I saw this truck while driving home last week from my daughter’s college graduation. Now I’m no livestock dietician (I failed that course in law school), but this seems like the worst possible thing to feed your animals.
Whoever’s behind the labeling also needs some help with marketing. I know I wouldn’t buy that.
I’m also not buying the DOL’s recent announcement that it’s holding two public forums to help it decide what to do about a new independent contractor misclassification test. I think we all know what the DOL is going to do already.
The DOL will hold an Employer Forum on June 24, then a Worker Forum on June 29. Anyone can attend. RSVP links are here (6/24) and here (6/29).
After this charade open-minded exchange of viewpoints, the DOL will get to work preparing a new rule for determining who is an employee under the Fair Labor Standards Act (FLSA). The current regulation, issued by the Trump DOL, refocuses the traditional Economic Realities Test inquiry on two core factors: (1) the nature and degree of the individual’s control over the work, and (2) the individual’s opportunity for profit or loss. The Biden DOL tried (unsuccessfully) to prevent the Trump rule from going into effect, but a federal court ruled that the Biden DOL’s attempt to dismantle the rule was flawed, and the Trump rule therefore went into effect.
Now, let’s not kid ourselves. Just because a court told the Biden DOL that it’s stuck with this Trump-made rule doesn’t mean anyone at the DOL is actually applying it. The Biden DOL has said it plans to rewrite the rule, pronto. The new rule will make it harder to classify workers as independent contractors under the FLSA. We already know that’s going to happen, even if we don’t know the precise language to be used.
In late 2022, the DOL will issue its new rule, which will be like the old rule that we had before the Trump DOL’s new rule. Meet the new boss, same as the old boss. And with each new administration, it will become harder then easier then harder to be classified as a contractor under the FLSA.
So I will not be wasting my time listening in on these forums. I expect they’ll be as useful as inedible food. Which cannot be good for the GI tract.
This spring has been a bad time for injured civilians who prefer not to be buried alive.
In Peru last month, a funeral procession was interrupted when the 36-year old car accident victim was heard banging on the lid of her coffin, trying to get out. Days earlier the woman had been pronounced dead, in what turned out to be an unfortunate mispronunciation.
In Shanghai, a nursing home mourned the passing of an elderly resident, who was placed in a body bag and sent to the mortuary. As seen in this video taken by a bystander, the mortuary workers unzipped the bag and found the man still moving. He was transferred to a hospital, which seems to me like a more appropriate place for someone still alive.
People may go quiet, but that doesn’t mean they should be treated as dead. The same holds true for individual arbitration agreements. They may exist quietly in the background, but courts can’t just ignore them, as a recent Fifth Circuit Court of Appeals decision made clear.
A plaintiff alleged violations of the Fair Labor Standards Act (FLSA), claiming she was misclassified as an independent contractor and therefore was denied overtime pay. She asked the court to treat her lawsuit as a collective action, claiming that other contractors were also misclassified and were also denied overtime pay. In FLSA cases, plaintiffs have to opt in to join the class. The district court approved the distribution of opt-in notices to similarly situated contractors, letting them know about the lawsuit and their right to participate.
The defendant opposed the notices, pointing out that the contractors had all signed individual arbitration agreements that included class action waivers. They couldn’t opt in, the defendant argued, so they should not get the notice. When the court approved the notices anyway, the defendant filed a writ of mandamus with the Fifth Circuit Court of Appeals, asking the appeals court to intervene and stop the notices from going out.
The Fifth Circuit granted the writ and stopped the notices from going out. The Court of Appeals ruled that the arbitration agreements required all disputes to be resolved through individual arbitration, and therefore the contractors could not opt in to the lawsuit. Since they could not opt in, they could not be sent notices inviting them to opt in.
It’s unusual for a Court of Appeals to grant a writ of mandamus. But here, the Court of Appeals recognized that the arbitration agreements were very much alive, even if the contractors who signed them were silent in the background.
This case is a good reminder of the value of individual arbitration agreements with class action waivers. A well-drafted arbitration agreement will require all claims to be resolved on an individual basis and will include a waiver of the right to participate in any class or collective action. The agreement should also deprive the arbitrator of jurisdiction to preside over a class or collective action.
Businesses that rely on independent contractors should check their agreements and consider adding robust, carefully-drafted arbitration clauses.
Arbitration agreements can sit silently in the background for years, but that doesn’t mean they are dead.
Snakes have been in the news lately. A Maryland man was recently found dead in his home, killed by a venomous snake bite. This might seem surprising, until you learn that the same man kept 124 pet snakes in his house, including rattlesnakes, cobras, black mambas and a 14-foot-long Burmese python.
I also learned this week of a horrifying tourist attraction in Manitoba called the Snakes of Narcisse, where you can view “tens of thousands of red-sided garter snakes as they slither to the surface from their winter dens.” Tourists can view the dens and the snakes’ “mating balls,” in which “one [unlucky] female is surrounded by up to one hundred males.” Brackets are mine, since this can’t be fun for the snakestress, no matter how many cocktails are involved.
According to Quizlet, six colleges and universities have snakes for mascots. I won’t spoil the surprise. You can click here for the big reveal.
For student-athletes at these six schools, plus those at every other non-snake-themed college, there’s a Third Circuit case that’s worth watching.
The Third Circuit has agreed to hear a case that poses the following question: “Whether NCAA Division I student athletes can be employees of the colleges and universities they attend for purposes of the Fair Labor Standards Act solely by virtue of their participation in interscholastic athletics.“
If the Third Circuit says yes, student-athletes may be entitled to millions of dollars in back wages under the FLSA. A ‘yes’ ruling would be deadly venom to just about every non-major sports program, since schools have no budget to pay wages to student-athletes. Very few programs in very few sports actually make money.
For those who brought this suit and think they are advocating for the student, be careful what you wish for. If the Third Circuit rules that student-athletes are entitled to be paid, college sports are largely dead. Women’s sports would take the biggest hit, as would every other program that isn’t a top-tier college football or basketball program raking in the cash.
This is a case to watch closely. If student-athletes are entitled to be paid, there would no longer be any distinction between amateurs and professionals. The whole concept of the student-athlete — and almost all of college sports — would go the way of the Round Island Burrowing Boa. That’s an extinct snake that used to live in Mauritius, says wikipedia.
Those who have seen me present on independent contractor issues know that I like to incorporate song references by The Who. There are so many song titles and lyrics that help the presentation flow.
On Tuesday, it’s my turn to co-present at the annual BakerHostetler Master Class on Labor Relations and Employment Law. The session is called Answering Tough Questions About Independent Contractors, Joint Employment and the Contingent Workforce, Using Songs by The Who. The session is free, 2-3p ET on April 5. Register here.
If you join me, you’ll get gems like this when we update you on 2022 developments, such as David Weil’s nomination to serve as Wage and Hour Administrator of the DOL:
Democrats: Meet the new boss, same as the old boss.
Republicans: We won’t get fooled again.
David Weil was the Wage and Hour Administrator in the DOL during the Obama Administration. He published two Administrator’s Interpretations expressing the view that most independent contractors were misclassified and that joint employment should be much easier to establish. He wrote about the problems with the “fissured workforce,” meaning the expansion of non-traditional, non-employee labor. He was not a friend of the business community and especially disliked by the franchising community.
In 2021, Biden nominated him to reclaim that post.
Last week, the Senate voted 53-47 to block the nomination.
In the independent contractor space, it’s been a busy few months for the DOL, and I would imagine the administration would like to fill this role as quickly as possible.
Last month, a federal court took issue with the Biden DOL changing its tune on the Trump DOL’s test for independent contractor misclassification. The court declaredThe Song Is Over and rejected the Biden DOL’s change, reinstating the Trump-era test for worker classification under the Fair Labor Standards Act (FLSA). More details here.
In January, the DOL and the NLRB signed a Memorandum of Understanding in which they agreed to share information to combat independent contractor misclassification.
Join me and my colleagues Margaret Rosenthal and Vartan Madoyan on Tuesday for more updates, tips, previews, and Who-themed lyrics. There’s no charge to attend. I’m Free.
There’s an optical illusion known as a negative afterimage. If you stare at the red dot on this woman’s nose for about 15 seconds, then look at a blank wall, you’ll see the woman on your wall – but in full color and with dark hair. And yet, there is no woman on your wall.
You see what isn’t there because the illusion tricks the photoreceptors in your retina.
Monday’s ruling by a federal judge in Texas also has us seeing what isn’t there – or what was there and then wasn’t there – or something like that, but with respect to the test for independent contractor classification.
In early January 2021, the Trump DOL issued a new regulation that sought to provide clarity on how to determine whether someone is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). Even though the FLSA is a federal law that is supposed to apply everywhere, different courts around the country used different versions of the FLSA’s Economic Realities Test to make that determination.
Under the new regulation, 29 CFR Part 795, there would be just one test. It was simple, and the same rule would apply all over the country. The regulation was scheduled to take effect March 8, 2021. But a few days before the effective date, the Biden Administration postponed implementation of the new rule. Then in May, they rescinded it. They replaced it with nothing. If you go to the Code of Federal Regulations, there is no 29 CFR Part 795. (Here, try it!)
But Monday’s ruling said to stare a little harder. It’s there.
The court ruled that the Biden Administration’s effort to delay and then withdraw Part 795 was unlawful and violated the Administrative Procedure Act. The delay provided too short a comment period, failing to offer the public a meaningful period to provide input. The withdrawal was improper because the DOL failed to consider alternatives and instead “left regulated parties without consistent guidance.”
Because the delay and withdrawal of the Trump era rule were deemed unlawful, the court ruled that Part 795 did, in fact, go into effect March 8, 2021, and “remains in effect.”
So now you probably want to know what the rule is, since you cannot find it online in the Code of Federal Regulations – at least as of Tuesday night.
The test in Part 795 identifies two “core factors” for determining the independent contractor vs. employee question under the FLSA. If both factors point in the same direction, the issue is generally decided. If the core factors point in different directions, three “other factors” are considered.
• The nature and degree of the individual’s control over the work; and
• The individual’s opportunity for profit or loss.
The control factor supports independent contractor status if the worker “exercises substantial control over key aspects of the work,” including setting schedules, selecting projects, and being allowed to work for others.
The profit or loss factor weighs in favor of independent contractor status if the worker has the opportunity to earn profits or incur losses based on the exercise of initiative, managerial skill, business acumen or judgment, or based on management of his or her own investments or capital expenditures. Examples of investments may include hiring helpers or buying equipment.
If the two core factors do not determine the issue, three other factors are to be considered:
• Amount of skill required for the work;
• Degree of permanence of the working relationship between the individual and the potential employer; and
• Whether the work is part of an integrated unit of production.
Amount of skill required. This factor weighs in favor of independent contractor status if the work requires specialized skill or training that the potential employer does not provide.
Degree of permanence. This factor weighs in favor of independent contractor status if the work is definite in duration or sporadic. This factor supports employee status if the work is indefinite. Work that is seasonal by nature does not weigh in favor of independent contractor status, even though it’s definite in duration.
Whether the work is part of an integrated unit of production. This factor is likely to receive the heaviest criticism from worker advocates. The “integrated unit of production” factor comes from a pair of 1947 U.S. Supreme Court cases. Over the years, this factor has morphed into the question of whether the work is “integral” to the potential employer’s business. Part 795 takes a firm stance here, saying that — based on the 1947 Supreme Court decisions — the relevant question is whether the work is “integrated,” not whether it is “integral.”
This factor weighs in favor of independent contractor status if the work is “segregable” from the potential employer’s processes for a good or service. For example, a production line is an integrated process for creating a good. A software development program may require an integrated process for creating a computer program. Work that is performed outside of an integrated unit of production is more likely performed by an independent contractor.
What Happens Now?
First, the DOL can appeal the decision to the Fifth Circuit. We expect that will happen. In the meantime, a stay might be issued or might not be issued.
Second, Part 795 is now in effect, unless a stay is issued.
Third, it’s a fair question how much this really matters anyway. The test was not intended to change the outcome in most instances. It was instead intended to articulate more clearly how these determinations were already being made. The two “core factors” were already determinative in almost all cases, even if courts were not explicitly identifying two factors as being most important. Also, the Circuit Courts of Appeal do not have to adopt the DOL’s interpretation of the test. They can go on using their five-part and six-part tests, or they can apply the Part 795 analysis.
The Part 795 should now be the applicable test. But we shall see.
If you stare hard enough at your handy copy of the Code of Federal Regulations, and then look at a blank wall, Part 795 just might appear.
If you weren’t in Turkey last month, you missed the annual Selçuk Efes Camel Wrestling Festival, which featured 162 competitors in four categories.
The camels are paired by weight and skill, and their techniques include tripping their opponents with foot tricks or applying headlocks then sitting on their opponents. Some just push until the other camel gives up. A winner is declared when one camel scares away the other, making him scream or collapse. The camels are muzzled so there is no biting.
Among those missing the spectacle were the owners of Steadfast Medical Staffing, a Virginia-based firm that maintains a database of nurses and pairs them with healthcare facilities. That’s because they were in federal court, defending against a lawsuit by the Department of Labor. The DOL alleged that they had misclassified the nurses as independent contractors in violation of the Fair Labor Standards Act (FLSA).
After a bench trial, the judge agreed with the DOL and ruled that the nurses — which included CNAs, LPNs and RNs — were employees of the staffing agency. The Court applied the Economic Realities Test, which is the proper test for determining who is an employee under the FLSA.
The Court considered all relevant factors, then applied camel-style headlocks while sitting on the defendant, causing the staffing agency to either scream or collapse (unclear from the opinion). The Court ruled that the staffing agency failed to pay overtime and failed to comply with FLSA record keeping requirements. The agency will be liable for approximately $3.6M in back wages plus another $3.6M in liquidated damages.
Following the judgment, the DOL issued a statement with quotes from the Secretary of Labor, Marty Walsh, and the Solicitor of Labor, Seema Nanda, that the DOL was sending an “unequivocal message” to Steadfast and other staffing companies that the DOL is serious about pursing independent contractor misclassification.
Staffing agencies that treat workers as independent contractors are on notice that the DOL is serious about enforcement. Remember, the facts of the relationship determine whether a worker is an employee or an independent contractor, not how the parties choose to characterize the relationship.
More than 1,100 nurses will share in the award, with a healthy-but-to-be-determined amount of fees headed to the plaintiffs’ lawyers.
A prized wrestling camel can be sold for more than a million Turkish lira. That’s about $75,000. Large awards like this for systemic misclassification are not surprising. This one will cost the staffing firm about 96 wrestling camels.
I grew up in Miami, but not this Miami. My weekends were Miami Jai-alai and Coconut Grove, certainly not the hip hop adult club scene.
But if I had grown up in that other world, I might have heard of the King of Diamonds, which I am now aware was the place to be seen if you are looking to spot celebrities at a famous adult entertainment venue. According to Miami newspaper archives, the original club went bankrupt in 2018 after failing to pay its mortgage and its rent. This came on the heels (high heels?) of being cited for serious safety code violations, including malfunctioning fire sprinklers.
Making matters worse, at about the same time, 27 of the club’s dancers sued, alleging wage and hour violations and that they had been illegally misclassified as independent contractors.
The case was delayed because of COVID-19, but it finally went to trial last fall, and the jury agreed that the dancers had been misclassified. Two weeks ago, the judge entered a final judgment, awarding the dancers more than $15 million. Some of the dancers’ individual awards exceeded $800,000.
The takeaway here is that independent contractor misclassification claims are big dollar claims. The defendants in this case drew more attention than usual because of the high profile of their club, but the legal risks apply to any business making widespread use of contractors.
Remember, it’s the law that decides whether a worker is an independent contractor or an employee. It doesn’t matter what the parties call the relationship or what the written contract says.
The club (or, a club with essentially the same name) reopened in 2020 with new ownership. I don’t know whether they’ve changed the classification and pay structure of their performers, but that would seem like a good idea. They’ll want to keep the place up and running in case Floyd Mayweather comes back with his infamous Money Truck to drop $100,000 on an evening’s entertainment.
For some other wild tales at the old joint, you can read more here.
I was oblivious to that whole scene growing up, but I sure had some great times at Miami Jai Alai (video highlights from 1980s), rooting for Michelena, Benny, and Harretche, and hoping to hit on my trifecta. Good times.
Suppose Kermit works 30 hours a week at The Muppet Show. He holds a non-exempt position as a research assistant, trying to determine why are there so many songs about rainbows.
Frog food is expensive these days, so he holds a second job too. Kermit works nights at Sesame Street, where he spends 20 hours a week investigating multi-colored arc-shaped atmospheric phenomena and what’s on the other side.
With 30 hours at one job and 20 hours at another, neither role pays Kermit overtime.
But is he being cheated out of time-and-a-half? Let’s hop in and take a deeper look.
Horizontal joint employment is when a person holds two jobs, but the businesses are under common control. They may have the same owners or officers, they may coordinate schedules among workers, or they may share a common pool of employees. When horizontal joint employment exists, the hours from both jobs are aggregated, and 30 hours at one job plus 20 hours at the other equals 50 total hours, 10 of which require overtime pay.
So what about our short-bodied, tailless amphibian friend? Does Kermie get overtime?
Kermit may seem like a free spirit, but whether he’s on The Muppet Show (30 hours) or Sesame Street (20 hours), his every move is controlled by Jim Henson. Literally.
Common control signals horizontal joint employment, which means Kermit’s been shortchanged 10 hours of overtime. It’s not easy being green.
You’ve probably read about recent changes to the joint employment tests, but those changes are for vertical joint employment, not horizontal joint employment. Vertical joint employment is when the employees of a primary employer perform services for the benefit of a secondary employer, like in a staffing agency relationship. When staffing agency employees work side-by-side with a company’s regular employees, the staffing agency and the other business may be joint employers.
The rules on horizontal joint employment are unchanged. So if sharing employees with a business under common control, be aware of the rules and look before you leap.
The Waseda University Library in Tokyo maintains an online archive of drawings dedicated to epic Japanese fart battles of the 17th and 18th centuries. The depictions, called he-gassen (really!), show farts so powerful they penetrate walls and blow cats out of trees.
This mode of attack must have been intimidating, but approaching enemies should have smelled what was coming and taken evasive action.
The same can be said for a Nevada telecommunications company, which had engaged 1,400 call center workers but treated them all as independent contractors. In the immortal words of Daryl Hall, no can do.
Under federal wage and hour law, the Economic Realities Test is used to determine whether a worker is an employees, regardless of what the parties call the relationship. In this case, the telecom company failed virtually every part of the test. The workers were economically reliant on the telecom company, which controlled their work in just about every relevant way, making the workers employees.
The facts were so bad that the Department of Labor took the laboring oar on this one, filing its own lawsuit in federal court. The DOL won a $1.4 million award, and the Ninth Circuit Court of Appeals upheld the decision.
Remember, a worker’s status as an employee or independent contractor is determined using the legal test and the facts of the relationship, regardless of what the parties call themselves.
The moral of the story is that if it smells like an employment relationship, it probably is. Choose your battles wisely. He-gassen!
I just got back from running in a 200-mile relay, Muskegon to Traverse City, with a group of college friends. I ran three legs of 4, 4, and 5 miles. I had the easiest set of three legs among the 12 runners, but I’m happy just to have finished. It was great to see everyone, and I was able to disconnect from work life for a few days.
So, what I’m saying here is, I had a better weekend than the guys I’m about to write about. And for them, there’s no running away from their problems.
In yet another exotic dancer case to hit the news, the performers at King’s Inn Premier Gentlemen’s Club in Massachusetts are about to score a $292,000 settlement in a claim that they were misclassified as independent contractors. A hearing to approve the settlement is scheduled for this week.
There seem to be a lot of exotic dancer cases in the annals of independent contractor misclassification, and the clubs seem to lose their fair share of these cases. This case, like most of the dancer cases, is a wage and hour case. The dancers claimed they were denied a minimum wage and overtime pay, in violation of the Fair Labor Standards Act (FLSA). The club claimed the dancers were independent contractors and therefore were not covered under the FLSA.
But why do you care about a strip club exotic dancers case? Two reasons:
Second, any settlement of an FLSA lawsuit must be approved, and it becomes public record.
You can read more about the first point here, in a collection of posts about this test and how it is used to determine whether someone is an employee.
The second point deserves a bit more attention, though. Most types of litigation can be settled in a private settlement agreement. An FLSA case cannot be. The law requires the settlement of an FLSA case to be approved by a judge, and there is a public hearing at which the settlement terms are considered.
Once you get sued for an FLSA violation, it’s very hard to get out of it with anything resembling confidentiality. This is the kind of claim you want to avoid in the first place.
How do you avoid an FLSA claim when you have independent contractors?
Be proactive. Evaluate your relationships using the Economic Realities Test and see if they hold up.
Review your contracts and see if they can be adjusted to better memorialize the facts that support independent contractor status.
Consider obtaining representations from the contractors up front to determine whether they really do operate independently.
Don’t wait until its too late to take action. You can’t just run away from an FLSA case.