Stop Licking My Face? DOL Rescinds Independent Contractor Guidance

Tasty! Image by Roman Michael Gottfried from Pixabay

In this issue of Science Focus Magazine, the BBC tackles the difficult question of Why Do Dogs Lick People?

Says Dr Emily Blackwell, a lecturer in companion animal behaviour and welfare at the University of Bristol, “It’s a greeting and can be taken as a compliment.”

Ok then. That’s a nice gesture.

But that’s not going to be the case with the new administration’s Department of Labor, apparently. Steps are already being taken to remove helpful guidance on whether workers qualify as employees or independent contractors.

That’s not a nice gesture. There will be no lovable face licking by the new DOL.

On January 19th, the Trump DOL issued two opinion letters addressing whether certain kinds of workers are employees are independent contractors and the appropriate test for making that determination.

But last week, under direction from the Biden Administration, the DOL rescinded the guidance. Here’s what the two letters covered:

  • FLSA2021-8: Addressing whether certain distributors of a manufacturer’s food products are employees or independent contractors under the FLSA.
  • FLSA2021-9: Addressing whether requiring tractor-trailer truck drivers to implement safety measures required by law constitutes control by the motor carrier for purposes of their status as employees or independent contractors under the FLSA, and whether certain owner-operators are properly classified as independent contractors.

Under the Trump administration, the DOL had committed to publishing more opinion letters. These letters help the public understand the DOL’s interpretation of the law. They apply general rules to more specific situations. They answer questions. That’s good, right? Doesn’t the government want compliance? From the perspective of the business community, compliance is easier if we know what the DOL is thinking.

Fast forward to last week. Even though Marty Walsh has not yet been confirmed as Secretary of Labor, the DOL is already undoing what the DOL had recently done.

Looking ahead, we can expect to see fewer opinion letters, or maybe none. The Biden Administration has indicated that these types of unofficial guidance documents should not be issued. The Administration feels that it ties the hands of the DOL. During the Obama Administration, the DOL entirely discontinued the practice of publishing opinion letters on wage and hour issues, so a plunge back into the darkness seems likely to happen again under a Biden Administration DOL.

This is a bad trend for businesses trying to understand and comply with the law.

So my advice today? If you want some love and attention when trying to unravel the independent contractor versus employee conundrum, don’t look to the DOL for help. Instead, go get a puppy. It might lick your nose, which could be nice.

 

© 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. 

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Bad Call, Ref: Lawsuit Fails When Ref Sues the Wrong Party

Some athletic lads from the University of Illinois High School yearbook, 1921

When referees and umpires make bad calls, they can be truly memorable.

Remember when the University of Colorado beat Missouri on Fifth Down to win a 1990 NCAA football game? Or when the Saints were denied a shot at the Super Bowl in 2019 on a missed pass interference call? Or the blown safe at first call that ruined Armando Galarraga’s 2010 perfect game with two outs in the 9th?

In a lawsuit decided last week, a high school basketball ref made another bad call, resulting in dismissal of her claim.

Ginger Girard, a high school ref in Connecticut, sued the International Association of Approved Basketball Officials and the local Board, claiming that they engaged in employment discriminated by not giving her good ratings. She claimed the poor ratings were because of her gender, not her performance, and that the poor ratings caused her to lose financial opportunities.

But to bring a claim of employment discrimination under federal law, you have to sue your employer. The court ruled that the Association and the local Board were not the ref’s employer. She took a shot but didn’t even hit the rim. Case dismissed.

The ref then asked for the legal equivalent of instant replay, appealing to the Second Circuit Court of Appeals. But she airballed it again.

The Court of Appeals applied a Right to Control Test, finding that the Association and the Board did not control how she reffed games. (It’s worth noting that that the court used a 13-factor test, which is different from the Supreme Court’s 7-factor test, which is different from the IRS’s former 20-factor test, which is different from how several other courts define the relevant Right to Control Factors. To know your test, you’ve gotta know your court.) The Court of Appeals also pointed out that when she was retained to referee games, the participating schools paid her, not the Association or the Board. She sued the wrong party.

Refs make mistakes, and refs’ lawyers can whiff too. Whether on the court or in the court, you’ve got to know your opponent. Figuring out Who Is My Employee can make all the difference between victory and defeat.

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

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Stop Making Sense: California Companies Can Be Liable for Not Following Rule That Did Not Yet Exist

Sometimes things stop making sense. And I’m not referring to the 1984 Talking Heads album, which included “Psycho Killer,” “Burning Down the House,” and other songs least likely to be used in an episode of Sesame Street.

No, when I say things “stop making sense,” I’m thinking more like dogs climbing ladders, pigeon-eating catfish, or Nazi Russian goats. Seriously mind-bending facts. The stuff that makes you question what was in those brownies.

The California Supreme Court’s ruling today falls in that category. Remember the 2018 Dynamex decision? That’s the one where the Court invented a new ABC Test for deciding whether someone was an independent contractor or an employee under California wage and hour law. Ever since then, companies have been trying to figure out whether that made-up test would apply retroactively. In other words, would California hold companies liable before 2018 for not following a test that did not yet exist until 2018?

After today’s decision in Vazquez v. Jan-Pro, we now know the answer: Of course! It’s California. Even companies not in the fortune telling industry should have known what legal standard the justices were going to invent. And of course it’s fair to hold companies liable for failing to comply with a standard that, before 2018, did not exist anywhere in California law. If Johnny Carson could figure out what was in that envelope (“seersucker“), California business should have been able to figure out what legal test the California Supreme Court would make up in 2018.

The Court reasoned that it’s normal practice for a decision to apply retroactively and said it’s only fair for the decision to apply to everyone retroactively since Dynamex didn’t see it coming either. The Court rejected the common sense notion that it would be unfair to apply the test retroactively, even though courts across California had — for years — applied the multi-factor Borello balancing test when determining employee vs. independent contractor status.

One saving grace may be that the Dynamex decision is now almost three years old, so statutes of limitation for wage and hour claims are running out. Most wage and hour claims in California must be brought within three or four years of the violation, depending on the claim asserted.

I can’t say this decision is surprising. But I couldn’t say the knife-wielding squirrel featured in the last blog post was surprising either. It’s a crazy world out there, folks. Sometimes it’s best to just stay home and watch Veep, which once seemed too outlandish to be believable.

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

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Employee Benefits for Contractors? Don’t Overreact to New DOL Rule (or to Knife-Wielding Squirrels)

Terror in the backyard! Screen grab from @asdiamond on twitter

A knife-wielding squirrel was seen patrolling a backyard fence last week, according to this article in the Toronto Sun. Here’s the video evidence. Fortunately, no one took action and no one overreacted. The squirrel reportedly gnawed on the knife a bit, lost interest, and dropped it to pursue other squirrel-related passions. Everything turned out ok.

Not overreacting is important. Get all the facts, and look at the big picture before deciding whether to take action.

Same with the new DOL regulation on determining in dependent contractor status, first reported here.

This week I’ve seen two articles saying that, under the new rules, providing employee benefits to independent contractors does not tilt the scales in favor of employee status under the new rules. No, no, no! If you’ve seen that commentary, please disregard it. It is an overreaction, and if you provide traditional employee benefits to an independent contractor, that’s a sure sign of misclassification.

Now, let’s break that down a bit. Yes, it’s true that in the commentary to the new rule, the DOL indicated that providing some types of benefits to an independent contractor does not necessarily mean the contractor is misclassified. (As you will all undoubtedly recall from reading all 261 pages of the DOL commentary, that’s on pages 58-59.) But — and there’s a big but (one t) — it does not mean that you can freely start giving employee benefits to contractors.

First, let’s not overstate what the DOL is trying to say. The DOL is not saying you can provide traditional employee-type benefits to contractors, the same way you do for your employees. The DOL is saying that it’s not automatic misclassification under the FLSA if you provide a contractor with extra money for the contractor to help fund his/her own benefit plan, such as through the healthcare.gov exchanges.

Second, let’s not forget the very narrow scope of the DOL’s new rule. The new rule applies only to the FLSA. That is, it applies only for determining whether someone is owed overtime and a minimum wage. And here’s the important point: The FLSA and the new rule and the new test have nothing to do with determining independent contractor vs. employee status under federal tax and benefits law.

The test for determining whether someone is an employee under federal tax and employee benefit law is a Right to Control Test, not the FLSA Economic Realities Test addressed in the new rule. If you add your contractor to your regular employee benefit plan, you have almost certainly created an employment relationship under those laws. Or, perhaps worse, you could disqualify your plan by providing plan benefits to a non-employee.

Under either scenario, providing regular employee benefits to an independent contractor is a very bad idea under current federal law. In short, don’t do it.

Hopefully, federal law will eventually change to allow independent contractors better access to employee-type benefits without converting them to employees for all purposes. But we are a long way from there.

In the meantime, let’s not overreact. As for the new rule, Biden might invalidate it anyway before it is scheduled to take effect March 8.

As for knife-wielding squirrels, don’t confront them directly. You’ll just make them angry and more determined and–as you can see in this video–squirrels can be pretty darn creative when they are determined to get something.

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

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Snapshot or Long Exposure? Dep’t of Labor Approves New IC Test … For Now

Say cheese! Image by OpenClipart-Vectors from Pixabay
(Note: This post was updated on 1/6/21)

This octopus in New Zealand has been trained to take photos of visitors to the Sea Life Aquarium. That’s a pretty neat trick. I’m sure the visitors love it and will pay whatever exorbitant fee the aquarium charges to profit on the back of its cephalopod slave labor, but do the photos last? Do the visitors keep them, or do the pictures end up in the circular file at home?

Some photos are cherished and kept. Others, not so much.

So which category will the DOL’s new independent contractor test fall into — cherished and kept? Or not so much?

As reported here, in September 2020, the DOL published a new proposed rule for how to determine independent contractor vs. employee status under the Fair Labor Standards Act (FLSA). The DOL has been rushing to publish the new rule before Inauguration Day 2021, in case of a change in the Oval Office.

Now facing that change, the White House on Monday approved the proposed rule, and this morning the Department of Labor released the new rule. It takes effect on March 8, 2021–unless it doesn’t. The Biden administration’s incoming press secretary, Jen Psaki, has already said the new administration would try to kill this one in an early executive order. We’ll see how that plays out.

Meanwhile, whether the new rule goes into effect or not, the FLSA analysis for independent contractor vs. employee should not really change anyway. The new rule is essentially a repackaging of how the courts have already been applying the FLSA test. While Democrats have protested the new rule as an attempt to make it easier to classify someone as an independent contractor, I don’t see it that way. I see it as a clearer way to articulate the test that has been applied for years.

Once Biden takes office, there are so many things he’ll want to undo, he’ll need more hands than an octopus has legs, so this one might not quite hit the top of the list. We’ll continue to monitor the status of this proposed new rule, including whether and when it actually takes effect.

In the meantime, if you can get to New Zealand anytime soon, there’s an octopus that would like to snap your picture. Happy New Year!

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

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Today’s Tip: Beware of Multi-State Issues (and Rudolf is a girl?!)

Neil deGrasse Tyson broke the news last week that Santa’s reindeer must be female, since they still have their antlers in the winter. Mind blown: Rudolf is a girl. #girlpower

It seems like should have figured that out earlier. Sometimes things are not as they seem. So let’s play some reindeer games.

Assessing independent contractors status isn’t always as it seems either. Do you pass the IRS Test? Congratulations, but that tells you nothing about whether your relationship meets state law tests. Did you win an unemployment claim on the basis that your contractor was not your employee? Congratulations, but that tells you nothing about whether your relationship has contractor status under federal wage and hour law.

To determine whether an independent contractor relationship is legitimate requires you to look at multiple tests across multiple laws across multiple jurisdictions.

Companies that retain contractors across multiple states should pay particular attention to the differences among multiple states and across multiple laws. The same relationship can be deemed employment under one test and independent contractor under another.

For example, in my home state of Ohio, the analysis of whether a worker is an independent contractor or an employee is subject to a long list of competing legal standards:

  1. Federal Income Tax: Right to Control (IRS factors)
  2. Ohio Income Tax:  Follows IRS
  3. ERISA, ADA, Title VII, ADEA: Right to Control (Darden Test)
  4. Affordable Care Act: Right to Control (Treasury Regs.)
  5. FLSA: Economic Realities Test
  6. NLRA: multi-factor hybrid/right to control test
  7. OH Unemployment (ODJFS): IRS old 20-Factor Test
  8. OH Workers Comp / Construction: Need 10 of 20 old IRS Factors
  9. OH Workers Comp / Other: Ohio Right to Control Test
  10. OH Discrimination (RC 4112): Ohio Right to Control Test

The complexity is similar in every state.  In Illinois, the list is about as long, but with different state law tests and standards:

  1. Federal Tax: Right to Control (IRS factors)
  2. ERISA, ADA, Title VII, ADEA: Right to Control (Darden Test)
  3. Affordable Care Act: Right to Control (Treasury Regs.)
  4. FLSA: Economic Realities Test
  5. NLRA: multi-factor hybrid/right to control test
  6. IL Unemployment: ABC Test
  7. IL Wage Payment & Collection Act: ABC Test
  8. IL Workers Compensation: Various factors, including control, relationship to company’s business
  9. But, if Construction, then Employee Classification Act:
    – Presumption is employee,
    – Then apply ABC Test,
    – Then apply 12-factor test to prove sole proprietorship or partnership is IC

And there are 48 more states just like these (but different).

So bottom line: Just like you can’t make assumptions about your reindeer’s gender based on its name, you can’t make assumptions about your contractor’s status based on what you call the relationship. You’ve gotta check the antlers — or the appropriate law.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge

Buckle Up? Why The Gig Economy Should Love Biden’s HHS Pick

Back before seatbelts were a thing, Sears sold this handy Auto Strap for Front-Seat Tots. Tie your toddler to some part of the car, and drive carefree! What could go wrong?

Ok, things have changed a bit when it comes to driving. Seatbelts and airbags seem to have carried the day. Things have also changed quite a bit in the modern workforce, with the gig economy pushing aside traditional employer-employee work relationships.

Something important just happened to help California gig economy companies, and it’s gone under the radar. Biden named California Attorney General Xavier Becerra as his pick for Health & Human Services. Why should gig economy companies care who Biden’s HHS pick is? Because naming Becerra to HHS means Becerra will no longer be California’s Attorney General. And that’s good new because a key part of Becerra’s agenda as State AG had been to knock around gig economy companies as much as possible.

Becerra tried to sabotage Prop 22 by giving it a misleading description on the ballot, but voters saw through it and passed the measure anyway.

Becerra has been the driving force behind California’s lawsuits against ride share companies, trying to force them to reclassify drivers as employees.

But now, assuming he gets confirmed, someone else will take over as California AG. Hopefully it will be someone with less of an anti-gig economy agenda than Becerra. We’ll see. But for now, this pick seems to be good news. I don’t know what he’ll do as HHS Secretary, but I know what he won’t do as HHS Secretary, and that’s to pick fights with companies who help to keep the gig economy strong.

So strap in and let’s see what this new ride will bring. Just be sure to use a seatbelt, not a $1.88 standing harness.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Statue or Statute? When Defending a Misclassification Claim, Don’t Forget a Limitations Defense

I took this photo in Paris. Creepy, isn’t it?

When a New Zealand man was caught snooping around with a torch at a building where he didn’t belong, someone called the authorities. When the local police arrived, the man was still there but still as a stone. He was pretending to be a statue.

The ruse failed, and the man was taken into custody.

The moral of the story, I suppose, is that elaborate ruses don’t make good excuses.

The same can be said for a group of movers who claimed that a moving company had misclassified them as independent contractors and denied them a minimum wage and overtime. The federal court hearing the case, however, threw it out because the movers filed too late. Under the Fair Labor Standards Act (FLSA), the statute of limitations on federal minimum wage and overtime claims is two years — or three years, if willful. These plaintiffs filed well after the deadline had passed.

The plaintiffs didn’t go away quietly, however. Knowing they had missed the deadline, they first tried some creative arguments as to why the court should toll — or extend — their deadline to file.

First, they argued that they the moving company had tricked them into thinking they weren’t employees and had no FLSA rights, since the moving company told them they were independent contractors. Sorry, the court ruled. If that were an excuse, there would be no statute of limitations in misclassification cases. The deadline to file would get tolled every time, and that’s not gonna happen.

Second, they argued that the moving company failed to provide the required posters that notify employees of their rights. Again, no dice. Independent contractors aren’t entitled to employee notices, so if the company thought the workers were contractors, there obviously wouldn’t be notices. This too would apply in every misclassification case and cannot be grounds for tolling the filing deadline.

Finally, they argued that they were immigrants and shouldn’t be held responsible for not knowing the rights under US law. The judge wasn’t buying that one either. Ignorance of the law is not an excuse, especially when the plaintiffs were basing their lawsuit on the very law they claimed to be ignorant of.

This case dealt with statutes not statues, and despite spellcheck’s frequent failure to see the difference, there is a difference. Anyway, the excuses by the statue guy and the movers were similarly unimpressive. The movers’ case was dismissed for failure to file within the statute of limitations, and the court never even considered whether the workers were actually misclassified.

Companies facing misclassification claims need to remember to review statutes of limitation. A claim filed too late is destined to fail, so long as the company raises that defense.

And I still can’t believe the New Zealand guy thought he could go unnoticed by holding really really still. I’d love to see the body cam footage from when the officers moved in and caught him. Swatting away the pigeons on his head probably gave him away.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

Discomfit a Bear? Here’s a Quick Tip To Improve Your Independent Contractor Agreements

In this story from the Illustrated Police News, 1877, we see the courageous exploits of a young lady from Runcorn, England, skillfully discomfiting a bear with her parasol. Now, I question whether this really happened as captioned. The caption says she punched the bear in the eye with her parasol, but this artist’s rendering depicts more of a body blow, so I’m not sure which to believe. But either way, as you can see, the bear was discomfited and this atypical encounter ended well.

In this instance, a parasol was more than a mere umbrella. It served as a defensive weapon.

The lesson here is that objects we take for granted can be used as a defensive weapon with some proper planning. That includes your independent contractor agreements.

Independent contractor agreements should not be generic, off-the-shelf documents. Every agreement is an opportunity to build your defense against a claim of independent contractor misclassification.

Think about all of the factors that go into determining whether someone is an employee or an independent contractor. For a refresher, you can review some earlier posts on Right to Control Tests and Economic Realities Tests. Also here.

On factors where are you do not exert control and do not need to exert control, put that in the contract. Put in the contract that the contractor controls these factors and you have no right to control them.

For example, do you care what time of day the contractor works? Do you care if the contractor retains helpers? Do you care whose tools the contractor uses?

If not, put that in the contract: The contractor decides when to work, whether to hire helpers, and what tools to use. There are dozens more factors like these to consider. The point is to customize your agreement so that it is defensive weapon to help fend off a claim.

Then go a step further and put in the contract that you have no right to control these decisions. Remember, the Right to Control tests generally focus on whether you have the right to control something, even if you don’t actually exercise that right.

If you use your agreement to memorialize the good facts—those that support independent contractor status—then you can turn that agreement into a defensive weapon.

The agreement might not help if confronted with a bear in Victorian England (“here, read this contract while I run!”), but it may help to discomfit an independent contractor misclassification lawsuit.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

 
2018_Web100Badge
 

DOL Can’t Go For That (No Can Do), Appeals Joint Employment Ruling

Channeling their inner Hall & Oates, the Labor Department appealed a recent ruling by a New York federal judge that tried to invalidate the DOL’s new joint employer test.

What do I mean? I mean the DOL basically said, “I Can’t Go For That (No Can Do).”

Taking a step back — but not all the way to 1981, when the Private Eyes album was released — the DOL enacted a new test for joint employment in March 2020., which you can read about here. But in September 2020, a federal judge in New York claimed the test was invalid. DOL: No can do. The ruling is now on appeal and will be heard by the Second Circuit Court of Appeals. Expect a decision sometime in 2021.

While conducting important background research for this blog post (which consisted entirely of me listening to Apple Music’s Yacht Rock Essentials on my Sunday morning run), it struck me how similar the Hall & Oates lyrics are to Meatloaf’s “I’d Do Anything for Love (But I Won’t Do That).”

Hall & Oates: I’ll do anything that you want me to do, Yeah, I’ll do anything that you want me to (ooh, yeah), but I can’t go for that, nooo (no). No can do.”

Meatloaf: I would do anything for love, but I won’t do that. No I won’t do that.

Am I overthinking this? Are they not that similar? It was cold out. And raining. And there was a steep hill I had to get up. So I was trying to focus on something other than my aging knees. Which were probably thinking no can do.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

2018_Web100Badge