21 Act, passed in 2004, addresses what happens when a bank allows its customers access to a mobile deposit app. When a customer electronically deposits a check, the bank creates an electronic image of that check, called a “substitute check.” This is what you sometimes see when you view your statement online. It’s negotiable, like a live check.

The original live check, however, still exists too. A fraudster who acts quickly enough can sometimes cash both. Under the Check 21 Act, the bank that creates the “substitute check” — the bank that allowed its customer access to the mobile check cashing app — is the bank that bears responsibility for any loss from the twice-cashed check.

This makes sense. Because that bank’s customer is the fraudster who double dipped, that bank is also in the best position to recoup the funds from the double-dipper.

Staffing agencies, payroll agencies, or PEOs who issue a twice-cashed check are sometimes asked to make good on the same payment twice. They shouldn’t be. If the double dipping occurred through an electronic “substitute check,”, they can point to the Check 21 Act, specifically 12 USC §5004, and argue that the double-dipper’s bank is properly accountable.

Note:  The Check 21 Act only applies to electronic double dipping. If an employee claims to have lost an original live check and obtains a substitute, then cashes both checks, different rules apply.

Five (More) Signs Your Independent Contractor May Be Properly Classified

IMG_1079Last week I posted Five Signs Your Independent Contractor May Be Properly Classified. While I feel pretty good about the post, I also feel like there’s more where that came from. So here goes.

Five More Signs Your Independent Contractor May Be Properly Classified:

  1. The contractor has its own employees. Since contractors are in business for themselves, they should be free to hire their own employees. If they actually do, chalk up a few points.
  2. The contractor pays its own expenses. One indicator of a legitimate independent contractor relationship is that the contractor, if a sound businessperson, will earn a profit but, if a poor businessperson, will incur a loss. The profit/loss determination is often a function of how well the contractor prices its services. If you reimburse a contractor for all of its expenses, the risk of loss is generally removed. Legitimate independent contractors should be bearing some risk.
  3. The contractor works from its own office space. The flexibility to work wherever and whenever suggests proper classification as an independent contractor.
  4. The contractor works using its own tools and equipment. That’s more evidence that the contractor is running its own business and has more opportunity to incur a net loss.
  5. The contractor carries its own insurance. When a contractor carries the types of insurance typically carried by a business, the contractor is likely operating as a business. Look for General Commercial Liability and Workers Comp coverage.

Remember, the tests for determining Who Is My Employee? vary by law, and most test are balancing tests, so no single factor is likely to be determinative. Relationships with these five features, however, are more likely to have the scales tilted in favor of recognizing independent contractor status.

Joint Employment Is Like Taking Steroids By Accident

athlete-joint employment - staffing agency - 1840437_1920It seems like every month another professional athlete is caught using a prohibited substance. The typical script (after getting caught) is to blame the maker of a supplement. “I should have more carefully checked the label,” or “I had no way of knowing what was in that synthetic elephant urine.”

Fair or unfair, every athlete knows that he/she is responsible for what goes into the athlete’s body, whether the juicing was intentional or not.

The same rule applies to companies who use staffing agencies.

When workers are deemed to be joint employees, both the staffing agency and the company that benefits from the services are responsible for failures to follow employment law. It doesn’t matter who made the mistake.

Under the FLSA, for example, employers must pay non-exempt employees a minimum wage, must pay for all hours worked, must pay overtime, and must properly calculate overtime rates. Sometimes this is hard. Two traps that ensnare even the most sophisticated employers are the challenge of accounting for off-the-clock work (checking email by cell phone, for example), and calculating the base hourly rate when there are bonuses and other forms of compensation provided.

Joint employment means joint liability. If the staffing agency responsible for paying employees makes an error, both companies are on the hook. That means a company can be responsible for hundreds of thousands of dollars in damages  — including back pay, attorneys’ fees, and liquidated damages — for errors it had no control over.

When the potential exists for a finding of joint employment, be careful when selecting  vendors who supply workers. Here are three tips:

  1. Be sure any vendors who supply workers are reputable, competent, professional, and reliable. (Four tips in one! you’ll thank me later)
  2. Be sure they stand behind their obligations with a suitable (and specific) indemnity clause.
  3. Be sure they are sufficiently insured.

Remember, under the FLSA (and many other laws), your company may be jointly liable for a staffing agency’s mistakes — even if you had no control over their pay practices.

Using staffing agency workers is like taking a performance supplement. It may enhance the bottom line and improve overall performance, but any funny business is your responsibility.

It doesn’t matter who put the horse steroid in your protein powder. If you ingest it, you are responsible for it.

Labor Dept Withdraws 2015-16 Joint Employment, Independent Contractor Guidance

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Did the new Labor Secretary of Labor finally throw employers a bone? I think so, but it’s too early to tell whether it’s delicious bacon-flavored or some generic processed meat flavor.

On June 7th, the Department of Labor (DOL) announced it was withdrawing the 2015 and 2016 informal guidance on joint employment and independent contractors.

Read the full post here, on BakerHostetler’s Employment Law Spotlight blog.