Announcement: Good Morning to our New Contingent Workforce Practice Team

Baker Hostetler Continent Workforce TeamI recently finished reading Elton John’s autobiography, Me. I’ve always been a big fan, particularly of the early 1970s albums and not the hits. Albums like Tumbleweed Connection, Honky ChateauCaptain Fantastic and the Brown Dirt Cowboy, and Don’t Shoot Me I’m Only the Piano Player have always been among my favorites.

I learned in the book that in 2012, Elton turned over his early 1970s collection to the Australian dance trio Pnau, letting them sample excerpts of these songs in unexpected ways. The result was Good Morning to the Night, a remix album that I had never heard of, but I listened and it blew my mind. Some of the tracks are dance mixes, which are generally not my thing but here it works, in a way I never could have imagined. Another track creates a Pink Floyd feel. Highly imaginative.

I’m excited to announce a new development too, but there is no accompanying dance track or remix.

Last week, BakerHostetler announced the formation of our new Contingent Workforce practice team, which is co-led by me and Mark Zisholtz. We assembled a team that consists of more than 20 Baker lawyers from various practice areas, including tax, employee benefits, government contracts, and corporate transactions. All of these areas of law can come into play when addressing contingent workforce issues .

I invite you to review the Contingent Workforce practice team’s web pages. The web design includes subpages focused on specific services we provide to userssuppliers, and gig economy & technology platforms. On the right side of the web page, you will also find links to two useful tools. The Playbook offers a practical approach for businesses looking for information on how to comply with California’s new independent contractor misclassification law, Assembly Bill 5; and Five Things You Should Know About Joint Employment provides useful tips and facts.

I also recommend Good Morning to the Night. It’s different and unexpected, especially if you know and love the early ‘70s Elton John songs that were not chart-toppers. You can thank me later. And check out the new Contingent Workforce web pages!

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© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Need Direction After California’s New Independent Contractor Law? Download the Playbook!

Siri punked me. Independent contractor misclassification AB 5Sometime I forget where I park, so when I went to the airport recently, I told Siri where I left the car.

Siri then punked me with this. I think it was intentional. Stupid AI.

California businesses may be in need of some direction too. On September 18, Gov. Gavin Newsom signed Assembly Bill 5 into law.  The law redefines the Independent Contractor vs. Employee test in California, applying an ABC Test to a broad range of state laws.

When the law takes effect January 1, 2020, it will instantly turn thousands of independent contractors into employees. Some aspects of the law may even apply retroactively.

What are your options?

I can think of ten. Click here to download The Playbook: Now That California Has Passed AB 5, What Are the Options for Businesses Using Independent Contractors?

 

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© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

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Arbitration Agreements & Staffing Company Workers: Can They Take You Anywhere You Want to Go?

1956 chevy bel air Arbitration agreements staffing agency

1956 Chevy Bel Air. The Ides of March’s Vehicle was a ‘55.

I’m your vehicle baby. I can take you anywhere you want to go.

That may be true for Jim Peterik, vocalist and frontman for The Ides of March, who issued this bold proclamation in the band’s 1970 single, “Vehicle.” (It worked. See more below.)

It’s not true for arbitration agreements, though. They can’t take you anywhere you want to go unless you draft them very carefully. A recent decision by the First Circuit Court of Appeals reminds us of this lesson, although the opinion disappointingly fails to quote the Ides of March.

In Hogan v. SPAR Group Inc., we have an independent contractor named Paradise Hogan (which seems like would have been a cool name for a rock band); a staffing company called SBS; and a retail services provider called SPAR.  SPAR contracted with the staffing company to use the services of its independent contractors, including Hogan.

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Supreme Court Ruling May Stop Enforcement of Some Contractors’ Arbitration Agreements

New Prime v Olivieri double decker bus

The year 1925 was a banner year for transportation. Walter Percy Chrysler founded the Chrysler Corporation, London introduced its first double decker bus, and Malcolm Campbell became the first person to exceed 150 mph in an aero-engined car, accomplishing the feat at Pendine Sands in Wales. (Thanks, Wikipedia!)

Meanwhile, back in the States, American courts had developed a habit of not enforcing arbitration agreements, and Congress was determined to change that. In 1925, Congress enacted the Federal Arbitration Act (FAA), which is the law that allows parties to agree to arbitrate disputes and which tells courts to respect those agreements, subject to a few limited exceptions.

Those exceptions were at issue in the Supreme Court case of New Prime v. Olivieri, decided last week in an 8-0 decision. 

The Court ruled that:

(1) If there is a question about whether the FAA applies to an arbitration agreement, a court — not an arbitrator — decides whether the FAA protects the arbitration agreement. 

(2) The FAA’s exception — which says the FAA does not cover workers in the transportation industry — applies not just to employees in the transportation industry but also independent contractors. In other words, the FAA does not protect arbitration agreements entered into by independent contractors in the transportation industry.  

For business owners who wish to use arbitration agreements with their workers, what does this ruling mean?

I.  Who decides who decides?

Sometimes an arbitrator decides whether a dispute is subject to arbitration, and sometimes a court decides. Last month in the Henry Schein case, the Supreme Court held that an arbitrator can decide, in most instances, whether a dispute is covered under an arbitration agreement.

But last week’s New Prime case draws a distinction about who decides if the issue is whether the FAA applies to the dispute.

So, to simplify: On the issue of who decides whether a dispute is subject to an arbitration agreement, what’s the rule now? 

1. If the issue is whether the FAA protects the arbitration agreement, a court decides whether the FAA applies or not. (That’s the New Prime decision.)

2. If the FAA does apply and the issue is whether a particular dispute is subject to the agreement to arbitrate, then the arbitrator decides whether a dispute is subject to the agreement to arbitrate — assuming that the arbitration agreement has delegated to the arbitrator the ability to decide. (That’s the Henry Schein decision.)

The last sentence in Point 2 is the reason companies should consider adding a clause to their arbitration agreements saying that the arbitrator decides questions of arbitrability.

II.  How does the New Prime ruling apply to arbitration agreements with independent contractors? 

For independent contractors not in the transportation industry, this ruling does not apply. Arbitration agreements with independent contractors are generally enforceable and are protected by the FAA.

But how do we know the FAA doesn’t apply to all independent contractors in interstate commerce?

To answer that question, we need to head back to the Year 2001, a year after the electronic calendar shifted away from 19xx and technically-inclined doomsday prophets foretold of planes falling out of the sky. Shortly after mankind endured this potential calendar-caused calamity, the Supreme Court issued its decision in Circuit City Stores v. Adams.

The issue in Circuit City was whether the FAA applies to arbitration agreements between employers and employees. There is a carve out provision in the FAA, saying that the law favoring arbitration does not apply to “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

The issue in Circuit City was whether the carve out for “contracts of employment” of “workers engaged in foreign or interstate commerce” was intended to be broad and apply to all employees in interstate commerce or just those in the transportation industry. What was the intended meaning of “workers engaged in … interstate commerce”?

In Circuit City, the Court ruled that:

(1) the FAA generally does apply to arbitration agreements between employers and employees, but

(2) the FAA does not apply to workers in the transportation industry.

The Court decided that the phrase “workers engaged in … interstate commerce” was intended to refer only to workers in the transportation industry, not all workers. Arbitration agreements with employees in industries other than transportation would be enforceable under the FAA.

But that decision left open an important issue: What about independent contractors in the transportation industry? Do they have “contracts of employment”? Does the FAA apply to their arbitration agreements or not?

Fast forward to last week’s New Prime case.

The Supreme Court ruled that when the FAA was written in 1925, the phrase “contracts of employment” was understood to mean all work engagements, not just employer-employee relationships. Our understanding of the word “employment” has changed over time and, if that phrase were used in a statute today, it would likely refer only to true employer-employee relationships. But in 1925, it meant all work.

The Court therefore ruled that the FAA’s carve out applies to all workers in the transportation industry, regardless of whether such workers are employees or independent contractors. This means that arbitration agreements signed by employees or independent contractors in the transportation industry are not covered by the FAA, and therefore their agreements to arbitrate disputes are not protected by the FAA. Those disputes might have to go to court.

So what happens now?

First, the ruling is narrower than it may seem. The Court ruled only that the FAA did not apply to independent contractors’ arbitration agreements in the transportation industry.  It did not rule that these arbitration agreements were automatically void.

Many states have their own statutes that protect arbitration as a means for resolving disputes. Companies with workers in the transportation industry should check whether there is a state law that can be applied to protect these arbitration agreements.  If it would be reasonable to apply that state’s law, then companies should consider choosing that state’s law in the arbitration agreement’s Choice of Law provision. The right state’s law might still be able to save the arbitration agreement. We can expect further litigation on this subject, but here’s a tip for now. Try to pick a state with a favorable arbitration statute if your workers are in the transportation industry.

Second, we can expect the next battle to be over the meaning of the phrase, “transportation industry.” Does the “transportation industry” include only workers who transport goods across state lines? Or does the “transportation industry” include independent contractor drivers who transport passengers across town (such as ride share) or who deliver your pizza?

In Circuit City, the Supreme Court looked favorably on other court decisions that had defined the “transportation industry” to mean those workers “actually engaged in the movement of goods in interstate commerce.” If that holds true, then local drivers of passengers and late-night food cravings should be considered not part of the “transportation industry.” The FAA, therefore, would still apply to those workers.

But we can expect the plaintiffs’ bar to argue for a broad interpretation of the “transportation industry.” We can now expect to see arguments that rideshare drivers and local delivery drivers are in the “transportation industry” and that their arbitration agreements are not protected by the FAA. I think that argument is incorrect, but I do expect to see it.

I would expect Courts of Appeal (and perhaps eventually the Supreme Court) to adopt a narrow view of the “transportation industry,” meaning that the FAA still applies to independent contractors who transport people or make local deliveries. I expect the courts to rule that the carve out from the FAA exempts only those workers (employees and contractors) who routinely transport goods across state lines.

For now, here’s what you need to know:

  • Arbitration agreements with independent contractors in the “transportation industry” are not protected by the FAA. It may be more difficult to enforce those arbitration agreements unless they are governed by the law of a state with its own arbitration statute.
  • Arbitration agreements with independent contractors outside of the transportation industry should remain enforceable under the FAA.

And the bottom line for me is that maybe it’s time for self-driving cars.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Orlando on Jan. 24, Philadelphia on Feb. 26, or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Will New Bill Finally Allow Independent Contractors to Receive “Employee” Benefits?

Employee benefits for independent contractors

In 1983, Journey released the album Frontiers which, as you all know, is not as good as Escape but way better than Raised on Radio. The third song on Frontiers is After the Fall (youtube 80s refresher here), not to be confused with the later-formed Australian rock band, After the Fall (which is not to be confused with the much earlier British post-punk band The Fall, which came before After the Fall, but I digress). The Australian band, After the Fall, featured a drummer named Mark Warner, not to be confused with the Democratic Senator from Virginia, who, incidentally, is not related to John Warner, who was also once a Senator from Virginia.

Mark Warner the Senator recently introduced a bill that relates to the subject of this blog, and so for that, I am grateful, especially since it allowed me to mention the album Escape, which I really liked very much.

Sen. Warner has been trying for some time to gain traction on a bill that would promote portable employee benefits for gig workers. I am solidly behind this idea, as it would provide much more flexibility for independent contractors to carve out their own career paths without forfeiting employee benefits. I never understood why we tie health insurance to employment in this country, but that’s for another day.

Warner’s bill has never gone anywhere but, to his credit, he is trying again.

Last week, he introduced an amendment to a massive appropriations package. The amendment would set up a system to award grants for state and local governments and non-profits. The grants would support the creation of programs to allow portable benefits for gig workers, including health insurance, workers compensation, disability coverage, and retirement savings plans.

I hope the program succeeds. The current legal framework, which recognizes independent contractors and employees but no third option, is not consistent with how the modern gig economy works. If benefits can be de-coupled from employment, as they should be, we may eventually see a 21st century system that allows gig workers to receive insurance, workers comp, and other protections, without having to be reclassified as employees.

Thank you, Sen. Warner. I won’t stop believin.

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

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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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Misled: Gov’t Study Claims Contingent Workforce is Shrinking. False.

Contingent workforce study resultsDespite what you might think from having attended myriad weddings, bar mitzvahs, or other parties, Kool & the Gang has songs other than “Celebration.” (I had to look this up to verify.) One such song is called “Misled.” It includes lyrics like, “She’s as heavy as a Chevy” and “So enticing, he’s sure to take a bite.”

The video hilariously begins with our hero washing his face in the sink – a surefire way, if there ever was one, to heighten suspense and draw the audience in.

Also to draw you in, the Bureau of Labor Statistics (BLS) headlined its just-released study on the contingent workforce by concluding that the number of contingent workers is declining compared to 2005. Whah?

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