Monthly Archives: March 2021

03.29.21
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West Virginia Adopts Pro-Business Independent Contractor Test

Three Fun Facts about West Virginia:

  1. The New River is actually one of the world’s oldest rivers and, unusually, flows south to north.
  2. The nickname and team mascot for Poca High School in Poca, WV is the Dots.
  3. West Virginia just adopted the most pro-business worker classification test in the nation.

While I would love to write about the Poca Dots, I’m going to focus on the state’s new worker classification test, enacted March 11, 2021. It takes effect 90 days later, on June 9, 2021.

The new test creates a safe harbor. If you comply with a list of requirements, including a written contract, your worker is automatically an independent contractor under WV wage and hour law, anti-discrimination law, workers’ compensation, and unemployment.

The bill nearly had a disastrous flaw. In its original form, passed by one chamber, if you failed to meet the safe harbor criteria, you’d automatically be deemed an employee. That would have had absurd unintended consequences, including that a worker would automatically be an employee if there was no written contract or if the contract did not include all required clauses.

I drafted a last-minute amendment that was adopted and inserted into the bill at the eleventh hour. The amendment said that if the safe harbor was not met, the worker would not automatically be an employee. Instead, the worker’s status would determined by using the 20-factor Right to Control Test in IRS Rev. Ruling 87-41. (The 20 factors are explained here in this PDF from the Texas Workforce Commission.)

The bill is very pro-business.

Businesses retaining contractors in WV should review the safe harbor provisions and be sure to comply. Compliance means a free pass for independent contractor status under state law (but not under federal law). Contracts may need to be adjusted to include the required clauses. Now is the time to do that.

Here is a link to the bill. The blue text contains the safe harbor. Read it closely and make sure these provisions are in your WV independent contractor agreements.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Sign up now for the BakerHostetler 2021 Master Class on The State of Labor Relations and Employment Law. Twelve sessions, one hour every Tuesday, 2 pm ET, all virtual, no cost. Click here for more information. List me as your BakerHostetler contact so I know you’ve registered. 

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03.22.21
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Who WAS My Employee? Companies Must Provide This Notice to Former Employees By May 31.

Please hold. The past is calling. Source: LOC

This weekend I watched The Call, a South Korean horror film (yes, subtitles) about a woman who receives a call from 20 years earlier. The past and present keep changing as the two callers interact over time. Oddly there were two movies released in 2020 named The Call. It’s this one.

The past can affect the present, but not usually the way it did in the movie.

The American Rescue Plan Act of 2021 (ARPA) imposes new COBRA-related obligations on employers, including notice requirements to former employees. In this blog, we usually ask Who Is My Employee?, but this week’s post is about Who Was My Employee?

ARPA changes the COBRA rules for April 1 through September 30, 2021. Employees who are involuntary terminated or become COBRA-eligible due to a reduction in hours are entitled to a 100% subsidy on their COBRA premiums for six months, April 1 to September 30. The company must pay the premiums, which are then reimbursed by the government through payroll tax credits.

ARPA extends this subsidy opportunity to former employees too, even those who did not sign up for COBRA when they were terminated. Under ARPA, those individuals get a second chance to sign up if they became COBRA-eligible less than 18 months ago.

Employers must send new COBRA notices to individuals who were involuntarily terminated (or who became COBRA-eligible due to a reduction in hours) within the last 18 months, including those who did not choose coverage at the time. These individuals can take advantage of the subsidized premiums from April through September, unless their 18-month COBRA eligibility period ends earlier or they become ineligible for another reason. Eligibility ends if the individual becomes eligible for other healthcare coverage or Medicare.

The DOL will be publishing model notices by April 10.

Employers must send this notice by May 31.

There’s more that employers need to know about changes to COBRA. The changes mean that your template severance agreements probably need to be revised too. There are new COBRA notice requirements for departing employees and new notices that must be sent when the subsidies are about to end.

I drafted a post addressing these subjects for BakerHostetler’s Employment Law Spotlight blog, which you can read here.

Reaching back 18 months to send notices to departed employees is an unusual requirement, but employers will have to make reasonable efforts to track these people down. Fortunately, unlike in The Call, employers don’t need to worry about anything that happened 20 years ago. The 18-month lookback is plenty to worry about.

© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Sign up now for the BakerHostetler 2021 Master Class on The State of Labor Relations and Employment Law. Twelve sessions, one hour every Tuesday, 2 pm ET, all virtual, no cost. Click here for more information. List me as your BakerHostetler contact so I know you’ve registered. 

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03.15.21
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Use a Sea Slug’s Secret Superpower When Drafting IC Arbitration Clauses

Witness: The severed head of a sea slug. Image by Sakaya Mitoh, who performed this awesome experiment.

Did you know that sea slugs have superpowers?

According to researchers at the Nara Women’s University in Japan, if you sever the head of a certain type of slug, the slug can grow a new body, organs and all. I like that as the basis for a new Marvel character. Or maybe the slug is a distant cousin to Roland the Headless Thompson Gunner.

The moral of the story is that when a slug loses its head, all is not lost. (This is how sea slugs survived the French revolution.) The same may be true in the context of arbitration agreements for independent contractors. (Come on, that’s a really good segue, isn’t it?)

For independent contractors in the transportation industry, arbitration agreements may be unenforceable under federal law. But all is not lost. In some states, state arbitration law can save the day. That means it’s important to know your state laws and to draft choice of law clauses carefully.

Here’s what I mean:

For companies that work extensively with independent contractors, there are lots of good reasons to require that disputes are resolved in arbitration, not in court. One of the biggest advantages of arbitration is the ability to include a class action waiver, requiring any claimant to bring a case on an individual basis only. No class actions. Class claims are the sexiest of all claims to plaintiff’s lawyers. Individual claims are not nearly as lucrative. Or sexy.

The Federal Arbitration Act (FAA) embraces arbitration as an enforceable way to resolve disputes. But there’s a big exception to the FAA. It doesn’t apply to transportation workers “engaged in … interstate commerce.” The meaning of that phrase is unclear, and there are lots of lawyers fighting about its scope. Different courts have come to different conclusions, especially regarding last mile delivery drivers and rideshare. Eventually, the Supreme Court is likely to rule on exactly what this phrase means.

But in the meantime, what if your contractors are arguably “engaged in … interstate commerce”? Are you stuck with a lengthy legal battle over whether your arbitration agreement is enforceable under the FAA?

Not necessarily. Don’t forget about state law. Several states have their own laws embracing arbitration as an enforceable way to resolve disputes, and these state laws generally do not have exceptions for transportation workers.

New York is a good example. Courts in New York have upheld arbitration agreements, even when the workers were arguably transportation workers not covered by the FAA.

Choose your state law carefully, especially if your arbitration agreement might be subject to the FAA’s exception for transportation workers. It’s common to include a “choice of law” clause in contracts, but those clauses are often dropped into contracts without anyone thinking about why a certain state’s law should apply. Those clauses really do matter, and the choice of law section should be carefully considered.

When it comes to arbitration agreements, the choice of law clauses should not be viewed as a boilerplate clause to toss in without careful thought.

The ability to choose a particular state’s law is a real superpower. Use it like a sea slug!

© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Sign up now for the BakerHostetler 2021 Master Class on The State of Labor Relations and Employment Law. Twelve sessions, one hour every Tuesday, 2 pm ET, all virtual, no cost. Click here for more information. List me as your BakerHostetler contact so I know you’ve registered. 

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03.08.21
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Macaques & The Guess Who: Why the New Independent Contractor Rule Won’t Take Effect March 8

Photo by Hectonichus and, yes, this fella is sticking his tongue out at you (but he can’t remember why).

A Swedish study concluded that baboons, pig-tailed macaques, and squirrel monkeys have some of the worst short-term memories in the animal kingdom, barely exceeding that of bees. The point is, never ask a pig-tailed macaque where you left your car keys.

Having a short memory can be a problem in some situations, but not it’s not an issue if you’re just trying to recall the latest Department of Labor test for independent contractor misclassification. Everything you recall from six weeks ago is being undone anyway. (Or Undun, if you’re a fan of the spelling-impaired Canadian band The Guess Who.)

Remember the new rule issued by the DOL in January 2021 for determining employee vs. independent contractor status? It was going to modify the Economic Realities Test to focus on two core factors: (1) the nature and degree of the worker’s control over the work, and (2) the worker’s opportunity for profit or loss based on personal initiative or investment. The new rule was to take effect March 8. The test would apply only to claims under the Fair Labor Standards Act (FLSA).

No more. Last week, the DOL delayed implementation until May, but the rule most likely will be rescinded completely. Undun.

This decision comes on the heels of the DOL rescinding two opinion letters that were also issued in January. Undun. The letters provided guidance on determining independent contractor status in a few particular situations.

The Economic Realities Test remains the test used to determine who is an employee under the FLSA. It’s a multi-factor balancing test.

So if you’ve been relying on recent DOL guidance for how to apply that test, channel your inner pig-tailed macaque. Whatever you recall from January can be forgotten. And where did I put my car keys?

© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Sign up now for the BakerHostetler 2021 Master Class on The State of Labor Relations and Employment Law. Twelve sessions, one hour every Tuesday, 2 pm ET, all virtual, no cost. Click here for more information. List me as your BakerHostetler contact so I know you’ve registered. 

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03.01.21
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(Just Like) Starting Over: Biden Salutes John Lennon on Joint Employer Policy

The 1980 Double Fantasy album is meh, featuring alternating tracks by John Lennon and Yoko Ono. But there’s at least on gem on that album, and it’s the very first track: “(Just Like) Starting Over.” The song was originally titled “Starting Over” but the parenthetical was a late addition, reportedly inserted to make sure listeners knew this wasn’t Dolly Parton’s country music chart topper from the same year, “Starting Over Again.” Not that anyone has ever confused John Lennon with Dolly Parton, but I get it.

President Biden’s policy on joint employment is already embracing the same theme, even before Marty Walsh gets confirmed as Secretary of Labor. The DOL ain’t wastin time no more. (And speaking of the Allman Brothers, if you haven’t yet seen the documentary Jimmy Carter: Rock N’ Roll President, it’s worth 96 minutes of your time.)

Late last week, the DOL announced it has submitted a new proposed rule for determining joint employer status under the Fair Labor Standards Act (FLSA). The text of the proposed rule has not yet been released, but here’s what we know:

1. The new rule would replace the regulations enacted by the Trump DOL in March 2020. The March 2020 regulation required actual control for a finding of joint employment and focused the joint employer analysis on four factors — right to hire/fire, supervision of work conditions or schedules, rate/method of pay, and control of personnel files. That test made it tougher to establish joint employment.

The March 2020 regulations are already the subject of litigation, and the Second Circuit Court of Appeals is hearing a case to decide whether the new rules are valid. That means the March 2020 rule could be on the chopping block no matter, with either the Second Circuit or the Biden DOL doing the chopping.

2. The new rule will be (just like) starting over. It will re-adopt an Obama-era joint employment test. But which one?

Option A:

Before the March 2020 rule requiring actual control, all that was need to be a joint employer was the right to control certain aspects of the relationship.

When using a staffing agency for staff augmentation, for example, there was a pretty high likelihood that would be joint employment, even if the staffing agency had exclusive control over the four factors highlighted in the March 2020 test — setting wages, setting schedules, controlling pay, and maintaining personnel files. At a minimum, the new rule will go back to that standard.

Option B:

But there’s a worse option that could be in the cards. Five states are bound by a 2017 federal appeals ruling that adopts a much broader interpretation of joint employment. In a case called Salinas, the Fourth Circuit ruled that two businesses are joint employers unless they are “completely disassociated” from one another. The Fourth Circuit covers MD, NC, SC, VA, and WV. That decision suggests that every borrowed labor situation might automatically be joint employment, since the two companies have a contractual “association” with each other.

The Salinas decision was based on an old regulation, on the books since 1958, that the March 2020 regulation eliminated and replaced.

Which version of joint employment will the new Biden rule seek to adopt? Or will the DOL come up with a new test entirely?

Either way, we know that the test for joint employment will change in 2021 or 22, and the new rule will make it much more likely that staffing agency relationships and other borrowed labor arrangements create joint employment.

While the specifics of the new test are not yet known, we know enough already to start to plan. Staffing agency agreements should be checked and revised to protect against joint employment liability. This post provides a few of my favorite tips.

There are plenty of steps that can be taken to protect against joint employment, so long as businesses plan ahead and draft their contracts carefully. Change is coming, but we’ve been down this road before. It’s (just like) starting over.

© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Sign up now for the BakerHostetler 2021 Master Class on The State of Labor Relations and Employment Law. Twelve sessions, one hour every Tuesday, 2 pm ET, all virtual, no cost. Click here for more information. List me as your BakerHostetler contact so I know you’ve registered. 

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