Author Archives: Todd Lebowitz

08.20.18
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When Is a Referral Service an Employer?

Hamburger

Retired prison guard Don Gorske claims to have eaten two McDonald’s Big Macs every day for the past 46 years. That’s 30,000 Big Macs.  If you are looking to hire a retired prison guard whose arteries laugh at the common man’s battle with cholesterol, Don is your man.

Referral services are business that serve as matchmakers. They could find you someone like Don if that’s what your company needs.

But when are referral services considered employers (or joint employers) of the workers they place? That is the question explored in a recent Bulletin posted by the Wage & Hour Division of the DOL.

The Bulletin looks specifically at home health care registries, but the analysis and factors should be applicable when trying to answer this question for any business whose primary service is matchmaking for workers.

Unlike home health care agencies, registries don’t provide actual home healthcare services. they just find qualified providers and match them with individuals in need, who then presumably become the caregivers’ employers.

Under federal wage and hour law (the Fair Labor Standards Act), an Economic Realities Test is used to determine whether an employer-employee relationship exists.

In the context of health care referral services, here are the factors that the WHD says are most relevant:

  1. Background Checks & References. Objective data collection does not suggest employment, but interviews that result in subjective judgments and recommendations may suggest an employment relationship.
  2. Hire and Fire. Hiring and firing are suggestive of employment. A referral service should be introducing candidates, not making hiring decisions.
  3. Scheduling and Assigning Work. Also indicative of employment. A referral service should not be involved in this.
  4. Controlling Caregiver’s Work. Control suggests employment. A matchmaker should not be involved in the actual work being performed.
  5. Setting Pay Rate. This is up to the employer (the individual) and the employee. A referral agency should not be setting pay rates.
  6. Receiving Continuous Payment for Services (Instead of Fee-Based). When the a registry receives a referral fee, that does not suggest an employment relationship. But if the agency’s pay varies by the number of hours worked by the caregiver, an argument can be made that the worker’s pay is affected by the hours worked and the cut given to the agency, which may weigh in favor of an employment relationship. This seems like a minor factor though.
  7. Paying Wages. If the registry pays the caregiver’s wages, that weighs in favor of an employment relationship.
  8. Tracking Hours. The employer, not the agency, should be responsible for tracking hours in compliance with worker pay and recordkeeping requirements.
  9. Purchasing Equipment and Supplies. The caregiver or the recipient should be doing this, not the agency.

As long as we’re talking health care, I’m going to limit my Big Mac intake to under two a day. Not that I’m judging, Don.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.16.18
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When Are Shareholders Also Employees? (Disney-Themed Version)

When are shareholders considered employees

I have always believed that in the song made famous by Happy, Dopey, Sneezy and friends, they were saying “Off to work we go,” but I just checked a few sites for lyrics and the lyrics all show the dwarves singing, “It’s home from work we go.” Can this be true? Have I been mixed up all these years about which way the dwarves were going to dig dig dig with a shovel or a pick?

Work can be confusing. A non-cartoon-dwarf scenario that can be confusing is trying to determine whether shareholders in a business are also employees of that business. In today’s post, we examine that question by celebrating the 15th anniversary of a 2003 Supreme Court case. (Happy Anniversary, case! 🎂)

Like many tests for determining Who Is My Employee?, this one comes down to control and the familiar Right to Control Test.

In Clackamas Gastroenterology Associates, P. C. v. Wells, an employee of this Oregon-based medical clinic tried to sue for disability discrimination under the federal Americans with Disabilities Act (ADA). To bring claim under the ADA, though, the plaintiff must show that her employer has 15 or more employees.

The clinic had four owner/shareholders who were also physicians. If they were also employees, then the clinic had 15 employees and Ms. Wells could pursue her ADA lawsuit. If these physicians were just shareholders and not employees, then the clinic had fewer than 15, and Ms. Wells would be SOL.

The dispute made its way to the U.S. Supreme Court. The Court ruled that the proper way to determine whether the physician/shareholders counted as employees was to apply a Right to Control Test. But which version?

The standard Right to Control Test tries to distinguish between an employee and an independent contractor. Because the question here is a bit different, the test had to be adapted to fit the situation.

The Court decided that these six factors were most important for deciding whether the physician/shareholders were also employees:

1. Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;
2. Whether and, if so, to what extent the organization supervises the individual’s work;
3. Whether the individual reports to someone higher in the organization;
4. Whether and, if so, to what extent the individual is able to influence the organization;
5. Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and
6. Whether the individual shares in the profits, losses, and liabilities of the organization.

Like the traditional Right to Control Test, this is a balancing test. Some factors may weigh in one direction, some may tilt the other way. Ultimately, a judge (or jury) needs to weigh the factors and make a determination.

In this case, the Supreme Court did not do the weighing. Instead, it articulated the test and sent the case back to the Oregon district court to weigh the factors.

So for Ms. Wells, the case left the Supreme Court and went back to the federal court in Oregon. And so the real question is: For Ms. Wells after the Supreme Court’s ruling, was it “off to court we go” (headed back to Oregon) or “home from court we go” (leaving D.C.)? I bet she never thought about that.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.13.18
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NYC to Cap Number of Uber, Lyft Drivers

Traffic uber lyft NYC law suspect TLC license

In the Jimi Hendrix song, Crosstown Traffic, Jimi plays a nifty little riff with a makeshift kazoo constructed from a comb and tissue paper. The lyrics compare trying to get through to his lady friend with trying to get through Manhattan’s cross-town traffic, which was already bad in 1967. (Thanks Wikipedia!)

News Alert: New York City Has Bad Traffic!

So whose fault is that?

In a gut punch to the gig economy, New York City just passed an ordinance that will place a one-year ban on granting new licenses for ride hailing vehicles.

To drive using Uber or Lyft in NYC, you need a license from the Taxi and Limousine Commission (a different kind of TLC). During this one-year suspension period, the city will conduct a study on traffic and congestion and will examine driver compensation.

According to this Wall Street Journal article and nifty graph, since the emergence of Uber and Lyft as ride-share options, the value of NYC taxi medallions has plummetted from about $1 million to roughly $200,000; and since 2015, the number of TLC-licensed drivers (cabs and ride-sharing services) has more than doubled. The City points to increased congestion as the reason to suspend the issuance of new TLC licenses for a year.

The ride-share companies argue that the cap will limit the number of available drivers in outer boroughs, increasing New Yorkers’ wait times.

Is the City’s motivation really to address traffic congestion? Or is the idea instead intended to help the struggling taxi industry? Hmmmm.

Under the new law, licenses that have already been granted are not being taken away.

In case you were interested (or even if you are not), here are the general requirements for obtaining a license from TLC if you want to drive. [Uber, Lyft]

But for the next 12 months, the application process will be “just like crosstown traffic,
So hard to get through to you.”

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.09.18
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Can Independent Contractors Sue for Employment Discrimination?

diaper independent contractor discrimination

The answer brings to mind the one must-have item for the thousands of crazies who spend 12 hours in Times Square waiting for the ball to drop every New Years’ Eve with no available public restrooms:

Depends.

Under federal anti-discrimination law, an individual generally needs to be an employee to bring an employment discrimination claim. Laws like the Age Discrimination in Employment Act (ADEA) and Title VII of the 1964 Civil Rights Act require employment status to file a lawsuit. Race discrimination claims, on the other hand, can potentially be brought under a different statute.

State laws, however, vary. Some states permit independent contractors to bring “employment discrimination” lawsuits; other states do not.

A recent decision by the Washington Supreme Court serves as a reminder that in the Great Northwest (home of Mount St. Helens and Blaine Peace Arch Park [which I visited  last month and got to run around and around the obselisk that marked the international border]), an independent contractor can bring a state law claim for discrimination “for the making or performance of a contract for personal services.”

The Pennsylvania Human Relations Act also prohibits discrimination against independent contractors.

On the flip side, state anti-discrimination laws in Ohio and Florida protect only employees, not independent contractors.

To determine whether independent contractors are protected under anti-discrimination laws, the answer truly is: It depends.  It depends on the type of alleged discrimination and depends on the state whether the alleged discrimination occurred.

None of this is to say that companies in states like Ohio or Florida should discriminate against contractors. In fact, where facts of any individual case are particularly egregious, common law claims might be recognized by courts uncomfortable with the idea that there is no remedy, even if the state’s anti-discrimination statute does not permit the claim. Although I live on the defense side, I still say: Do the right thing.

And if you should ever find yourself in Times Square on New Years’ Eve, passing the hours until the ball drops, I say this: Bring your adult undergarments. There’s no place to pee.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.06.18
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Is It Legal to Subcontract Out Union Work? (Ask a Song Title)

Subcontract union workI like similar but contradictory song titles. Pink Floyd has Wish You Were Here. But REO Speedwagon has Wish You Were There.

For one Puerto Rican company in the injection-molded products business, the message to its union was Wish You Were Gone (that’s Cosmo Pyke, 2017).  The company decided to outsource a portion of its injection mold production to a subcontractor but otherwise stayed in the business. The union filed an unfair labor practice charge.

The union won. The NLRB recently ruled that the company could not subcontract out work that had traditionally been performed by the union — at least not until the company had bargained over it and reached impasse. The Board ruled that once the union is performing a certain kind of work, a company’s decision to reconsider who performs this work is a mandatory subject of bargaining, so long as the company was remaining in the business. (The result likely would have been different if the company was getting out of that line of work.)

The Board noted that the company “remained an active participant in the production of injection-molded products, owned the machinery that manufactured the product, and continued to sell the product directly to the customers it served prior to its transfer of production to Alpla [the subcontractor].”

The moral of the story here is that — whether you wish the union were here, there, or gone — you need to bargain with it before subcontracting out its work. Exceptions may apply, depending on the facts and circumstances, but be cautious.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.02.18
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DOL: Association Health Plans Are Not Evidence of Joint Employment

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For some conditions, medical treatment will not help. For example, in 1979, Robert Palmer had “a bad case of lovin’ you” and no pill was gonna cure his ill. It is unknown whether this condition ever cleared up. At last report, Palmer had become addicted to love.

For those with conditions where pills can cure ills, or for those (like Huey Lewis?) who just want a new drug, medical coverage can be important. A new DOL rule allows small businesses to participate in Association Health Plans without exposing themselves to joint employer liability.

An Association Health Plan (AHP) is a group health plan that allows small employers to band together to purchase the types of coverage that are available to large employers, which can be less expensive and better tailored to the needs of their employees. AHPs can be formed based on common geography or based on a common industry or trade group.

The Department of Labor recently issued FAQs and a lengthy rule about AHPs, but for our purposes, one of the important pro-business features is that participation in an AHP cannot be used as evidence that the participant employers are joint employers under federal wage and hour law or employee benefits law.

The rule also recognizes that businesses may contract with individuals as independent contractors and that jointly participating in an AHP with these independent contractors does not make the business an employer or the contractor an employee.  The inclusion of independent contractors in an AHP is not evidence of misclassification.

The rule takes effect August 20, 2018.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

To nominate WhoIsMyEmployee.com for 2018 best ABA Blawgs,
click here: http://www.abajournal.com/blawgs/web100/
Thank you for your support! (Nominations close on Aug 7)

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07.30.18
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Lessons from a Reggae Cucumber Song: Draft Benefit Plan Eligibility Language Carefully

ERISA independent contractor misclassification cucumber

Reggae artist Macka B has a song touting the nutritional benefits of the cucumber. The song includes verses like:

Get the cucumber cut it inna slice
Put it inna jug of water overnight
You know what you get for a fraction of the price
Energy drink full of electrolytes

I learned about this song when I asked The Google for songs about benefits. But as much as I like the song (youtube here), this post is about a different kind of benefits.

One of the biggest risks of independent contractor misclassification is having to provide employee benefits to workers you thought were independent contractors. If it turns out those workers were misclassified and are really employees, they may suddenly be eligible for all sorts of employee benefits, including retirement plans like 401(k) match and employee stock ownership. And they’ll be eligible retroactively. This can be expensive. A goof of this type cost one major corporation $97 million back in the late 1990s.

As one recent federal court decision from Georgia reminds us, businesses can avoid this risk with careful drafting in its benefit plan document.

Continue reading →

07.26.18
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Does California’s ABC Test Violate Federal Law? Truckers Sue, Saying It Does

Trucker Dynamex ABC Test California

The 1976 song, Convoy, is about a fictional trucker rebellion, protesting the 55 mph speed limit, tolls, and mandatory log books to ensure that drivers limit their hours. The song is full of trucker slang and includes CB conversations among Rubber Duck, Pig Pen, and Sodbuster. The truckers crash road blocks and flee the police and reinforcements from the Illinois National Guard. Here’s a fun little article about how this truckers’ protest anthem became a hit single.

The truckers are protesting again.

On July 19, the Western States Trucking Association filed a federal lawsuit, alleging that the California Supreme Court’s new ABC Test (set forth in the Dynamex case) for Continue reading →

07.23.18
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Court Expands Use of ABC Test in California, Commits Candy Land Party Foul

Dynamex ABC Test Candy Land

Suppose you are dominating an important game of Candy Land, having picked the orange card first, which gave you the privilege of taking Rainbow Trail across half the board to a distant purple square, leaving your toddler opponent in tears, whining, “No Fair!” Well, your toddler would be wrong since that was perfectly fair and within the rules. But you feel bad for young Timmy and so you allow him to change the rules mid-game so that no one can use Rainbow Trail, forcing you to plod slowly across all the regular squares, bored to tears because this stinking game takes forever.

Sometimes we make exceptions for bratty toddlers, but in real life it’s no fair to change the rules in the middle of the game. You may have built your entire Candy Land strategy around trying to pick the Orange square card first. It’s not fair to block you from Rainbow Trail after the game has started.

The same is true in business. Businesses hire employees or retain independent contractors according to the rules in place when they make those decisions.

An important ruling last week threatens to change the Independent Contractor vs. Employee rules midway through the game — but this is no game.

Continue reading →

07.16.18
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We’re Blogging about Logging! (I know, lame headline, but true)

Logger Ohio workers compensation independent contractor

The lyrics, “Come fly with me, come fly, come fly away” are instantly associated with Frank Sinatra (although, troublingly, the Michael Buble version appeared higher in my google search for a link to the lyrics). It is a little known fact* that the original version of the song was an ode to woodsmen and forestry workers and went something like this: “Come log with me, come log, come log away.”

In the original* lyric, Ol’ Blue Eyes invites a fellow logger to chop wood with him — not for him. That same distinction (with, not for) made all the difference in a recent court decision denying workers compensation benefits to a logger.

Continue reading →