Going Mobile? DOL Endorses Independent Contractor Model for Virtual Marketplace Apps

Opinion letter mobile app

Long before mobile apps were a thing, Pete Townsend and The Who were already going mobile. In the 1971 song, Townsend sings about the virtues of life on the open road, living in a mobile home. I’m an air-conditioned gypsy.

In an important opinion letter released this week, the DOL went mobile too, lending support to businesses in the “on-demand” or “sharing” economy. The letter is the first significant ruling that supports independent contractor status for service providers who obtain work through virtual marketplace apps.

A virtual marketplace app is a matchmaking service. It connects consumers who need a service (driving, housekeeping, handyman, anything) with service providers who do the work. Virtual marketplace companies (VMCs) are frequently the target of misclassification claims. In these types of claims, service providers — and the plaintiffs’ lawyers who love them — file lawsuits claiming that the service providers are really employees of the VMC. Frequent targets have been Uber, Lyft, Doordash, and Grubhub.

In Monday’s letter, the DOL opined that service providers are indeed independent contractors of the VMC, not its employees, at least under the facts of this particular case. The letter does not identify the specific VMC at issue, but the facts in the letter are going to be generally applicable to lots of VMCs.

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“This is a Cabinet”: DOL Proposes New Definition of Joint Employer, Seeks to Clear Up a Confusing Label

This post was originally published as a BakerHostetler Employment Alert on April 3, 2019. Cabinet joint employmentSometimes it’s obvious what something is, and you don’t need a label. Other times it’s not so obvious, and you do need a label. Then there’s the rare instance when it’s obvious what something is, but someone feels compelled to supply a label anyway. That third scenario is what I saw when I went to my daughter’s volleyball tournament last weekend and snapped this photo of a cabinet in the lobby. The label is small, but if you look closely, you’ll see that it helpfully declares the item to be a “cabinet.” It further announces, in red handwriting, that the item has been “sold,” thereby allaying my concerns that my daughter was spending her Saturday playing volleyball in a den of cabinet thieves.

The second scenario – label needed – is the focus of this Alert. And the territory is familiar ground ‒ joint employment.

It’s rarely obvious what that phrase means, and companies that use workers supplied by other companies have been seeking clarity for some time now. Ignoring Ronald Reagan’s famous quip about the nine most terrifying words in the English language, the Department of Labor (DOL) announced on Monday that it’s here to help.

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Independent Contractor Misclassification Claim Fails, in Part, Due to Plaintiff’s Goat Farm

Goat independent contractor misclassification

The face that sunk a lawsuit?

In my house, we sometimes have bizarre but short conversations about job functions.  A recent example:

Lindsay: I think I want to do a job that helps people.

Andy: Doesn’t every job help people?

Me: Not executioner.  

This post is about a case involving directional drilling consultants.  And while that sounds like the job title of a scene director in the porn industry, it’s actually a job involving subterranean oil and gas exploration.  Directional drilling consultants (DDs) advise drilling companies how to aim their directional drills when drilling a well that starts down a vertical path, then switches to horizontal.  This allows the company to drill discretely in areas away from home.  Like Josh Duggar.  

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“So Tired of Being Alone”? Blogger Managers at SB Nation Claim Independent Contractor Misclassification

Bloggers independent contractor misclassificationThe good reverend and crooner Al Green was “so tired of being alone,” but he sang it in a way that made me want to keep listening. Stay solo, Rev. Al. On a more somber note, The Motels’ song, Only the Lonely is depressing. Why can only the lonely play? Everyone should be able to play.

Blogging can be a lonely endeavor. Bloggers write and push out content, hoping people will read. Fortunately for me it’s just a side gig, but for many it’s a way of life.

A lawsuit involving bloggers at SB Nation serves as a reminder that bloggers’ status as independent contractors is subject to challenge. In this case, three blogger/site managers allege that, despite their independent contractor agreements (Blogger Agreements), they were really employees entitled to overtime pay. According to the plaintiffs, site managers are required to watch games and report on breaking news on their assigned teams.

In a recent decision, the federal district court granted conditional certification to the Continue reading

We’ve Got Baby Steps Toward a New Definition of Joint Employment Under the FLSA.

Baby steps joint employment FLSA new rule

I still don’t know what this is, but I got it from Wikipedia.

According to Wikipedia, which knows everything, or thinks it does, Baby Steps is the name of a Japanese manga series by Hikaru Katsuki. I have no idea what that means, but apparently it’s a story of some sort, which I infer from the following description: “The story is centered on Eiichirō Maruo, a first year honor student who one day decides that he is lacking exercise.”

This does not make me want to watch it.

I will, however, be watching the baby steps being taken by the Department of Labor’s Wage and Hour Division (WHD). On February 28, the WHD submitted a proposed new rule on joint employment to the White House Office of Information and Regulatory Affairs (OIRA). The new rule would modify the meaning of “joint employment” under the Fair Labor Standards Act (FLSA), which is the federal law governing minimum wage and overtime requirements.

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Should the Economic Realities Test be Changed for the Gig Economy? One Court Thinks So (But How Would That Affect Jon and Ponch?)

CHiPS are off duty police officers contractors or employees?

Go Jon! Go Ponch! Screenshot from IMDb

According to IMDb, the highest rated episode of CHiPs was Christmas Watch. Thieves at the community church ran off with a 15th century bell, which meant — according to IMDb — “The Christmas season doesn’t mean any less work for Jon and Ponch!”

Well ho ho ho then. The Christmas season means lots of extra work for lots of other people, including real life police officers. A recent case in the Sixth Circuit Court of Appeals addressed whether police officers taking second jobs are independent contractors or employees.

The test for Independent Contractor vs. Employee under the Fair Labor Standards Act (FLSA) is well-established. It’s the Economic Realities Test, a multi-factor test that seeks to determine whether, as a matter of economic reality, the worker is reliant on the hiring party to earn a living.

But in Acosta v. Off Duty Police Services, the Court of Appeals questioned whether the usual formula should still apply in the modern gig economy, when lots of people take second jobs.

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What is the Test for Independent Contractor vs. Employee? (Jan. 2019)

what is the test for independent contractor misclassificationSeems like a simple question, but it isn’t. My question to your question is, “Why do you ask?” That’s because the test for Independent Contractor vs. Employee is different under different laws.

And worse, the tests keep changing, as we saw in Monday’s post about the NLRB’s SuperShuttle decision.

As of today, January 31, 2019, here’s where we stand:

The current tests for determining Independent Contractor vs. Employee are:

National Labor Relations Act (NLRA)

Right to Control Test (SuperShuttle version, as of 1/25/19)

Title VII, Age Discrimination in Employment Act (ADEA), ERISA

Right to Control Test (Darden version, or some variant of it, as applied circuit by circuit)

Internal Revenue Service

Right to Control Test (IRS version)

Affordable Care Act

Right to Control Test (emphasis on particular factors, based on regulation)

Fair Labor Standards Act (FLSA)

Economic Realities Test (which different courts articulate differently)

California, Massachusetts wage & hour laws

ABC Tests (strict version of Part B)

New Jersey wage & hour

ABC Test (regular version of Part B)

California state laws other than wage & hour

S.G. Borello & Sons Test (customized hybrid version of Right to Control & Economic Realities Tests), we think, for now

State Unemployment and Workers Comp Laws

Pick a card, any card. Tests vary substantially state to state. Some are Right to Control Tests, some are ABC Tests, some are entirely made-up, customized tests that require consideration of — or proof of — specific factors

Other State Laws (wage & hour, discrimination, tax)

Tests vary significantly state by state, law by law

This chart may be a helpful start, but three significant challenges remain, when trying to determine Independent Contractor vs. Employee.

  1. Fifty Shades of Gray.  These tests, for the most part, are balancing tests. Courts and agencies must weigh multiple factors. In most instances, some factors will favor contractor status and some will favor employee status. Different courts may reach different conclusions, even with the same facts.
  2. Planes, Trains, and Automobiles. Multi-state employers face the added challenge of having to deal with different tests in different states. Then, just to keep everyone on their toes, states generally apply different tests for different state laws. Sometimes different tests apply in different industries too. Transportation workers, for example, may be subject to different tests than construction workers.
  3. Into the Wild. The tests keep changing. In January 2019, the NLRB changed its test in the SuperShuttle case. In 2018, California changed its test under state wage and hour law from the S.G. Borello balancing test to a strict ABC Test. In 2015, New Jersey switched to a different version of an ABC Test for its state wage and hour law. The times they are a-changin.

What to do about it? (Free tips!)

  1. Know the tests that apply where your business operates.
  2. Construct your independent contractor relationships in a way that tends to favor the factors supporting independent contractor status. Inevitably, business considerations will get in the way, and tough decisions will have to be made about how much control can be relinquished and how the relationships need to be structured. Adjust the facts of the relationship.
  3. Use a customized independent contractor agreement that emphasizes the factors that support independent contractor status. Avoid off-the-shelf agreements. Merely reciting that everyone agrees the relationship is an independent contractor relationship is only a teeny bit helpful. “Teeny bit helpful” is not the gold standard.
  4. Re-evaluate existing relationships, and make changes from time to time.
  5. Implement a gatekeeper system to prevent operations managers from entering into contractor relationships that may be invalid. Require any retention of a contractor to be approved by a point person, who can issue spot and seek help in evaluating whether a contractor relationship is likely to withstand a misclassification challenge.
  6. Seek legal help before you get audited or sued. Now is the time to review and modify relationships to reduce the likelihood of a misclassification claim. Once a claim is made, your business can only play defense. Create your playbook now, before the defense has to take the field.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in 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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