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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Now is the Time to Add These Safe Harbor Clauses to Your Independent Contractor Agreements

Image by Luca Falvo from Pixabay

I just finished reading The Longest Day, the 1959 book by Cornelius Ryan that tells the story of the D-Day landing from Allied, French, and German perspectives. The book covers June 6, 1944 and the days leading up to it, but it doesn’t get into what happened next. To facilitate supply lines into Europe right after D-Day, the British built two artificial harbors off the Normandy coast. Mulberry Harbours A and B allowed for the transport of up to 7,000 tons of vehicles and supplies to the mainland each day.

A harbor is a place where ships can seek shelter from the open ocean. Switching our focus to peacetime and the law, a “safe harbor” is the legal term for a provision that protects against liability if you meet certain conditions. No ships are required. Know the required conditions, and you can find shelter from a legal storm.

Two states recently passed laws that create safe harbors against claims of independent contractor misclassification.

Businesses using independent contractors in West Virginia and Louisiana should update their contracts immediately to take advantage of these new statutes.

Each state’s law provides a list of conditions that, if met, will make someone an independent contractor, providing a safe harbor against claims that these workers are misclassified and should be employees. The LA law creates a presumption of contractor status; the WV law is conclusive.

One of the conditions in WV, for example, is that the written contract “states…that the person understands” a list of five specific facts. The contract needs to “state” these five things. The WV law has other requirements too.

The LA law requires that 6 of a possible 11 conditions are met to fall within the safe harbor.

Other states are considering similar laws. Missouri and North Carolina are considering similar bills. Oklahoma was headed down the same road during the last legislative section but has not yet passed a bill.

Businesses using independent contractors in these states should amend their agreements to take advantage of these safe harbor opportunities.

At a time when the federal government is pledging to crack down further on independent contractor misclassification, it’s important to have contracts that are built to withstand classification challenges by any governmental body. Even under federal law, which doesn’t have these safe harbors, these recitations can be helpful when trying to meet the Right to Control and Economic Realities Tests used in federal law and in most states.

Your agreements with independent contractors provide an opportunity to build your defense against claims of misclassification. They should not be treated as a mere formality.

You want to be able to point to your agreements as Exhibit 1 in your defense against a misclassification claim. Play offense, not defense. Adding the WV and LA clauses — and even the proposed NC and MO clauses — can go a long way toward protecting your independent contractor relationships.

You might not be into reading books about World War II and that’s ok. But please read your contracts carefully. Now is a great time to amend and improve independent contractor agreements.

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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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Like Being Thrown on a Trotting Horse? This Company is Trying Rideshare without Independent Contractors

In 18th Century Europe, common methods for trying to revive drowning victims included throwing the victim onto a trotting horse, dunking in freezing water (ironic?), and my personal favorite, blowing tobacco smoke into the rectum.

These were creative ideas and sometimes they actually worked. The bouncing motion from being on a trotting horse could force air in and out of the lungs, like modern CPR. Tobacco smoke contains nicotine, which causes the brain to release epinephrine, which helps to stimulate the heart to contract.

It’s fun now to look back at how people tried to solve problems when they didn’t know what would happen.

The biggest unknown in the world of independent contractor misclassification is what would happen if rideshare and delivery companies were forced to reclassify all drivers as employees. A well-funded startup in Dallas is attempting to find out.

As reported here, a new rideshare service called Alto just completed a $45 million round of Series B funding. Alto’s model is to use all W-2 drivers and company-owned vehicles. The service currently operates only in Dallas, Houston, and Los Angeles, and has announced plans to switch to all-electric vehicles.

Will it work? Who knows.

Is it a viable business model? Who knows.

But in some ways, it’s a test case to see how an industry dominated by the independent contractor model might operate if forced to use all W2 workers. Yes, I know the taxi industry is another comparable. But it hasn’t exactly thrived since the emergence of rideshare. I’m pretty sure that’s not the model that rideshare would look to if force to pivot.

As the old proverb goes, necessity is the mother of invention. For those keeping score at home, Mothers of Invention was also the name of an experimental rock band in California once fronted by Frank Zappa and which featured tracks such as “My Guitar Wants to Kill Your Mama.” But that’s for another day.

For now, the rideshare industry continues to operate with its independent contractor model under siege. Widespread conversion of driver contractors to employees would be difficult and would introduce massive disruption in the industry. We’ll see what happens. In the meantime, let’s continue to innovate. Sometimes, even being thrown on a trotting horse can be helpful.

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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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Portable Benefits: Soon to Be Available for Mass. Independent Contractors?

This article in The Fox Magazine lists five things you can buy that are portable, even though you wouldn’t think they could be. The list includes toilets, massage chairs, saunas, neck fans, and bedrooms. The description of a portable bedroom goes like this:

Another brilliant innovation from the country that brought us the toilet in a suitcase, you can now buy a portable bedroom which comes folded up in a series of cabinets that look just like regular closets and dressers. Simply open the cabinet and fold out your bed for a super comfortable night’s sleep.

Um, no thanks.

If this article is revised next year, one surprising addition to the list could be Health Benefits for Massachusetts Independent Contractors. A new bill, inspired by California’s Prop 22, has been introduced in the Massachusetts legislature. To my surprise, the three co-sponsors are Democrats.

The bill, H. 1234, would create a exception to the strict ABC Test in Massachusetts, but only in the rideshare and delivery industries.

If the bill passes, rideshare and delivery platform companies would be required to offer occupational accident insurance and pay into a portable benefit account for drivers.

In exchange for doing so, these companies would gain assurance that drivers on their platforms are independent contractors under Massachusetts state law. The normal ABC Test would not apply. Platform companies would also be required to follow a few other basic guidelines in their interactions with drivers, including that:

  • Drivers can decide when to work and not work;
  • Drivers’ access to the platform cannot be terminated for declining a specific rideshare or delivery request;
  • Drivers can provide services on multiple platforms; and
  • Drivers can also work in another lawful occupation or business.

The bill is supported by the Massachusetts Coalition for Independent Work (and, of course, by the gig companies), and it is opposed by the Boston Independent Drivers Guild.

If passed, this would mark a significant exception to the strict ABC Test in Massachusetts, which currently presumes all working relationships to be employment, unless:

(A) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and 

(B) the service is performed outside the usual course of the business of the employer; and, 

(C) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Unlike California’s AB 5 (later rewritten as AB 2257), the Massachusetts law does not currently have exceptions for certain industries. Rideshare and delivery services would be the first industries carved out of the Massachusetts ABC Test.

The bill is in the early stages of being considered. It has been referred to the Joint Committee on Financial Services for further consideration. We’ll keep an eye on this one. It’s much more intriguing to me than a portable bedroom or sauna.

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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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Independent Contractors May Have a Weil Problem On Their Hands

Crash Test Dummies is a band from Winnipeg that I really like — especially the 1993 album, God Shuffled His Feet. It’s full of thoughtful questions asked in a booming deep voice. The song In the Days of the Caveman takes a look back, with some keen observations added for good measure:

In the days of the caveman
And mammoths and glaciers
Bugs and trees were your food then
No pajamas or doctors

See, that’s all true and probably not something you had thought about before.

President Biden has given us another reason to look back and reconsider some things you hadn’t thought about in a while. Last week, Biden nominated David Weil to serve as Wage and Hour Administrator. Weil served in the same role under Obama, so we’ve seen that movie too.

Here are some highlights from Weil’s last stint as W&H Administrator:

  • Administrator’s Interpretation 2016-1: Joint Employment under the FLSA, which I wrote about here when it was issued. Weil embraces the broadest possible view of joint employment. The Trump Administration’s DOL rescinded this guidance in 2017.
  • Administrator’s Interpretation 2015-1: Applying the FLSA’s “Suffer or Permit” Standard to Independent Contractor Classification, which I wrote about here. Weil advocates an expansive view of employment, declaring that “most workers are employees under the FLSA’s board definitions.”

Here’s what we can expect from Weil 2.0:

  • Increased enforcement activity by the DOL against companies using independent contractors.

Right now, claims generally arise through lawsuits, and class/collective actions present the most danger. The risk of class claims can be limited with arbitration agreements and class waivers. But arbitration agreements provide no defense against a DOL action. Those agreements don’t bind the government. Expect the DOL to go after companies that make extensive use of independent contractors.

  • Increased enforcement activity by the DOL on joint employment claims.

Remember, unlike independent contractor misclassification, joint employment is not illegal. Joint employment is a problem when a primary employer (such as a staffing agency or vendor/subcontractor) fails to comply with some aspect of the FLSA and its wage payment rules. Under a broad theory of joint employment, the company benefitting from the services is going to be liable for the errors of the primary employer, even though the alleged joint employer had no control over the primary employer’s wage practices.

  • New regulations on independent contractor classification and joint employment.

The standards and test keep changing, depending on who holds the White House. One step the Wage and Hour Division can take to try to make its views more permanent is to adopt its views as formal regulations, not just Administrator’s Interpretations. This is what the Trump DOL tried to do for both independent contractor misclassification and joint employment. Expect a strong push by the DOL to adopt new regulations that make it harder to maintain independent contractor status and easier to find joint employment.

The bottom line is that we’re going back in time. Maybe not so far back that bugs and trees were your food then, but back to 2015 and 2016 interpretations of the FLSA. Expect no pajamas or doctors.

What to do about it? Businesses that rely on independent contractors should tighten their agreements now. Businesses that engage staffing agencies should review those contracts now.

These posts contain a few of my favorite tips:

Good luck out there, and beware of mammoths and glaciers.

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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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Macaques & The Guess Who: Why the New Independent Contractor Rule Won’t Take Effect March 8

Photo by Hectonichus and, yes, this fella is sticking his tongue out at you (but he can’t remember why).

A Swedish study concluded that baboons, pig-tailed macaques, and squirrel monkeys have some of the worst short-term memories in the animal kingdom, barely exceeding that of bees. The point is, never ask a pig-tailed macaque where you left your car keys.

Having a short memory can be a problem in some situations, but not it’s not an issue if you’re just trying to recall the latest Department of Labor test for independent contractor misclassification. Everything you recall from six weeks ago is being undone anyway. (Or Undun, if you’re a fan of the spelling-impaired Canadian band The Guess Who.)

Remember the new rule issued by the DOL in January 2021 for determining employee vs. independent contractor status? It was going to modify the Economic Realities Test to focus on two core factors: (1) the nature and degree of the worker’s control over the work, and (2) the worker’s opportunity for profit or loss based on personal initiative or investment. The new rule was to take effect March 8. The test would apply only to claims under the Fair Labor Standards Act (FLSA).

No more. Last week, the DOL delayed implementation until May, but the rule most likely will be rescinded completely. Undun.

This decision comes on the heels of the DOL rescinding two opinion letters that were also issued in January. Undun. The letters provided guidance on determining independent contractor status in a few particular situations.

The Economic Realities Test remains the test used to determine who is an employee under the FLSA. It’s a multi-factor balancing test.

So if you’ve been relying on recent DOL guidance for how to apply that test, channel your inner pig-tailed macaque. Whatever you recall from January can be forgotten. And where did I put my car keys?

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

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Watch This Rooster! PRO Act Would Change Definition of Employee Under Labor Law.

Who says the news is always negative? Not so in Alabama, where we were treated this headline on AL.com:

Teen reunited with pet rooster lost at Alabama Cracker Barrel after Civil War reenactment

It seems an 18-year old Civil Ward reenactor brought his Buff Orpington rooster, Peep, to a civil war reenactment in nearby Tennessee, then stopped for lunch afterward. Our hero dutifully put on Peep’s leash and secured him to the bed of his truck while dining at a nearby Cracker Barrel after the event. But when he returned, the rooster was gone.

Police and animal control were summoned to the scene. The parties were later reunited when Peep wandered back to the Cracker Barrel, and this story had a happy ending. This had been Peep’s third Civil War reenactment, although his role in the battle plan was unclear. Fortunately for Peep, further battles lie ahead.

Further battles lie ahead in Congress too, not for roosters but for businesses everywhere. Rep. Bobby Scott and 200 Democratic co-sponsors have re-introduced a massive labor bill that fulfills every wish of the unions.

The PRO Act – Protecting the Right to Organize – would bring a massive overhaul to the National Labor Relations Act. Two portions of the bill would affect independent contractor misclassification and joint employment.

First, the PRO Act would re-adopt the Browning-Ferris test for determining whether someone is a joint employee of two employers. This test had been adopted by the Obama Board but reversed by the Trump Board. The test would consider two entities to be joint employers if they “share or codetermine” control over workers’ terms of employment. The notion of control would be broad. It would include not just actual direct control, but reserved control or indirect control. Under the original Browning-Ferris test, control over the speed of an assembly line was considered sufficient control to make a business a joint employer.

Second, the PRO Act would adopt a nationwide strict ABC Test for determining whether someone is an employee or independent contractor. The new rule would require that all workers performing services be considered employees under the NLRA unless (all three):

(A) the individual is free from the employer’s control in connection with the performance of the service, both under the contract for the performance of service and in fact;
(B) the service is performed outside the usual course of the business of the employer; and
(C) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

This is the same test adopted by California (recall Dynamex and AB 5) but without the exceptions. California lawmakers recognized this test wouldn’t work in all industries and adopted a long list of exceptions to this test.

The PRO Act would not have any exceptions.

It’s no surprise that the bill was reintroduced. A similar bill was passed by the House last year but never considered by the Senate.

While 60 votes in the Senate isn’t going to happen, this bill deserves a close and watchful eye. (Follow its progress here.)

That means really watching it, not just tying it to the bed of your truck and hoping it’s still there after you finish your Cracker Barrel omelet.

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

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Stop Making Sense: California Companies Can Be Liable for Not Following Rule That Did Not Yet Exist

Sometimes things stop making sense. And I’m not referring to the 1984 Talking Heads album, which included “Psycho Killer,” “Burning Down the House,” and other songs least likely to be used in an episode of Sesame Street.

No, when I say things “stop making sense,” I’m thinking more like dogs climbing ladders, pigeon-eating catfish, or Nazi Russian goats. Seriously mind-bending facts. The stuff that makes you question what was in those brownies.

The California Supreme Court’s ruling today falls in that category. Remember the 2018 Dynamex decision? That’s the one where the Court invented a new ABC Test for deciding whether someone was an independent contractor or an employee under California wage and hour law. Ever since then, companies have been trying to figure out whether that made-up test would apply retroactively. In other words, would California hold companies liable before 2018 for not following a test that did not yet exist until 2018?

After today’s decision in Vazquez v. Jan-Pro, we now know the answer: Of course! It’s California. Even companies not in the fortune telling industry should have known what legal standard the justices were going to invent. And of course it’s fair to hold companies liable for failing to comply with a standard that, before 2018, did not exist anywhere in California law. If Johnny Carson could figure out what was in that envelope (“seersucker“), California business should have been able to figure out what legal test the California Supreme Court would make up in 2018.

The Court reasoned that it’s normal practice for a decision to apply retroactively and said it’s only fair for the decision to apply to everyone retroactively since Dynamex didn’t see it coming either. The Court rejected the common sense notion that it would be unfair to apply the test retroactively, even though courts across California had — for years — applied the multi-factor Borello balancing test when determining employee vs. independent contractor status.

One saving grace may be that the Dynamex decision is now almost three years old, so statutes of limitation for wage and hour claims are running out. Most wage and hour claims in California must be brought within three or four years of the violation, depending on the claim asserted.

I can’t say this decision is surprising. But I couldn’t say the knife-wielding squirrel featured in the last blog post was surprising either. It’s a crazy world out there, folks. Sometimes it’s best to just stay home and watch Veep, which once seemed too outlandish to be believable.

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

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Snapshot or Long Exposure? Dep’t of Labor Approves New IC Test … For Now

Say cheese! Image by OpenClipart-Vectors from Pixabay
(Note: This post was updated on 1/6/21)

This octopus in New Zealand has been trained to take photos of visitors to the Sea Life Aquarium. That’s a pretty neat trick. I’m sure the visitors love it and will pay whatever exorbitant fee the aquarium charges to profit on the back of its cephalopod slave labor, but do the photos last? Do the visitors keep them, or do the pictures end up in the circular file at home?

Some photos are cherished and kept. Others, not so much.

So which category will the DOL’s new independent contractor test fall into — cherished and kept? Or not so much?

As reported here, in September 2020, the DOL published a new proposed rule for how to determine independent contractor vs. employee status under the Fair Labor Standards Act (FLSA). The DOL has been rushing to publish the new rule before Inauguration Day 2021, in case of a change in the Oval Office.

Now facing that change, the White House on Monday approved the proposed rule, and this morning the Department of Labor released the new rule. It takes effect on March 8, 2021–unless it doesn’t. The Biden administration’s incoming press secretary, Jen Psaki, has already said the new administration would try to kill this one in an early executive order. We’ll see how that plays out.

Meanwhile, whether the new rule goes into effect or not, the FLSA analysis for independent contractor vs. employee should not really change anyway. The new rule is essentially a repackaging of how the courts have already been applying the FLSA test. While Democrats have protested the new rule as an attempt to make it easier to classify someone as an independent contractor, I don’t see it that way. I see it as a clearer way to articulate the test that has been applied for years.

Once Biden takes office, there are so many things he’ll want to undo, he’ll need more hands than an octopus has legs, so this one might not quite hit the top of the list. We’ll continue to monitor the status of this proposed new rule, including whether and when it actually takes effect.

In the meantime, if you can get to New Zealand anytime soon, there’s an octopus that would like to snap your picture. Happy New Year!

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

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Buckle Up? Why The Gig Economy Should Love Biden’s HHS Pick

Back before seatbelts were a thing, Sears sold this handy Auto Strap for Front-Seat Tots. Tie your toddler to some part of the car, and drive carefree! What could go wrong?

Ok, things have changed a bit when it comes to driving. Seatbelts and airbags seem to have carried the day. Things have also changed quite a bit in the modern workforce, with the gig economy pushing aside traditional employer-employee work relationships.

Something important just happened to help California gig economy companies, and it’s gone under the radar. Biden named California Attorney General Xavier Becerra as his pick for Health & Human Services. Why should gig economy companies care who Biden’s HHS pick is? Because naming Becerra to HHS means Becerra will no longer be California’s Attorney General. And that’s good new because a key part of Becerra’s agenda as State AG had been to knock around gig economy companies as much as possible.

Becerra tried to sabotage Prop 22 by giving it a misleading description on the ballot, but voters saw through it and passed the measure anyway.

Becerra has been the driving force behind California’s lawsuits against ride share companies, trying to force them to reclassify drivers as employees.

But now, assuming he gets confirmed, someone else will take over as California AG. Hopefully it will be someone with less of an anti-gig economy agenda than Becerra. We’ll see. But for now, this pick seems to be good news. I don’t know what he’ll do as HHS Secretary, but I know what he won’t do as HHS Secretary, and that’s to pick fights with companies who help to keep the gig economy strong.

So strap in and let’s see what this new ride will bring. Just be sure to use a seatbelt, not a $1.88 standing harness.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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