Category Archives: Gig Economy

12.09.24
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What is the S.G. Borello Test? (Hint: It’s No Ashley Paradox)

Remember Rick Astley? Yes, this guy. And this song. I assume he had other songs but I know of none of them.

I recently read a Reddit post that offers the Astley Paradox. And it’s a good one.

If you ask Rick Astley for his copy of the movie Up, he cannot give it you as he will never give you up. However, in doing so, he lets you down. Thus creating the Astley Paradox.

California’s tests for determining independent contractor status are not paradoxical, But they are complicated.

There are essentially two tests, the ABC Test and the S.G. Borello Test. The ABC Test is the default test, and it’s the hardest to please.

There are a gazillion exceptions to the ABC Test, and you can find these in California Labor Code sections 2776-2784. But when an exception applies, it doesn’t mean the worker is an independent contractor. It means you use the S.G. Borello test to make that determination instead of the ABC Test.

The S.G. Borello Test is a balancing test. In contrast to the ABC Test, you don’t have to satisfy every factor.

Here’s the S.G. Borello test, with some bonus commentary from the California Department of Industrial Relations:

The California Supreme Court established the Borello test in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341. The test relies upon multiple factors to make that determination, including whether the potential employer has all necessary control over the manner and means of accomplishing the result desired, although such control need not be direct, actually exercised or detailed. This factor, which is not dispositive, must be considered along with other factors, which include:

  1. Whether the worker performing services holds themselves out as being engaged in an occupation or business distinct from that of the employer;
  2. Whether the work is a regular or integral part of the employer’s business;
  3. Whether the employer or the worker supplies the instrumentalities, tools, and the place for the worker doing the work;
  4. Whether the worker has invested in the business, such as in the equipment or materials required by their task;
  5. Whether the service provided requires a special skill;
  6. The kind of occupation, and whether the work is usually done under the direction of the employer or by a specialist without supervision;
  7. The worker’s opportunity for profit or loss depending on their managerial skill;
  8. The length of time for which the services are to be performed;
  9. The degree of permanence of the working relationship;
  10. The method of payment, whether by time or by the job; 
  11. Whether the worker hires their own employees;
  12. Whether the employer has a right to fire at will or whether a termination gives rise to an action for breach of contract; and
  13. Whether or not the worker and the potential employer believe they are creating an employer-employee relationship (this may be relevant, but the legal determination of employment status is not based on whether the parties believe they have an employer-employee relationship). 

Borello is referred to as a “multifactor” test because it requires consideration of all potentially relevant facts – no single factor controls the determination. Courts have emphasized different factors in the multifactor test depending on the circumstances. For example, where the employer does not control the work details, an employer-employee relationship may be found if (1) the employer retains control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative, Inc. v. Workers’ Compensation Appeals Board (1991) 226 Cal.App.3d 1288.) 
As the Supreme Court has explained, Borello “emphasizes statutory purpose as the touchstone for deciding whether a particular category of workers should be considered employees rather than independent contractors for purposes of social welfare legislation.” (Dynamex, 4 Cal.5th at 935.) The emphasis on statutory purpose “sets apart the Borello test for distinguishing employees from independent contractors from the [common law] standard . . . in which the control of details factor is given considerable weight.” (Id.)

Most contractor relationships won’t satisfy all of the factors, but you’re going to need to satisfy most if you want independent contractor status under the S.G. Borello test. There’s no precise mathematical formula for how many factors you need, and different judges may evaluate the same set of facts differently, so it’s important to satisfy as many factors as you can.

California law isn’t as forgiving as Rick Astley. California law will often let you down and desert you.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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12.02.24
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Sampling Bias? California’s New Freelancer Law Only Applies to “Professional Services”

This clever illustration of sampling bias is from @sketchplanator. Marketers, under California law, provide “professional services.” So do photographers, fine artists, travel agents, barbers, foresters, human resource administrators, and a grab bag of other miscellaneous service workers. But not construction workers, lawyers, electricians, nannies, or dog walkers.

Why does this matter?

Well, California’s new Freelancer Worker Protection Act (FWPA) (explained here) only applies to “professional services.” The term “professional services” is defined as having the same meaning as in AB5, the law that sets up the ABC Test and then adds a medley of exceptions. “Professional services” is one of the exceptions.

So what does that mean for companies retaining freelancers in California?

If they provide “professional services” (as defined in Labor Code 2778), then:

  • There’s an exception to the ABC Test, meaning that to determine whether they are truly independent contractors, you use the S.G. Borello test. That’s a multi-part balancing test.
  • If they pass the IC test, the FWPA potentially applies.
  • If they pass the IC test and provide at least $250 in services in any 120-day period, then the FWPA does apply. A written contract is required, along with several other requirements, explained here.

If you want the full list of “professional services,” scroll down. I’ve copied it here. Otherwise, you’ve successfully completed this post, and you will earn a gold star on your chart on my refrigerator. (Do parents still do that? Please let me know.)

Professional Services under Labor Code 2778:

(2) “Professional services” means services that meet any of the following:

(A) Marketing, provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the individual or work that is an essential part of or necessarily incident to any of the contracted work.

(B) Administrator of human resources, provided that the contracted work is predominantly intellectual and varied in character and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.

(C) Travel agent services provided by either of the following:

(i) A person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code.

(ii) An individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.

(D) Graphic design.

(E) Grant writer.

(F) (i) Fine artist.

(ii) For the purposes of this subparagraph, “fine artist” means an individual who creates works of art to be appreciated primarily or solely for their imaginative, aesthetic, or intellectual content, including drawings, paintings, sculptures, mosaics, works of calligraphy, works of graphic art, crafts, or mixed media.

(G) Services provided by an enrolled agent who is licensed by the United States Department of the Treasury to practice before the Internal Revenue Service pursuant to Part 10 of Subtitle A of Title 31 of the Code of Federal Regulations.

(H) Payment processing agent through an independent sales organization.

(I) Services provided by any of the following:

(i) By a still photographer, photojournalist, videographer, or photo editor who works under a written contract that specifies the rate of pay and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity; the individual does not primarily perform the work at the hiring entity’s business location, notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity. This subclause is not applicable to a still photographer, photojournalist, videographer, or photo editor who works on motion pictures, which is inclusive of, but is not limited to, theatrical or commercial productions, broadcast news, television, and music videos. Nothing in this section restricts a still photographer, photojournalist, photo editor, or videographer from distributing, licensing, or selling their work product to another business, except as prohibited under copyright laws or workplace collective bargaining agreements.

(ii) To a digital content aggregator by a still photographer, photojournalist, videographer, or photo editor.

(iii) For the purposes of this subparagraph the following definitions apply:

(I) “Photo editor” means an individual who performs services ancillary to the creation of digital content, such as retouching, editing, and keywording.

(II) “Digital content aggregator” means a licensing intermediary that obtains a license or assignment of copyright from a still photographer, photojournalist, videographer, or photo editor for the purposes of distributing that copyright by way of sublicense or assignment, to the intermediary’s third-party end users.

(J) Services provided by a freelance writer, translator, editor, copy editor, illustrator, or newspaper cartoonist who works under a written contract that specifies the rate of pay, intellectual property rights, and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity; the individual does not primarily perform the work at the hiring entity’s business location, notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity.

(K) Services provided by an individual as a content contributor, advisor, producer, narrator, or cartographer for a journal, book, periodical, evaluation, other publication or educational, academic, or instructional work in any format or media, who works under a written contract that specifies the rate of pay, intellectual property rights and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity, the individual does not primarily perform the work at the hiring entity’s business location notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity.

(L) Services provided by a licensed esthetician, licensed electrologist, licensed manicurist, licensed barber, or licensed cosmetologist provided that the individual:

(i) Sets their own rates, processes their own payments, and is paid directly by clients.

(ii) Sets their own hours of work and has sole discretion to decide the number of clients and which clients for whom they will provide services.

(iii) Has their own book of business and schedules their own appointments.

(iv) Maintains their own business license for the services offered to clients.

(v) If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.

(vi) This subparagraph shall become inoperative, with respect to licensed manicurists, on January 1, 2025.

(M) A specialized performer hired by a performing arts company or organization to teach a master class for no more than one week. “Master class” means a specialized course for limited duration that is not regularly offered by the hiring entity and is taught by an expert in a recognized field of artistic endeavor who does not work for the hiring entity to teach on a regular basis.

(N) Services provided by an appraiser, as defined in Part 3 (commencing with Section 11300) of Division 4 of the Business and Professions Code.

(O) Registered professional foresters licensed pursuant to Article 3 (commencing with Section 750) of Chapter 2.5 of Division 1 of the Public Resources Code.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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11.25.24
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A Car Crash? Trump’s Labor Secretary Pick Supports ABC Test for Worker Classification

Sometimes things don’t make sense when you read them. Like this: Here’s an adorable video of a dog getting hit by a car.

You need to dig deeper to make sense of it. If you watch the video, you’ll understand. The sentence is true, and the video is adorable.

Another thing that didn’t make sense to me when I first read it is that Trump’s pick for Secretary of Labor, Lori Chavez-DeRemer, was a co-sponsor of the PRO Act.

I had to dig deeper. Is that really true? It is.

Remember the PRO Act? It’s an acronym for Protecting the Right to Organize. It’s a Democrat-sponsored bill that threatens to blow up the gig economy and convert most independent contractors to employees.

The PRO Act would change the definition of “employee” under the NLRA so that all workers are presumed to be employees, not independent contractors, unless the strictest version of the ABC Test is met. That’s the same test as in California, but without all the exceptions.

In the 2023 version of the PRO Act, a worker is an employee under the NLRA unless (all 3):

(A) the individual is free from control and direction 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.

Yes, that’s the same dreaded Part B that makes California such a difficult place to maintain independent contractor relationships.

The PRO Act would also broaden the definition of joint employment under the NLRA.

Chavez-DeRemer was one of three Republicans to co-sponsor the bill.

The PRO Act will not get the 60 votes needed in the Senate, so it’s not going to pass anytime soon (so long as the filibuster rule remains intact). But this bill is so pro-union that her support should be of concern to any business that engage contractors.

Chavez DeRomer served only one term in Congress, so she did not build an extensive record. But her support of the PRO Act is a part of that limited record.

I expect we’ll learn more about her views during the confirmation process. Her support of the PRO Act is something to keep an eye on. Getting hit with the PRO Act (or some DOL-authorized version of it) would be far worse that the damage done by the car hitting the dog in the video, which you really should watch if you skipped over the link above.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.21.24
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What Does It Mean? Supreme Court Weighs in on California’s Independent Contractor Law (Sort of)

I am entertained by poorly translated things. I have no idea what this shirt means or what the designer thought it would mean. I saw this one in Italy.

I can’t help but wonder what the reaction would be if I wore this shirt in the U.S. Would people say anything to me? I was tempted to ask the wearer about it or to try to buy it from her, but I chickened out.

Last week, the U.S. Supreme Court kind of chickened out too.

A petition had been filed with the Court, asking it to invalidate California’s AB5, its stringent independent contractor law. The petition argued that the law singles out certain businesses and therefore violates the Equal Protection Clause of the U.S. Constitution.

As you may recall, AB5 is the California law that makes it much harder to maintain independent contractor status. The law presumes that most workers are employees and requires a hiring party to satisfy a three-part ABC Test to classify someone as a contractor.

The law, however, does not apply the same standards to everyone. The law exempts loads of industries and types of workers from the ABC Test, and — if we’re being honest here — the law was really targeted toward rideshare and delivery companies.

And that’s exactly what the rideshare and delivery companies argued.

In June 2024, the Ninth Circuit voted to preserve the law, and the case (called Olson v. State of California) was appealed to the U.S. Supreme Court. The Supreme Court, however, can decide which cases to hear and does not have to give a reason for declining to hear a case.

Last week, the Supreme Court declined the petition, opting not to hear the case. The Court provided no reason.

A year earlier, in July 2023, the U.S. Supreme Court denied a different petition asking it to review AB5. The earlier petition, in Mobilize the Message LLC v Bonta, argued that the law’s restrictions on freelance work violated the first Amendment.

For some companies, the Supreme Court’s decision last week not to hear the Olson case will have limited effect. The passage of Prop 22 in late 2020 exempted certain rideshare and delivery app companies from having to comply with AB5. (Prop 22 was also challenged in court and survived.) But AB5 and its ABC Test, later recodified in AB2257, remain in effect for many industries and businesses.

This most recent petition to the Supreme Court alleged that AB5 violated the Equal Protection Clause by unfairly singling out certain industries. I think the evidence is plain that this is what motivated the law, but whether that motivation rises to the level of an Equal Protection violation is another matter.

But no matter. The Supreme Court can decline to hear the appeal, and that’s exactly what it did.

AB5 remains on the books, and I can now start thinking about how I could turn all of this into a poorly translated t-shirt.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.14.24
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Blending In: California Passes Freelancer Protection Law, Joining Other Locales

Don’t tell anyone, but there is a motorcycle toward the front of this photo. I know, it blends right in and is hard to see because it’s camouflaged. But look carefully and you’ll see it.

I saw it recently while in Bellagio on our vacation to Italy. Yes, I have better photos, but this one helps me make a point about blending in.

The California legislature has decided to blend in too, adopting a freelancer protection bill that is similar to laws already in place in New York State, Illinois, and several cities.

California’s Freelance Worker Protection Act takes effect 1/1/2025.

The law has no bearing on the determination of whether someone is an employee or independent contractor. But if the worker is a contractor and other criteria are met, then the requirements of the law must be followed by the party retaining the independent contractor.

If you’ll be retaining a freelancer in California, here’s what you need to know. As a reward for reading to the end, I’ve included some tips and a better photo.

Applies if:

  • Retention of individual IC or single member entity,
  • Retained to provide “professional services” (as defined in Labor Code sec 2778), and
  • $250 in services to be provided within 120 days

But not applicable if:

  • The hiring party is an individual and the work is for the hiring party’s personal benefit or benefit of the family (e.g., n/a to babysitter, dog walker)

Requirements:

  • Written contact that includes:
    • Name and address of each party
    • Itemized list of services and value
    • Rate and method of compensation
    • Date when payment is due or mechanism for determining when payment is due
    • Date when IC must submit invoice to allow for timely payment
  • Payment to IC is due on the date specified in contract or, if no date is specified, then 30 days after work is completed
  • Once work is completed, hiring party cannot require freelancer (a) to accept less in payment, (b) to provide more goods or services, or (c) to grant more IP rights than agreed to in the contract

Other provisions:

  • The law does not limit existing contract law or prevent an IC from enforcing a verbal contract or recovering under promissory estoppel
  • Waivers are void
  • Retaliation prohibited
  • Civil action permitted; recovery to include attorneys fees and costs
  • Damages:
    • If IC requested and was denied a written contract, then additional $1000
    • If hiring party failed to timely pay, then 2x unpaid portion
    • Damages equal to value of contract for other violations
  • Hiring party must provide IC with a copy of the contract
  • Hiring party must retain contract for 4 years

Tips:

  • Clarify intellectual property rights in contract; don’t leave that until later or assume there is a handshake understanding of who will own the IP
  • Specify a due date for payment or a process for determining when payment is due
  • Define when the work is completed, and define it in a way that requires specifications to be met. This is to protect against poor workmanship and to try to preserve the right to pay less for a shoddy output.

And here’s a more representative photo from the Italy vacation. This is at Alpe di Suise in the Dolomites.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.07.24
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Don’t Look Surprised: House Committee Presses DOL for Detail on Misclassification Investigations

My impression of European electrical outlets is that they seem surprised, as if they don’t know what might be coming. I saw this one in our Airbnb in Lake Como.

Am I wrong? Didn’t think so.

The outlet should not be surprised at what’s coming. And DOL Acting Director Julie Su should not have been surprised either when she was issued a subpoena by the House Committee on Education and the Workforce.

The committee, chaired by Rep. Virginia Foxx (R-NC) has been at odds with the DOL for some time. In particular, Foxx et al. have doubts about the legitimacy of the Su-led DOL’s belief that independent contractor misclassification is rampant. The Committee believes that the DOL is being too aggressive in seeking to find misclassification in relationships that are, in reality, properly classified as independent contractor relationships.

In March, the Committee sent the DOL a series of inquiries about its enforcement efforts. But the DOL largely evaded the questions. After ongoing back and forth, the Committee has finally issued a subpoena to the DOL, demanding production of specific information about the DOL’s enforcement activities.

More specifically, the subpoena requests documents sufficient to show, since January 20, 2021:

  1. The number of instances of misclassification that Wage and Hour Division (WHD) inspectors have found.
  2. The number of misclassification enforcement investigations that WHD has initiated.
  3. The number of misclassification enforcement investigations that WHD has jointly undertaken with the NLRB.
  4. The number of misclassification enforcement investigations that WHD has jointly undertaken with the FTC.

Responses to the subpoena are due October 7th. I don’t expect we’ll see direct answers.

And when that happens, it will be no surprise.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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09.16.24
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Try These Steps to Reduce IC Misclassification Risks, in the Long Run

Don Henley used to hurry a lot, he used to worry a lot, he used to stay out till the break of day.

But you don’t need to carry on that way. — at least when it comes to reducing your company’s risk of independent contractor misclassification. Here are four steps you can take that will proactively reduce risk, in the long run:

1. Review & Modify Actual Practices

Courts answer the question of Who Is My Employee? By reviewing the actual facts, not what the parties intend or what the contract says. Make sure the facts on the ground are consistent with economic independence of the contractor and a lack of control by the hiring party. Change the facts when you can.

2.Create a Vendor Qualification Questionnaire

Require vendors to make a set of written representations that support their status as independent contractors. Then rely on this set of representations when deciding whether to retain each contractor. These representations also help to pin down a contractor who later claims to be an employee.

3.Create a Gatekeeper Process

Sometimes contractors are retained by operations people who don’t know the first thing about misclassification and related legal risks. A gatekeeper process requires all retentions of independent contractors to flow through a designated person who can issue-spot and evaluate whether the proposed retention is consistent with independent contractor status. The gatekeeper has the discretion to approve or deny requests to retain a contractor.

4.Draft Customized Contracts

Any independent contractor agreement you find on the internet is pure garbage. Contracts should be customized:

  • To memorialize the specific facts that support independent contractor status in the relationship
  • To prohibit the exercise of control by the hiring party over various aspects of the relationship
  • To impose indemnity obligations and insurance requirements, and
  • To make it more difficult for a contractor to challenge the independent contractor classification

Taking proactive steps like these can help you to answer this question in the affirmative, when facing an independent contractor classification challenge: Who is gonna make it? We’ll find out, in the long run.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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09.09.24
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Hungry Serpents: Contractor Who Admitted Being Self-Employed Loses Suit in Which He Claims to Be an Employee

Snakes may have an eating disorder. Is cannibalism an eating disorder?

A wildlife technician for the Georgia Department of Natural Resources was searching for eastern indigo snakes, when he found a four-footer with an unusual appetite. Upon capture, the snake vomited up other snakes. The snake has eaten another indigo snake (no relation?), a rate snake, and possibly a rattlesnake, which may or may not have still been alive. Published reports of the incident are unclear about the rattlesnake.

Turning on your own species is not unique to snakes. We see independent contractors try that trick all the time. They’re content to be contractors until they decide they’re unhappy, at which point they sue and claim to have been an employee all along.

A recent Fifth Circuit case stood out to me for two reasons:

(1) The contractor had made previous statements, under oath, that he was self-employed. I wanted to see if the court would hold those against him.

(2) If the court applied the economic realities test, I wanted to see which version of the test it would use. Would the court apply the new DOL version of the test?

Here’s what happened. The Killick Group provides inspection services in the oil, gas, and energy industries. When the need arises for a job, the company engages third party independent contractor inspectors to perform the work.

One of those third party inspectors was Guillermo Gray. Gray was a certified welding and coding inspector with his own company. Gray sued Killick Group, alleging that he was an employee under the Fair Labor Standards Act (FLSA) and should have received overtime pay.

In defending the claim, Killick Group used past statements by Gray against him. In 2015, Gray was convicted of driving while intoxicated. When applying to secure a work-only driver’s license, he attested that he was “self-employed” as an inspector, and he listed his own company, Veritas Inspections, Inc., as his employer.

Killick Group argued that Gray was judicially estopped from claiming to be an employee, since he attested previously that he was self-employed. Killick Group also argued that Gray did not meet the test to qualify as an employee under the FLSA.

The trial court agreed with the judicial estoppel argument and granted summary judgment. On appeal, the Fifth Circuit had some concerns with the estoppel argument and decided to analyze the case under the FLSA.

The appeals court applied an economic realities test, considering five factors:

(1) the degree of control exercised by the alleged employer;
(2) the extent of the relative investments of the worker and the
alleged employer;
(3) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer;
(4) the skill and initiative required in performing the job; and
(5) the permanency of the relationship.

The court determined that Gray was an independent contractor under the test.

Two things stand out to me about this case.

First, the Fifth Circuit did not consider the version of the test created by the DOL in its recent independent contractor regulation. The Fifth Circuit applied the same five-part test that Fifth Circuit courts had applied in the past.

Second, I wish the Fifth Circuit would have analyzed the judicial estoppel argument. Since the court determined that Gray was not covered by the FLSA, the court did not consider the judicial estoppel argument. I find the judicial estoppel argument intriguing, and I like it as a tool — if it will work. Independent contractors regularly assert that they have independent businesses, such as when taking tax deductions and filing a Schedule C. As an advocate for companies, I’d like to be able to use those assertions against an individual who later claims to be an employee. It would have been helpful to have Fifth Circuit case law supporting that argument.

Both of these takeaways are worth digesting. I will digest them more thoroughly than the indigo snake digested its meals, one of which may or may not have still been alive at the time of regurgitation. The mystery of what happened to the possibly-eaten, possibly-still-alive rattlesnake remains unsolved. I choose to believe it was eaten and lived. That makes for the better story.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.26.24
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“Relative Nature”: Can You Bear This Broad Workers Comp Test for Employee Status?

Nature can be cruel. Friends can be crueler.

A 32-year old man was attacked by a brown bear earlier this month while hunting near Cooper Landing, Alaska. The man survived the bear attack, but then his hunting buddy shot him in the leg when trying to kill the bear. Thanks, buddy!

(No, it was not Dick Cheney.)

Nature makes its way into independent contractor status tests too, sometimes — relative nature, that is. Today’s post is about a test sometimes used in workers compensation cases.

In D.C., the test for whether someone is an employee under the workers’ comp law is a “relative nature of the work test.” States that have adopted this broad test have moved away from the more common “right to control” test.

Under this test, an employment relationship is found when (1) the work being done is an integral part of the regular business of the employer and (2) the worker, relative to the employer, does not furnish an independent business or professional service.

Here’s how D.C. courts interpret the two parts.

The first part focuses on the “nature and character of the claimant’s work or business” and requires consideration of three factors: (a) the degree of skill involved in the work in question; (b) the degree to which it is a separate calling or business; and (c) the extent to which it can be expected to carry its own accident burden.

The second part of the test focuses on the relation of the claimant’s work to the employer’s business and also requires consideration of three factors: (a) the extent to which the claimant’s work is a regular part of the employer’s regular work; (b) whether it is continuous or intermittent; and (c) whether its duration is sufficient to amount to the hiring of continuing services, as distinguished from contracting for the completion of a particular job.

In states that use this type of workers comp test, more relationships will be captured than under other, more traditional worker classification tests.

But this might not be a bad thing. The benefit of workers comp coverage for businesses is that it protects them from tort liability. In industries like construction, where injuries can be serious, coverage can be helpful. The disadvantage is that workers comp is no-fault, and you’re required to pay for the coverage.

So next time you’re hunting to see whether you might need to provide workers comp coverage to your contractor or causal laborer, remember that some states have pretty broad tests. Not broad enough to get coverage if your hunting buddy shoots you in the leg, but you get the idea.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.12.24
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Smashing! House Committee Presses DOL to Reveal Any Changes to Its Independent Contractor Enforcement Strategy

In this video, Muhammad Rashid of Pakistan, crushes 39 cans in 30 seconds. With his head. (I like the little fist pump he gives at the end.)

Why would a person do this? To get attention, I imagine. It caught my attention.

The House Committee of Education and the Workforce may also be trying to solicit a bit of attention, but I do want to know the answers to the Committee’s questions.

On August 8, they sent this letter to Acting Secretary of Labor Julie Su, asking her for information about the DOL’s enforcement activity under its new independent contractor rule. The Committee would like the DOL to answer three questions:

1) Since January 20, 2021, how many instances of misclassification have Wage and Hour Division (WHD) inspectors found? Please provide the total number of instances across each occupation that has been subject to investigation.

2) Please provide the number of misclassification enforcement investigations WHD has initiated for each specific industry sector since January 20, 2021.

3) Has DOL initiated any investigations related to misclassification based on its coordination with the National Labor Relations Board and the Federal Trade Commission? If so, please provide the number of investigations DOL has undertaken, broken down by each specific industry segment.

Committee Chair Virginia Foxx (R-not from Virginia) writes that she asked Su these questions when Su appeared before the Committee on May 1, but Su failed to answer. The letter begins by knocking Su around a bit, alleging that the DOL with its new independent contractor rule is trying to destroy all independent contractor relationships.

Maybe yes, maybe no. I don’t know where this letter falls on the continuum of publicity stunt vs. actual relevance for policy making, but I think these are good questions. It would be hopeful for businesses to know whether the DOL’s enforcement strategy has shifted since enactment of the new rule. And if so, how.

The Committee might get the answers it seeks, or it might just be banging its head against the wall cans. But it never hurts to ask.

What Mr. Rashid was doing, on the other hand, does hurt. Or it should hurt. And if it doesn’t hurt, then maybe that tells us something too. Also, I think Mr. Rashid owes someone the cost of 39 beers.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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