How to Support Prong C of the ABC Test, and Why You Can’t Lie Down When Faced with an Audit

Zippy practices for the 13th Annual Lying Down Championships

Lying down in the face of a challenge is rarely a good strategy. I did, however, find one exception.

A man from Montenegro recently won the 12th Annual Lying Down Championships, beating out nine other competitors by remaining horizontal under a tree for 60 hours. As a reward for his (lack of) effort, he received 350 euros, lunch for two at a restaurant, a weekend stay at a local village, and a rafting trip.

Then things got weird. Local media reported that shortly after the competition, the winner was taken into police custody for (allegedly) physically attacking journalists and damaging the headquarters of a newspaper that called him “the biggest swindler in all of Montenegro.”

I suppose there’s a lesson in here somewhere: Offer a man an award and he’ll lie still for 60 hours, but call him a swindler and he won’t take that lying down.

But I digress. In this post, I want to share some tips gleaned from a recent New Jersey Supreme Court case involving prong C of the ABC Test. The case also serves as a reminder never to take a misclassification audit lying down.

The dispute involved East Bay, a drywall installation company that used independent contractor drywall installers for residential jobs. Until 2013, the company treated its installers as employees. It then switched to an independent contractor model. Risky move. This sparked an audit.

The New Jersey Department of Labor and Workforce Development wanted to know why this company, which was still active, suddenly lacked employees. The audit looked at the individuals who continued to install drywall and examined whether, under New Jersey’s ABC Test, they were independent contractors or employees.

You can guess what happened next. The Department found that 16 installers were misclassified, and it issued a hefty back assessment against the company for failing to pay into the state unemployment fund. The company appealed and lost.

The New Jersey Supreme Court’s opinion focused largely on what it takes to prove prong C of the ABC Test — that the individual “is customarily engaged in an independently established trade, occupation, profession, or business.” (You can read more about New Jersey’s ABC Test here, but otherwise I am going to assume that readers are familiar with the basic concept of the ABC Test.)

The drywall company put forth evidence that the independent contractors had registered business entities and certificates of insurance. The New Jersey Supreme Court held that wasn’t enough to satisfy prong C. This evidence wasn’t enough to prove that the individuals truly operated independently. Evidence in support of prong C should demonstrate that the independent contractor would not become unemployed if the work from this company went away.

The Court gave some examples of evidence that would have been more persuasive in satisfying prong C, including:

  • That the IC’s business will continue when this engagement ends;
  • That the IC’s business is stable and lasting, or other evidence of longevity;
  • That the IC has other customers;
  • That the IC has other sources of revenue, and the company being audited is not the primary source of income for the IC;
  • That the IC provides the tools, equipment, vehicles, and other resources needed to perform the work;
  • That the IC has telephone listings or business stationery;
  • That the IC advertises;
  • That the IC has its own employees;
  • That the IC maintains inventory;
  • That the IC bears the risk of loss;
  • That the IC benefits from the goodwill generated from a job well done;
  • That the IC is required to maintain educational and licensure requirements;
  • That the IC is permitted to obtain work from other businesses; and
  • That the IC in fact performs work for other businesses.

The court cited these as examples of the types of evidence that would have been helpful to prove prong C. This is not a mandatory list. The point here was just that business registrations and certificates of insurance were not enough. Strategically, there is other evidence that would be helpful too, and there are steps that can be taken when retaining ICs to help build a defense. I maintain a longer list but, hey, I can’t give away all the secrets here.

Other observations from the New Jersey Supreme Court decision:

1. How to invite an audit. Switching from an employee model to an independent contractor model is, by itself, enough to prompt an audit.

2. An ominous footnote about prong B. There was also a dispute in this case over the meaning of prong B. Remember, New Jersey has a standard ABC Test, which allows prong B to be satisfied by showing either the work is outside the hiring party’s usual course of business or the work is performed outside of the places of business of the hiring party. (This is different than the California version of the ABC Test.) All drywall installation work was performed at customers’ residences. After the audit, the Commissioner of Labor found (inexplicably) that prong B was not satisfied. It is unclear from the opinion whether that was based on a conclusion that the customers’ residences were East Bay’s places of business or was based on some other fact, such as some kind of work being done at East Bay’s place of business. If the Commissioner believed customer’s residences to be East Bay’s places of business, then it is hard to see how the latter part of prong B could ever be satisfied. But the NJ Supreme Court did not consider prong B in its decision. The Court ruled that prong C was not satisfied, and so it chose not to wade into the morass of prong B.

But there is an ominous footnote. When the Court declined to consider prong B, it noted that in its prior decisions, the place of business meant locations where the hiring party had a “physical plant or conducts an integral part of its business.” That’s consistent with common sense and would exclude a customer’s residence. The Court then, however, invited the Department of Labor to issue regulations explaining how the Department thinks prong B should be interpreted. Yikes!

3. You need to fight unemployment claims by ICs at the initial audit level; you can’t expect a court to save you on appeal. Courts will defer to the findings of an agency if its factual findings have any support in the record, no matter how flimsy. In other words, the agency can be wrong in its overall weighing of the factors, but a court is supposed to affirm the agency’s decision if there’s evidence to support it. Not “a preponderance of evidence” or “ample evidence” or even “sufficient evidence.” Just “evidence.” Folks, the reason we have trials is because there’s almost always at least some evidence on both sides, even if the preponderance of the evidence leans the other way. You shouldn’t have to pitch a shutout to win the game.

I have seen the same deference standard applied to unemployment decisions in New York and Ohio. The courts defer to the agencies. It is unfair. The result can be that the agency’s decision gets affirmed, even if it made the objectively wrong decision.

This unfair standard highlights how important it is to win at the earliest stages in an unemployment claim, if independent contractor status is being challenged. The initial investigation is your best chance to defend independent contractor status. If you wait, it’s too late. Provide the auditor your best evidence on every factor, and don’t hold back.

Remember the consequences too. If one contractor is misclassified, the agency will likely deem all other similarly situated contractors to be misclassified, and you’ll be on the hook for unpaid assessments for all of them. The stakes are high. Companies using independent contractors should spend the time and money to mount a full defense of their contractor’s status at the audit stage. It’s worth the investment, especially because the state courts will generally defer to the agency’s findings, even if the agency is wrong.

Here’s the ultimate takeaway: If you’ve entered a Lying Down Competition, it’s ok to lie down for as long as you want. But if you’re faced with a worker classification audit, or a 1099 audit, or an unemployment claim by a former independent contractor, do not take that lying down.

You need to fight hard in the audit, producing evidence to support independent contractor status. You’ll have the right to appeal if you lose, but don’t expect a fair chance to prove your case. You’ve got to do your best to win any classification dispute at the initial audit. That’s the time to retain counsel and invest time and resources. If you lose the audit and bring an appeal, you’re fighting a steep uphill climb.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Watch Your Back, AB 5! Ninth Circuit Case Could Wipe Out California’s ABC Test

Yes, that’s a goat on my back.

This weekend we tried goat yoga. Highly recommended. It was a mix of basic yoga (my kind of yoga) to help get me stretched out, but held in a pen with goats who know no boundaries.

We then toured the farm, which featured llamas, long-haired pigs, guinea hens, a few obligatory dogs, and several varieties of goats, including the kind of fainting goats featured in that George Clooney movie.

Having to watch my back during yoga was something I signed up for and was part of the fun. Not so for California’s AB 5, which should be watching its back after what we saw at the Ninth Circuit last week.

The Ninth Circuit held oral argument in a case brought by Uber called Olson v State of California. Uber is arguing that AB 5 is unconstitutional.

While it’s hard to predict cases based on oral argument, the three judges on the panel seemed pretty sympathetic to Uber’s argument, which is that the statute arbitrarily picks winners and losers, i.e., the exemptions make no sense from an equal protection/due process standpoint.

Unlike the strict ABC Test in Massachusetts, the California ABC Test codified in AB 5 (and later AB 2257) contains loads of exceptions. The statute says to use the ABC Test to determine employee vs independent contractor status for all workers — except for dozens of categories of workers and other situations.

Let’s not pretend. We all know this bill was written to target ride share and delivery app companies. The unfairness of making this law apply to everyone soon became apparent and led to the insertion of dozens of exceptions. If an exception applies, the Borello balancing test applies instead of the ABC Test.

The exceptions just about swallow the rule, and a law targeting a handful of companies presents constitutional problems. Or so the argument goes.

We can expect a decision in the next few months, and this is one to watch. Unlike me at goat yoga, imagining a decision that strikes down or severely limits AB 5 is not a big stretch.

AB 5, watch your back.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Watch Your Back, AB 5! Ninth Circuit Case Could Wipe Out California’s ABC Test

Yes, that’s a goat on my back.

This weekend we tried goat yoga. Highly recommended. It was a mix of basic yoga (my kind of yoga) to help get me stretched out, but held in a pen with goats who know no boundaries.

We then toured the farm, which featured llamas, long-haired pigs, guinea hens, a few obligatory dogs, and several varieties of goats, including the kind of fainting goats featured in that George Clooney movie.

Having to watch my back during yoga was something I signed up for and was part of the fun. Not so for California’s AB 5, which should be watching its back after what we saw at the Ninth Circuit last week.

The Ninth Circuit held oral argument in a case brought by Uber called Olson v State of California. Uber is arguing that AB 5 is unconstitutional.

While it’s hard to predict cases based on oral argument, the three judges on the panel seemed pretty sympathetic to Uber’s argument, which is that the statute arbitrarily picks winners and losers, i.e., the exemptions make no sense from an equal protection/due process standpoint.

Unlike the strict ABC Test in Massachusetts, the California ABC Test codified in AB 5 (and later AB 2257) contains loads of exceptions. The statute says to use the ABC Test to determine employee vs independent contractor status for all workers — except for dozens of categories of workers and various other situations.

Let’s not pretend. We all know this bill was written to target ride share and delivery app companies. The unfairness of making this law apply to everyone soon became apparent and led to the insertion of dozens of exceptions. If an exception applies, the Borello balancing test applies instead of the ABC Test.

The exceptions just about swallow the rule, and a law targeting a handful of companies presents constitutional problems. Or so the argument goes.

We can expect a decision in the next few months, and this is one to watch. Unlike me at goat yoga, imagining a decision that strikes down or severely limits AB 5 is not a big stretch.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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The Ohio Supreme Court Just Made It Much Harder to Win a Misclassification Dispute

In the middle of the Bering Sea sit two islands, Little Diomede (U.S.) and Big Diomede (Russia). They sit less than three miles apart, but Big Diomede is 21 hours ahead. That’s because the International Date Line straddles the two. This would make scheduling play dates nearly impossible, but fortunately no one lives on Big Diomede. Little Diomede is home to about 115 brave (and very isolated) souls.

The Diomedes are a great example of being close but still so far away. The Ohio Supreme Court gave us another example in a worker misclassification dispute earlier this month. Ohio companies should pay close attention to this surprising — and bad — decision.

In this case, the Bureau of Workers’ Compensation (BWC) had determined that an underground-cable installation company had misclassified its workers as independent contractors rather than as employees.

The BWC looked back 5 years and handed the company a bill for $350,000 in back assessments for failing to pay into the workers compensation system. Companies pay into the system for employees, but not for contractors. The company appealed, arguing that under Ohio’s Right to Control Test, the installers were properly classified as contractors, meaning the back assessments were not warranted. The company provided evidence showing that the Right to Control factors tilted in favor of contractor status.

The Ohio Supreme Court reviewed the evidence and did not disagree with the company. You’d think, therefore, that they’d reverse the BWC decision, and the company would be relieved from paying the back assessments.

Nope.

The company was close, but oh so far from winning its appeal. That’s because the deck is stacked heavily against companies when it comes to challenging the BWC on worker classification determinations.

The Ohio Supreme Court ruled that, under Ohio law, so long as there is “some evidence” that could support the BWC’s conclusion, the BWC’s decision was untouchable. This is insane.

In every case involving a balancing test — like the Right to Control Test used here — there will be at least some evidence supporting employee status and some evidence supporting contractor status. The point of the test is to weight the competing factors and see which direction the scales tilt.

But according to this ruling, Ohio law grants the BWC an absurd level of deference. The decision appears to say that a court must accept the BWC’s conclusion, even if the scales tilt the other way, so long as there is “some evidence” to support the BWC’s findings.

For Ohio businesses using independent contractors, this ruling means trouble. The BWC is, of course, incentivized to find misclassification because it means more money for the state. After this ruling, companies appear to have little recourse for challenging the BWC, even when the BWC is wrong.

Ohio companies should immediately evaluate their misclassification risks. If a contractor gets hurt and brings a workers comp claim, the BWC will look for misclassification. If the BWC finds it, the BWC will not only grant workers comp coverage for the injured contractor, it will issue back assessments against the company for failing to pay into the workers comp system — with a look back of five years.

Back assessments can also be triggered by an audit.

Same for unemployment. An unemployment claim by a contractor can lead to the same result, with Ohio Job & Family Services making the misclassification call. Back assessments would issue in that scenario too for failing to pay into the unemployment fund.

This ruling goes against the whole point of having a balancing test. I might have expected this level of deference from California or New York, but not Ohio. This ruling was issued by a Republican-majority Supreme Court.

Like the Diomedes Islands, what appears close can be so far away. Your business might be able to show all the reasons why your contractors are properly classified, but it doesn’t even have to be a close call for you to lose. If BWC finds misclassification and there’s merely “some evidence “ to support its conclusion, you might as well be arguing your point in Russian, the language of all zero inhabitants of Big Diomede.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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It’s a Mistake? Too Bad. NLRB Might Soon Make Misclassification an Automatic Unfair Labor Practice

Cover art from the single, released on Epic Records

In the early 80s, I had two cassettes by the Australian band Men at Work — Business as Usual, released in 1981, and Cargo two years later.

Cargo includes the single, “It’s a Mistake,” a satirically upbeat Cold War-inspired song in which a soldier tries to figure out whether the Cold War is about to turn hot. The video features too-short shorts, bad lip syncing, and old ladies hitting the band members with umbrellas on the battlefield, all of which leads to an accidental nuclear launch, triggered when an officer tries to stub out his cigar in an ashtray but hits the wrong button.

All in all — a good song, a mediocre video, and a strong commentary on the politics of the day.

A recent move by the NLRB’s General Counsel revives the “It’s a Mistake” narrative, this time in the context of independent contractor misclassification. There are no accidental nukes involved, but the move is definitely politically motivated.

If the General Counsel has her way, the Board will rule that independent contractor misclassification is an automatic unfair labor practice (ULP), even if it’s a mistake.

To reach that conclusion, the Board would have to overturn its 2019 decision in Velox Express, in which the Republican-controlled Board ruled that misclassifying a worker, by itself, is not automatically a ULP.

The GC’s actions are no surprise. In mid-2021, she issued a strategy memo announcing that one of her strategic (political) priorities was to get Velox Express overturned during her tenure. With the NLRB now featuring a 3-2 Democratic majority, she’s likely to prevail.

What does this mean for companies that use independent contractors?

It means the stakes are higher. If Velox Express is overturned, misclassification of independent contractors would likely become an automatic ULP, even if the classification was well-intentioned. Essentially, there would be strict liability for misclassification.

Traditional remedies for ULPs include back pay and reinstatement, which could mean forced reclassification as employees. The GC has been pushing to further expand the scope of available remedies because, hey, why not.

If your business is hit with a ULP and forced to reclassify workers under the NLRA, good luck trying to maintain independent contractor status under wage and hour laws or other laws.

A reversal of Velox Express, therefore, may have sweeping ramifications, making it much harder to maintain independent contractor status across a broad range of federal and state laws.

The consequences of this expected reversal will be serious — not quite on the scale of nuclear devastation, but worse than old ladies hitting you on the head with an umbrella.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Don’t Get Stuck Naked: Tips for Enforceable Arbitration Agreements When Using Staffing Agency Workers

He was in here. Really. Source: Syracuse Fire Dept Facebook

A Syracuse man was rescued from inside the walls of a historic theater last month after spending two days trapped, naked. The man apparently had entered the building’s crawlspace (why?) and fell from the ceiling into a gap between walls in the men’s restroom. No word on why he was au naturale.

But I’m sure he was glad to be freed from this unexpected situation. He should have planned better — like by not hiding in a crawlspace or, if he had a really, really good reason to hide there, by at least wearing clothes.

You can protect your business from unexpected situations (different ones), such as by making sure your staffing agency agreements include valid arbitration clauses with the staffing agency’s workers. The goal here is to avoid being left naked and stuck, if faced with a joint employment claim.

In a recent Oklahoma case, two staffing agency workers sued the staffing agency and the company where they provided services, alleging a failure to pay overtime.

The company where they worked filed a motion to compel arbitration, arguing that the arbitration agreement the workers signed with the staffing agency should cover all claims against both defendants. The district court initially ruled that the arbitration agreement was only between the worker and the staffing agency, and so it could not be relied upon by the other company. Motion denied.

But the Tenth Circuit disagreed, finding that the non-signatory company could enforce the agreement because the plaintiffs’ claims “allege substantially interdependent and concerted misconduct” against the two defendants. The plaintiffs were therefore “estopped from avoiding their duty to arbitrate their claims arising out of their employment relationship.”

That was good news in this case, but I wouldn’t count on that result every time. This case turned on Oklahoma estoppel law. But with proper planning, you can achieve the same result.

Here’s how:

First, in your agreement with staffing agencies, require the agencies to have all individuals assigned to perform services at your company sign an individual arbitration agreement.

Second, make sure it’s not just any old arbitration agreement, but one that includes customized terms. For example:

  • Require the worker to acknowledge that signing is a condition to being placed at your company.
  • Make sure the scope of covered claims is broad enough to include claims that are not just against the staffing agency.
  • List your company as a third party beneficiary with authority to enforce the agreement.
  • Make the obligation to arbitrate bilateral and binding on your company, even though your company will not sign the agreement. In other words, if you agree to perform services at the company, the company will agree to arbitrate any claims against you.

There are a few more tricks of the trade, but these are some of the key items. Keep the agreement short, and use simple language.

With some careful advance planning, you can avoid being left naked and stuck if faced with a joint employment lawsuit filed by staffing agency workers.

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

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No Bull! A California Court May Have Just Broken the Background Check System for Employees and Independent Contractors

If background checks were run on bulls, you probably wouldn’t hire Bodacious for rides at your child’s next birthday party. Bodacious has been described by some in the bull riding community as the meanest, most dangerous bull that ever was.

Fortunately, the identity of bulls with a history of violence is readily attainable, probably through some kind of bull riding database available to those in the industry. Or wikipedia.

When it comes to identifying humans with a history of violence, we can run criminal background checks. We do this for employee applicants and often for independent contractors. When using staffing agencies, we ask the agencies to run background checks for their employees before sending them to perform services onsite at our businesses.

Except that a recent Court of Appeal ruling in California may have just broken the criminal background check process throughout the state.

In a case called All of Us or None, the Fourth District Court of Appeal ruled that it violates the California Rules of Court, Rule 2.507(c), for Superior Courts to maintain criminal case databases that are searchable by date of birth or driver’s license number.

Wait, what?

If you want to run a criminal background check, you need additional identifying information such as date of birth or driver’s license number. There are thousands of people with identical surnames and similar sounding full names. According to mynamestats.com, there are 81,585 Californians with the surname Gomez, and 5,277 of them are named Maria Gomez. Check out this map to go down a state-by-state rabbit hole. Background check companies need additional identifying information to make sure they’re reporting on the right person.

Rule 2.507(c) says that certain types of information must be excluded from “court calendars, indexes, and registers of actions.” Taking a waaaay-broad interpretation of this rule, the Court of Appeal held that the “excluded” categories can’t be used at all, not even when searching for criminal records. Other “excluded” categories of information include such important differentiators as ethnicity, age, and gender. The Riverside Superior Court, defending the legality of its searchable database, argued that Rule 2.507(c) is intended to prevent people from searching for the excluded information in a database, but it cannot possibly be intended to prohibit searches when the searcher already knows that information.

The Court of Appeal disagreed.

Under federal law, a background check company must maintain reasonable procedures to ensure that the information they report is accurate. Using names alone would obviously produce absurdly unreliable results. Just ask anyone named Maria Gomez. Most Maria Gomezes are undoubtedly wonderful people and don’t want their background check reports to show that some other Bad Maria got into criminal trouble. But if a background check company cannot use important identifying and differentiating information it already knows to help verify someone’s identity and criminal record, how can it provide reliable reports in California at all?

I’m not sure how that’s gonna work. Leave it to California to break the whole background check system. We’ll see if the courts and background check companies find a way around this.

Meanwhile, if you’re running background checks in applicants or independent contractors in California, expect some delays, thanks to this ruling. And if you’re planning to have livestock at your child’s next birthday, may I suggest a pony?

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

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Spurs and Chickens: California Judge Says Prop 22 Is Unconstitutional; Appeal to Follow

There’s a fight brewing over cockfighting, and it may be headed to the Supreme Court. The dispute is over who can regulate the bloodsport and how. The Commonwealth of Puerto Rico has joined a cadre of cockfighting enthusiasts to ask the Supreme Court to rule that it’s unconstitutional for the federal government to ban the contests.

In 1933, Puerto Rico changed its laws to allow the sport, in which gamecocks are often fitted with spurs and battle until death or dismemberment. The federal government later stepped in to ban the fights. People bet on this stuff, really. On chickens. Wearing spurs.

Closer to home, another fight is brewing, and it’s on a subject familiar to readers of this blog – Prop 22 in California. Passed in late 2020 through a ballot initiative, Prop 22 exempts app-based drivers from the ABC Test and allows them to maintain independent contractor status, so long as the app companies provide certain types of benefits to drivers.

But on Friday, an Alameda County Superior Court judge ruled that Prop 22 is unconstitutional. Wait, what?

Even though Prop 22 passed with 58% support, the SEIU and a vocal group of drivers weren’t too happy and sued. The matter initially went to the California Supreme Court, but the Court dismissed the petition and said it would not hear the case. The SEIU tried again, this time starting in Superior Court, which is where cases are supposed to start. The union found a sympathetic ear in Judge Frank Roesch, who issued this 12-page opinion, which is confusing, hard to follow, and seems to me to be just plain wrong.

What was the basis for the ruling? Two things.

First, Judge Roesch concluded that Prop 22 was unconstitutional because it limits the legislature’s ability to regulate workers’ compensation. Prop 22 defines app-based drivers as contractors, and contractors don’t get workers comp coverage. The law limits the ability of the legislature to undo Prop 22, which was smart since the legislature hated the bill.

The judge found that these limitations made Prop 22 unconstitutional because the California constitution grants the legislature “plenary” power to oversee workers’ compensation. Prop 22 allows the legislature to make limited amendments to Prop 22 but not to undo the whole thing or reclassify the drivers as employees. In making his ruling, the judge essentially concluded that if the legislature couldn’t undo the law, then the law unduly restricted the legislature. But wait! Just a few pages earlier, the judge conceded that “The term ‘legislature’ in [the California constitution] includes the people acting through the initiative power.” Yes, that’s quite the internal contradiction. If the term “legislature” includes initiatives by the people, then initiatives by the people are the equivalent of legislative action. They are acting as the legislature. An appeals court will likely take care of that confusing mess.

Second, the judge concluded that Prop 22 violated the state constitution’s rule that legislation can only be about one subject. Judge Roesch pointed to the part of Prop 22 that gave app-based drivers the right to collectively bargain in a quasi-union environment. He concluded that the bargaining piece of the law is “utterly unrelated” to the law’s purpose. Huh? That utterly makes no sense. The whole point of Prop 22 was to grant app-based drivers various concessions in exchange for clarity on their status as contractors. These concessions include a minimum rate of pay, contributions to healthcare funds, automobile insurance, and the right to collectively bargain in a specified manner. How could the right to collectively bargain be unrelated to these other rights, all of which were part of the quid pro quo in exchange for preserving independent contractor status? The ruling makes no sense, and this too is likely to be cleaned up on appeal.

So what’s the status of Prop 22? Is it dead? Dismembered? The judge may have tied spurs to his feet and kicked the law around a bit, but I am cautiously optimistic that this law will live to see another day.

The case is now headed to the Court of Appeal, and it may end up back with the California Supreme Court.

Meanwhile, for those of you wagering on whether cockfighting will return to legal status, I’d say the odds are against. I don’t think the Supreme Court will take the case and, if it does, I don’t think the Court will say the federal government lacks the power to regulate chicken gladiator shows. I’d put my money on Prop 22 to survive on appeal. I think Judge Roesch’s analysis is incorrect and will be overturned on appeal. But I can’t say I have the same sense of optimism for our cockfighting aficionado friends.

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

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What Are the I-9 Requirements for Independent Contractors?

The Munker-White Illusion, image by David Novick (UTEP)

This is one of my favorite optical illusions. The spheres here are all beige. They are not red, green, or purple. Look closely and you’ll see. David Novick, a professor of engineering at UTEP, explains the illusion here.

It’s fun to be fooled with optical illusions. But it’s not fun to be fooled with federal immigration law.

Companies retaining independent contractors should remember these key points for I-9s and immigration law compliance:

1. Properly classified independent contractors do not need to complete I-9 forms.

2. Misclassified independent contractor — that is, those who are really employees under federal law — are employees and should have a completed I-9. A multi-factor test is used to make this determination. According to federal regulations, these factors should be considered:

  • Who supplies tools or materials;
  • Whether the worker makes services available to the general public;
  • Whether the worker works for a number of clients at the same time;
  • Worker’s opportunity for profit or loss as a result of labor or services provided;
  • Worker’s investment in facilities for work;
  • Who directs the order or sequence in which the work is to be done; and
  • Who determines the hours during which the work is to be done.

3. Federal law prohibits individuals or businesses from contracting with an independent contractor to provide services in the U.S., knowing that the contractor is not authorized to work in the U.S. [8 U.S.C. 1324a(a)(4)]

4. Staffing agency temps employed by the staffing agency must complete I-9s as employees of the staffing agency. Contracts with staffing agencies should make clear the staffing agency accepts this obligation. If an agency sends a bunch of undocumented temps to your worksite, you might get an unscheduled visit from ICE, which is not a good look.

For those keeping a list at home (wait, that’s just me?), you can add immigration law noncompliance to the list of Things That Can Go Badly When Independent Contractors are Misclassified.

And that’s no illusion.

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

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Breaking News? DOL Rescinds Independent Contractor Rule That Never Took Effect

Remember when TV news was on at 6 p.m. and 11 p.m. and that was it? Every once in a while, there would be a Breaking News! alert, and it was always something really important. They wouldn’t interrupt Diff’rent Strokes for just anything. (Bonus points if you remembered there was an apostrophe in the title instead of the first ‘e.’)

But now, with 24-hour news on a dozen stations, everything is Breaking News! – even this story about a New Mexico man who went grocery shopping, then returned to his car to find 15,000 bees in the back seat. (Man walks back into store, returns jar of honey.)

The Breaking News! you’re reading about today is the Department of Labor’s (DOL) latest announcement, rescinding its proposed rule for determining independent contractor status under the Fair Labor Standards Act (FLSA).

Click here for the rest, posted by me on Friday on the BakerHostetler Employment Law Spotlight blog.

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

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