Category Archives: FLSA

05.01.23
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What is the Joint Employment Test under the FLSA? (And Why Are There So Many?)

In the Muppet Movie, Kermit famously wondered, “Why are there so many songs about rainbows?”

Articles in Psychology Today and Remind Magazine have attempted to answer this question. A blog post on the Tough Pigs website almost took a contrary view in a post titled “Why There AREN’T So Many Songs About Rainbows,” but that was a twitter gimmick asking for wrong answers only.

Turns out there are quite a few songs about rainbows. You can google it. There’s also a pretty good band called Rainbow (“Man on the Silver Mountain,” “Since You Been Gone”), and the University of Hawaii’s teams are the Rainbow Warriors, f/k/a just the Rainbows, which probably didn’t frighten much of their football competition in the Mountain West.

I’m inspired by Kermit’s lyrical question, but my thoughts stray in a different direction: Why are there so many … joint employment tests, just under the Fair Labor Standards Act (FLSA)? Shouldn’t courts applying a federal law use the same test in every jurisdiction? Of course they should, but they don’t.

Here are the current tests for joint employment under the FLSA, in a nutshell:

The First, Third, Fifth, and Ninth Circuits apply a four-factor test based on a 1983 case called Bonette. The test considers whether the putative joint employer (1) can hire and fire employees, (2) controls employees’ work and employment conditions, (3) determines rates of pay, and (4) maintains employment records. Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983).

The Second Circuit rejects the Bonette test as too focused on agency, instead applying a non-exclusive six-factor test. Zheng v. Liberty Apparel Co, Inc., 355 F.3d 61, 71-76 (2d Cir. 2003).

The Eleventh Circuit applies an eight-factor test that includes the Bonette factors and adds factors related to economic dependence. Layton v. DHL Express (USA), Inc., 686 F.3d 1172, 1176-78 (11th Cir. 2012).

The Fourth Circuit is having none of what the other circuits are having and goes in an entirely different direction. The Fourth Circuit’s test compares the two putative employers to determine whether they are “completely dissociated.” Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017); Hall v. DIRECTV, LLC, 846 F.3d 757 (4th Cir. 2017). The Fourth Circuit’s test is so far off the mark that it relies on a (mis)interpretation of a federal regulation that no longer exists.

And speaking of federal regulations that no longer exist, the Department of Labor’s regulation defining joint employment under the FLSA? You guessed it. It no longer exists.

In 2021, the DOL rescinded the joint employer regulation that had been adopted by the Trump DOL in 2020. The 2020 regulation has rescinded the previous regulation, which had been around for decades. No new regulation has been adopted, and so there is no regulation. Part 791 of Title 29 of the Code of Federal Regulations, formerly home to the DOL’s joint employment regulation, is empty.

So, why are there so many tests for joint employment? No good reason. There just are.

But that could change. Following a recent Ninth Circuit decision tagging Los Angeles County as a joint employer, L.A. County has petitioned the Supreme Court to reconsider the joint employment test. So we’ll see what happens there. A conservative Supreme Court majority might recognize how absurd it is that one federal statute can be interpreted so many different ways. Maybe they’ll take the case and announce one test for everyone.

In the meantime, if you’re looking for the joint employer test under the FLSA, you’ll need to look in several places. The test depends on where you are. All of us under its spell. We probably know that it’s ma-gic!

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.23.23
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DOL Gets Aggressive with $5.6 Million Consent Judgment on Independent Contractor Misclassification

There’s an island in Quebec that’s larger in area than the lake in which it sits. René-Levasseur Island was supposedly formed by the impact of a meteorite 214 million years ago, although eyewitness accounts differ. The land mass became an island in 1970, when the Manicougan reservoir was flooded, merging two crescent shaped lakes that surrounded the area.

I like fun geography facts, and an island larger than the lake in which it sits is a fun fact. But feels a bit aggressive for the Canadians to merge two crescent shaped lakes to turn this land mass into an island. I’m sure they had their reasons. If nothing else, it looks good on a map.

The Department of Labor is also being aggressive, but they’re not flooding any reservoirs. Instead, they’re channeling their aggression toward independent contractor misclassification.

In a news release this month, the DOL announced that it had obtained a consent judgment for $5.6 million against a national auto parts distributor and an Arizona logistics firm for allegedly misclassifying 1,398 drivers as independent contractors. The award included back wages and liquidated damages.

The DOL had alleged that, by misclassifying the drivers, the companies failed to meet minimum wage requirements, failed to pay overtime rates, and failed to keep required timekeeping records. These failures each were violations of the Fair Labor Standards Act (FLSA).

The award covered an eight-year period between April 2012 and March 2020.

I see three takeaways here:

First, the DOL is being aggressive in filing lawsuits when it thinks independent contractors have been misclassified. This consent judgment shows how expensive these claims can be for companies that improperly classify workers. Companies using independent contractors needs to be proactive in evaluating their risks and taking steps to minimize those risks. There are lots of ways to reduce risk if you plan ahead, before you’ve been sued or investigated.

Second, this case is a reminder that companies who classify delivery drivers as independent contractors are at heightened risk. Federal and state agencies and the plaintiffs’ bar seem to be filing a disproportionate number of claims involving delivery drivers. If your business uses delivery drivers who are classified as independent contractors, you may be at an increased risk of an audit or lawsuit.

Third, remember the DOL’s proposed new rule for independent contractor classification under the FLSA? (Read more here, here, and here.) The DOL wants to change the current test for who is an employee under the FLSA, replacing a regulation adopted by the Trump Administration in 2020. But cases like this one show that the current regulation is not impairing the DOL’s ability to enforce what it perceives as misclassification. The DOL’s many recent successes — as posted in DOL news releases — show that the DOL is doing just fine under the current rule when it comes to misclassification enforcement. The new rule is a solution without a problem.

Large judgments like this one seem shocking, but they are a reminder of the substantial dangers of misclassification.

Learn more by joining me at the 10th Annual 2023 BakerHostetler Labor Relations and Employment Law Master Class, all virtual, one hour every Tuesday starting February 7, 2023. My program on Contingent Workforce issues will be on March 7, 2023. Registration is free.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.09.23
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When They Get Around To It: Update on the DOL’s Independent Contractor Rulemaking

In Denbighshire, Wales, the Howatson family lives in a small house that sits… wait for it… in the middle of a roundabout.

In the early 1980s, after the family had been in the house for 20 years, local authorities told them their property sat smack in the middle of where a roundabout was to be built. The family refused to sell, and they now have lovely 360-degree views of people driving around their house all day and night.

The Department of Labor is taking is a more direct approach in its effort to update the worker classification test under the Fair Labor Standards Act. But it’s a slow process, and it will be several more months before we see a final rule.

But this post will provide a status update. Long story short, we’ll see a new rule when the DOL gets around to it.

In October 2022, the DOL released its proposed new test for determining who is an employee under the Fair Labor Standards Act (FLSA). The proposed rule generated more than 50,000 comments in response. I posted some initial reactions to the proposed rule in this article here.

The proposed rule identifies seven factors to consider when determining whether an independent contractor has been misclassified under the FLSA:

1. Opportunity for profit or loss depending on managerial skill;

2. Investments by the worker and the employer;

3. Degree of permanence of the work relationship;

4. Nature and degree of control;

5. Extent to which the work performed is an integral part of the employer’s business;

6. Skill and initiative; and

7. Additional factors.

Under federal law, the rulemaking process involves three main steps. First, the agency posts a proposed new regulation. That’s what the DOL did in October.

Second, there is a public comment period, in which anyone can submit a comment to the DOL. The most effective comments tend to assist the agency in evaluating its proposed rule, such as explaining likely unintended consequences or identifying concerns with how it is written. Comments can also offer legal arguments as to why the agency’s proposed rule is not consistent with the law it is supposed to be interpreting.

Finally, after reviewing the comments, the agency will publish a final rule. The final rule might differ from the proposed rule, or it could be the same. Or the agency can jettison the proposed rule entirely and do nothing. Here that last option is unlikely. The DOL will almost certainly issue a new rule.

On December 13, I submitted a lengthy comment on behalf of Flex, the trade organization representing app-based rideshare and delivery platforms. The full comment is available here, and I thought it might be helpful to summarize the main points for this audience.

The comment included two parts.

Part One argues that the DOL should not abandon the current rule (the 2021 Rule), which was passed less than two years ago. The 2021 Rule was adopted after a thorough rulemaking process and comment period, and the rule was developed based on a detailed analysis by the DOL of decades of case law. The 2021 Rule focused on two core factors, rather than offering a multitude of factors that have no pre-assigned weight. The 2021 Rule offered more predictability for businesses and contractors, and predictability in the law is — to put it bluntly — good. A regulation should add clarity, and the 2021 Rule added clarity.

Part One also pointed out that the 2021 Rule had done little to damper the DOL’s efforts at combatting misclassification. The DOL has published a long list of successes in obtaining settlements and judgments in the last three months alone.

Abandoning the 2021 Rule would also be arbitrary and capricious, meaning it might not survive a legal challenge, and we urged the DOL not to make a change.

Part Two argues that even if the DOL decides to abandon the 2021 Rule, the proposed new rule needs some work. Part Two focused on seven aspects of the proposed new rule that the DOL should change.

The key thing to remember is that the DOL wants to go back to a multi-factor test. Multi-factor tests have been around for a long time, but the devil here is in the details. If you read the DOL’s description of each factor and how it should be applied, the DOL is putting its fingers on the scale, taking every close call (and some that aren’t close) and resolving them in favor of employee status.

I will list the seven arguments below to provide a general sense of the key points. But, since this is supposed to be a quick read format, I’m not going to wade into the details. You can read the full comment if you like.

From the Table of Contents to Part Two:

1) In Factor #1, the Commentary about “Managerial Skill” Should Be Deleted or Revised Because It Fails to Account for the Realities of 21st Century Work.

2) Factor #2 Should Be Substantially Revised to Remove Provisions That Are Illogical, Incompatible with Economic Realities, and Contrary to FLSA Case Law.

3) Factor #4 Should Remove the Commentary That Legally Required Control May Be Relevant Evidence of Control Because This Commentary Is Contrary to Controlling Case Law, Contrary to this Department’s Own Guidance, and Not Probative of the Economic Realities of a Relationship.

4) In Factor #4, Use of Technology to Supervise Should Not Be Referenced as a Relevant Control Factor.

5) Factor #5 Should Preserve the Current “Integrated Unit of Production” Analysis and Should Not Adopt a Flawed “Integral Part” Analysis That is Contrary to Case Law and Legally Unsupported.

6) Any Final Rule Should Preserve the Helpful Subregulatory Guidance in Fact Sheet #13, Clarifying That Certain Factors Are Not Relevant.

7) Any Final Rule Should Replace the Term “Employer” with “Principal” or a Similarly Neutral Term.

You can read the complete arguments here.

And now onto Step Three of the DOL’s rulemaking process. Last week, the Biden Administration published its overall regulatory agenda for 2023. It included a May 2023 placeholder for a proposed final rule. That’s just a best guess at this point, and with more than 50,000 comments for the DOL to review, the actual release date may be several months later. But the DOL, at least at present, appears prepared to move forward with a new rule to determine independent contractor vs. employee status under the FLSA.

We’ll continue to monitor developments, in a roundabout way.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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12.27.22
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What to Watch for in 2023: Big Changes May Be Coming for Independent Contractor and Joint Employment Laws

If you google “what to watch for 2023,” you’ll mostly get tips on soon-to-be-released movies and streaming video shows. You’ll get grammatically impossible generic hype like “movies we can’t wait to see” (except the whole point is that you have to wait to see them) and you’ll get grammatically impossible niche hype like “The most anticipated Korean dramas and movies we can’t wait to watch in 2023.”

We won’t peddle hype in this post, and you’ll literally have to wait for all of the things addressed below. But here are five important developments to watch for in 2023.

1. The test for Independent Contractor vs. Employee is likely to change, at least under the Fair Labor Standards Act (FLSA). The Department of Labor proposed a new multi-factor test, and the period for public comment ended December 13. The DOL is likely to roll out a new test in 2023. It will replace the current core factors test described here.

2. The test for Joint Employment is likely to change, at least under the National Labor Relations Act (NLRA). In September, the NLRB proposed a new test for determining when joint employment exists under the NLRA. You can read more here. The public comment period has closed, and we can expect a new test sometime in 2023.

3. The NLRB is likely to rule that independent contractor misclassification, by itself, is an unfair labor practice. The NLRB General Counsel has expressed an intent to reverse the Velox Express decision from 2019, in which the Board ruled that misclassification was not an automatic ULP. More information is here. Now that the Board majority has switched from Republican to Democrat, expect a decision in 2023 that creates an automatic ULP when there’s a finding of worker misclassification.

4. Expect state legislatures to keep changing the tests for Independent Contractor vs. Employee. Some states will try to make it harder to maintain independent contractor status by passing ABC Tests, in either a standard or strict version. A few conservative states may go the other way and adopt the latest version of the Uniform Worker Classification Act proposed by ALEC. The law would create a safe harbor for independent contractor classification if certain requirements are followed, including having a written contract. Versions of this law have been passed in West Virginia and Louisiana. You can read more here. Expect Oklahoma to be next.

5. Expect significant rulings on California independent contractor law. Several important cases are pending. These include Olson v. State of California, which challenges the constitutionality of AB 5. Oral argument was held in the Ninth Circuit in July 2022. In another case, the California Court of Appeal is considering the legality of Prop 22, the successful ballot measure that helped to protect independent contractor status for rideshare and delivery drivers using app services. Oral argument in that case, Castellanos v. State of California, was held in December 2022.

The law regarding contingent workforce is constantly changing, and 2023 looks to be another year of significant transformation. As always, it will be a good idea to watch these new developments carefully, as they will likely have a significant impact on companies using independent contractors and other contingent workforce arrangements.

Wishing you all a happy and healthy 2023!

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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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11.28.22
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Another Thing to Worry About?: Can Individuals Be Joint Employers under the FLSA?

This gem recently popped up on my twitter feed. Causes of death in London, 1632. Seems to me that cancer would be bad enough, but 10 deaths were attributable to the deadly combination of “cancer and wolf.” Sounds to me like 17th century cancer wards needed a moat.

Other notable causes of death include “Consumption” (1797) and its equally deadly opposite, “Dead in the street and starved” (6). “King’s evil” fell 38 unappreciated subjects of the Crown, and 98 died from “Rising of the lights,” which is a fate perhaps narrowly avoided by Clark in Christmas Vacation.

There were lots of things in 1630s London that could bring a person down, but happily “joint employment” is not among the recorded causes of death. Which raises this question as we head into 2023:

Can individuals be liable as joint employers?

The answer, of course, is sometimes.

The Supreme Court of Virginia recently ruled that individuals could not be joint employers under that state’s law on unpaid wages. The decision, was based on a strict reading of a state statute, which permitted only “entities” to be joint employers. The Virginia court explained that this definition was narrower than the understood meaning of joint employer under the Fair Labor Standards Act (FLSA).

And, indeed, the FLSA does recognize that individuals may be joint employers. This nugget from the First Circuit Court of Appeals answers that question with little room for doubt: “The overwhelming weight of authority is that a corporate officer with operational control of a corporation’s covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages.” Donovan v. Agnew, 712 F.2d 1509, 1511 (1st Cir.1983).

The difference is definitional. The FLSA looks to whether one or more “persons” is the employer. Persons can be individuals or entities. The Virginia statute considered only “entities.”

Individual corporate officers can, therefore, face liability as joint employers, particularly in smaller organizations where corporate formalities might not be followed as closely as they should be. For example, in the Agnew case, the court determined that “corporate officers with a significant ownership interest who had operational control of significant aspects of the corporation’s day to day functions, including compensation of employees, and who personally made decisions to continue operations despite financial adversity during the period of non-payment” were employers under the FLSA.

The bottom line here is that, yes, individuals can — at least under some circumstances — be joint employers under the FLSA. But not necessarily under every state’s law.

So that’s one more thing that individuals need to be wary of, in addition to the king’s evil and the dreaded combination of “cancer and wolf.”

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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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11.14.22
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Rick Springfield & Joint Employment: L.A. County Liable in FLSA Overtime Suit, Despite No Control Over Payroll

Rick jams!

If I ask you to name a song by Rick Springfield, you’ll say “Jessie’s Girl.” If I ask you to name another, you’ll look at me with a blank stare. But there’s another song you probably know. I forgot all about it too until I heard it on the 80s channel last week.

“Don’t Talk to Strangers” was released in 1982 and, around May of that year, spent four weeks at #2 on the Billboard charts. (Bonus Trivia Question: Can you name the #1 song in May 1982? The answer is below.)

Springfield had a couple of other hits too. Remember “Love Somebody” and “I’ve Done Everything for You”? Good times.

Anyway, the State of California and County of Los Angeles are hardly strangers, and they not only talk, but they collaborate on social services programs. That collaboration led to a lawsuit raising joint employer questions under the Fair Labor Standards Act (FLSA).

The State of California and the County of Los Angeles administer an In-Home Supportive Services (IHSS) program, which allows low-income elderly, blind, or disabled residents of the county to hire a provider to help them with daily living activities. The State of California runs the program at a state level, through state regulations, but the counties play a role in administering the program too.

Under a 2013 DOL regulation covering domestic workers, these workers were entitled to overtime pay under the FLSA. Until late 2015, however, the regulation was vacated while a court reviewed it. The state began paying overtime in 2016.

In this lawsuit, one of the IHSS providers filed suit against Los Angeles County, seeking FLSA overtime wages for 2015, while the rule was vacated and under review.

The county responded that the state, not the county, was the employer; and therefore the county could not be liable for the state’s failure to pay overtime in 2015. The district court agreed and ruled that the state, not the county, was the employer. The county would not be liable for the unpaid overtime. Or so it thought.

In a recent decision, however, the Ninth Circuit Court of Appeals reversed that conclusion. Applying the FLSA joint employer test, the Court held that the county was a joint employer, even though it did not control payroll.

Seems a little unfair, but that’s how joint employment works.

According to the Ninth Circuit, here’s the joint employer test under the FLSA: To determine whether an entity is a joint employer, the court must consider “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.”

The test derives from a Ninth Circuit case called Bonette. Other circuits use slightly different tests.

Even though the state controls payroll, the Ninth Circuit ruled that the county had enough involvement, based on the four factors, to make it a joint employer. The county therefore would be jointly liable for the shortfall in overtime pay.

The case is a good reminder of the dangers of joint employment. Even if your business has no control over payroll, a joint employer is liable for the failure to pay overtime.

The idea of two different things coming together is also the answer to today’s trivia question from above: What was the #1 song on the Billboard charts in May 1982?

[scroll down for the answer]

.

.

.

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.

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The #1 song in May 1982 was Ebony and Ivory.

Also, random fun facts about Rick Springfield:

  • His real name is Richard Springthorpe.
  • He was born in Guilford, New Sales Wales, Australia.
  • He played Dr. Noah Drake on General Hospital.
  • Before making it big on his own, he played in bands called Wickedy Wak and Zoot.

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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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10.17.22
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But the Onions! DOL’s Contractor Rule May Cause Companies Heartburn

Have you ever gone to a new restaurant that took over the space where one of your favorite restaurants used to be?
 
You’ve been wanting to try the new restaurant. You get there and the menu looks similar, so you order the fettucine with shrimp because that dish was always really good at the old place. It arrives and it looks the same but you’re not sure that it tastes quite the same.
 
Maybe the sauce tastes a little different but it’s hard to tell for sure. Then, you get home later that night and you feel a little queasy. You realize that the new restaurant must have put onions in the sauce. You probably didn’t notice because when the dish was served it looked just like it did at the old restaurant.
 
But you’re not supposed to eat onions, and now you have to wait and see if you’re going to start cramping up from eating the onions or if you’re going to be just fine. You really just don’t know. It could just as easily go either way, and now all you can do is wait.
 
That’s kind of how I feel after reading the Department of Labor’s proposed new independent contractor rule, released earlier this week.

Click here to read the rest of the story, originally published in Law360 on 10/13/2022.

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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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08.15.22
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Garbage Bird? Don’t Get Poisoned By A Double Hit of Misclassification and Joint Employment

Photo: Benjamin Freeman/Wikimedia Commons (CC BY 4.0)

The natives of Papua New Guinea call the hooded pitohui a “garbage bird,” and they don’t eat it or touch it. As Westerners learned more recently, there’s a good reason for the islanders’ hostility.

The hooded pitohui is the first bird confirmed to be poisonous. The bird‘s feathers emit batrachotoxins, which causes numbness and burning in low concentrations. A heavier does can cause paralysis, cardiac arrest and death. In other words, there’s good reason for keeping the hooded pitohui off the menu.

Numbness and burning may also describe the impact of a recent DOL enforcement action on two contractors in Louisiana. They were dealt a double hit—the DOL found independent contractor misclassification and joint employment.

After an investigation, the DOL’s Wage and Hour Division found that hundreds of painters and drywall workers had been misclassified as independent contractors. The company that retained the workers, PL Construction, failed to pay overtime and failed to maintain accurate time records, both violations of the Fair Labor Standards Act (FLSA).

Adding to the pain, the DOL found that a higher tier contractor, Lanehart, was the workers’ joint employer. That meant Lanehart was jointly liable for the violations—even though it had no control over PL Construction’s pay practices.

The DOL recovered more than $240,000 in overtime back wages for 306 workers.

There are several lessons here, both for companies that retain independent contractors directly and for higher tier contractors that engage subcontractors that use ICs.

1. The DOL considers independent contractor misclassification an enforcement priority. The agency is actively looking for violations.

2. The DOL publishes its wins. That means you can expect a press release naming and shaming your company if the DOL finds that there’s a practice of misclassifying workers. Have you heard the old adage that there’s no such thing as bad publicity? It’s not true.

3. Higher tier contractors are taking a risk if they put their head in the sand and disregard misclassification by their lower tier subs—especially if they plan to direct the work of the lower tier sub’s workers.

Here, the DOL found that Lanehart, the higher tier contractor, supervised PL’s workers and maintained records of who worked when. Lanehart’s supervision and direction made it a joint employer of PL’s workers. Under the FLSA, a joint employer is fully liable for wage and hour violations, even where it had no control over how the lower tier sub paid its workers.

4. A lawsuit is not the only way misclassification claims arise. Federal and state agencies can initiate investigations too. And while arbitration agreements with class action waivers can prevent class action litigation, they can’t stop a federal agency from pursuing claims on its own.

The DOL made its position pretty clear in its press release: “Our investigation shows the costly consequences employers face when they or their subcontractors fail to comply with the law. When we determine a joint employment relationship exists, the Wage and Hour Division will hold all responsible employers accountable for the violations.”

Misclassification hurts. Joint employment doubles the pain. The DOL can inflict an uncomfortable burning sensation, even without sending a a hooded pitohui your way.

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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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06.20.22
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Inedible Food: DOL Starts New Rulemaking Process to Toughen FLSA Independent Contractor Test

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.

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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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05.09.22
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Not Dead Yet: Arbitration Agreements May Sit Dormant, But They Can Still Save You From a Class/Collective Action

Not dead yet. @SCMPNews

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.

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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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