Category Archives: Independent Contractor vs. Employee

04.23.18
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Pink Floyd or The Who?: NLRB Extends Deadline for Public Input on Important Misclassification Decision

pf photo 1 for nlrb post velox

Roger Waters & the boys, smiling pretty for the camera

Pink Floyd or The Who? Tough call for me, but I generally go with Pink Floyd, unless we’re listening to Tommy. Songs from both bands came to mind last week as I read the NLRB’s update on an important issue relating to independent contractor misclassification.

Who Are You (The Who, 1978)? In this post, we discussed a 2017 ruling, in which an ALJ found that the misclassification of independent contractors, by itself, is a violation of the federal labor law. This decision rejected the pickup basketball rule, “no harm, no foul.” Misclassification was deemed to be an unfair labor practice.

Join Together (The Who, 1990). The full Board then decided to reconsider that decision and invited public input on the question. Non-parties were asked to submit briefs to assist the Board in making its decision. Trade associations and labor groups are filing briefs on both sides of the issue.

Wish You Were Here (Pink Floyd, 1975). The Board temporarily lost its 3-2 Republican majority after Member Miscimarra stepped down, but earlier this month, the Senate confirmed John Ring as the third Republican member, restoring a majority and a pro-business slant.

Time (Pink Floyd, 1973). Last week the Board extended the deadline for briefing to April 30th. Any business or trade organization that wishes to provide input to the NLRB on this important issue still has an opportunity. Here are instructions for filing.

Careful with that Axe, Eugene (Pink Floyd, 1969). This is an important issue for businesses using independent contractors. If misclassification by itself violates the NLRA — even with no actual harm to the worker — then businesses may face unfair labor practice charges, even where there’s no union and, even stranger, those ULP charges can come from workers you didn’t even think were your employees.

Take It Back (Pink Floyd, 1994). Hopefully for businesses, the full Board will reverse the ALJ and reinstate the pickup basketball rule. I have High Hopes (Pink Floyd, 1994).

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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04.19.18
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Office Space (1999): Lessons for Avoiding Independent Contractor Misclassification

Office Space poster - independent contractor or employeeIf you haven’t seen Office Space in a few years, it’s time to refresh. The workers in the movie are all employees, but what if they weren’t?

Here are five signs that the Initech cubicle dwellers and others in the movie wouldn’t pass as independent contractors.

If you’ve never watched the movie, then this post might not be for you. There are no spoilers here, so feel free to read on anyway if you like. Then go watch.

Milton’s stapler. He really loves that red Swingline. Use of the company’s equipment is a sign you’re an employee, not an independent contractor.

Joanna’s flair. When the boss says you’ve got to wear at least 15 pieces of flair, that’s the sort of control indicative of an employment relationship.

Lumbergh’s 17 answering machine messages.  He’s trying very hard to direct Peter’s work. Direction and supervision are signs of control.

Peter’s frustrations, as told to the Bobs. Peter has to answer to seven layers of management? That’s seven layers too much supervision for an independent contractor. Contractors should be in business for themselves.

Storage Unit 2.  When Milton is directed to address the cockroach problem in Storage Unit 2, he knows that’s not in his job description. If management can assign additional duties, the worker is likely an employee, not a contractor.

Ah-yeah!

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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04.05.18
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What is a Dependent Contractor?

What is a dependent contractor?

One of the most frustrating aspects of the Employee vs. Independent Contractor conundrum is that that it’s really hard to spell conundrum. Another frustrating thing, though, is that the choice is binary. Under U.S. law, a worker is either an employee or an independent contractor. There’s no third choice.

Not so in Canada.

Our neighbor to the north recognizes the legal status of “dependent contractor.” A dependent contractor is a worker who operates as an independent business in most respects, but who works primarily for just one company.

In the U.S., doing all your work for just one company can sometimes cause the imaginary switch to flip from independent contractor to employee. A dependent contractor, however, sits comfortably in the land of in-between (which I think is somewhere near Newfoundland).

In Canada, there is no at-will employment. Regular employees are entitled to receive notice and severance pay before being shown the door. Independent contractors have no such rights. But dependent contractors do. In Canada, dependent contractors are entitled to notice and severance when terminated.

Could this third category of worker be recognized in the U.S.? Not likely to happen any time soon. In Canada, the main benefit of being a dependent contractor is entitlement to the same notice and severance benefits that Canadian employees are entitled to receive. In the U.S., most employees are at-will and, when they are fired, the only thing they get is out. (Get Out = great movie, by the way.) There’s rarely any legal entitlement to notice or severance pay.

U.S. employment laws are stuck in an earlier era and were not drafted with the modern workplace and gig economy in mind. Other worker status options are needed and should be considered. Maybe a version of “dependent contractor” status would work here, but it would look different than it does in Canada.

For now, the U.S. answer to the question, What is a Dependent Contractor? is that it’s not yet a thing. Hopefully one day it will be.

 

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.29.18
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If I Cut My Employee’s Hours, Can I Make Her an Independent Contractor?

Independent contractor part-time worker lizard

This question is best answered with an analogy to everyone’s favorite quadrupedal reptile – the lizard.

The lizard is a squamate reptile. I don’t know what squamate means, but I read it on Wikipedia. Lizards typically have four feet, external ears, and like to climb on the patio screens of retirees’ homes in Florida. Those are the defining characteristics that make them lizards.

Lizards also have tails, but they can shed those tails when in distress. I’m sure this makes the lizard sad, but sacrifices must be made.

The important point here is: Losing a tail doesn’t make a lizard any less of a lizard. (They are taught this by lizard psychotherapists.)

Now let’s get to the point. Today’s post is about what happens when businesses cut their employees’ hours. Workloads sometimes decrease to the point where employees are no longer needed for 40 hours a week. Maybe 10 hours is enough. Or maybe the work needed is sporadic — 5 hours one week, no hours the next week.

Can you convert these part-timers to independent contractors?

No, you can’t. A lizard is still a lizard after losing its tail, and an employee is still an employee after losing some hours. The lizard is not defined by the presence of its tail, and employee status is not determined by the number of hours worked.

It is ok to have an employee whose hours are minimal or occasional. Think of the high schooler who works once a week at the rec center. That’s an employee, not a contractor. The worker is an employee because of the work performed and the control the business has over how the work is done. An independent contractor, in contrast, is someone in business for herself.

What if the employee’s hours are reduced so much that she gets two other occasional jobs? That still doesn’t change the answer. If the work is classified as employment at 40 hours, it’s employment at 3 hours a week. Think of it this way: It’s employment the moment an employee shows up at the worksite. If the employee leaves the worksite after 30 minutes, the work performed for those 30 minutes was still employment.

Employment status doesn’t change based solely on the number of hours worked, and although this next fact is entirely irrelevant to the post, it is worth a quick mention since we have been discussing lizards. The Komodo Dragon is a lizard that has been known to eat mammals as large as a water buffalo (at least according to Wikipedia).

 

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.26.18
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Arbitration Agreements: Still the Hammer You Want in Your Toolbox

E39455E8-972A-4B73-BD7B-53AD1C29F259

If I had a hammer, I’d hammer in the morning. I’d hammer in the evening. All over this laa-aaand. That’s a lot of free labor for somebody. And noise. No one should hammer too late in the evening.

The song could describe a national network of independent contractors in the construction field. It doesn’t, but it could. (This is how I think now. Sad. Very sad.)

Thank you, Peter, Paul, and/or Mary for helping me introduce the real hammer for companies that use lots of independent contractors: Arbitration Agreements with Class Action Waivers.

The legitimacy of requiring employees to sign arbitration agreements with class action waivers is under scrutiny by the NLRB and will be the subject of an important upcoming Supreme Court ruling in the Epic Systems case. Regardless of what the Supreme Court decides for employees, however, the Epic Systems decision is not likely to limit the use of arbitration agreements with class action waivers in independent contractor agreements.

A ruling this month by the Sixth Circuit Court of Appeals showed how useful these agreements can be for businesses. In a short decision, the Court ruled that two independent contractors wishing to bring a class action alleging independent contractor miscalssification were barred from doing so because they had signed arbitration agreements with class action waivers. If they wanted to dispute their status, they had contractually agreed to do so only in arbitration, and only through an individual (not class) claim.

These agreements work. If they are well-drafted and include provisions that help make them fair to all parties, they are enforceable in most jurisdictions and can be an effective tool for keeping your business safe from independent contractor misclassification class actions.

Businesses that rely on independent contractor labor should consider using this tool in the morning and in the evening, all over this laa-aaand.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.19.18
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Selling Hot Dogs: Why the DOL Thinks It’s 2008 Again

Dol wage and hour guidance hot dogs

The year 2008 doesn’t seem that long ago. Flo Rida was atop the Billboard charts, No Country for Old Men won the Oscar for Best Picture, and Episode 1 of the 2008 season of Celebrity Apprentice (titled, “Selling Hot Dogs” [yes, really]) featured the judging panel of Donald Trump, Donald Trump Jr., and Ivanka Trump. More on Episode 1 below.

The DOL must be longing for the good old days. Earlier this month, the Wage & Hour Division quietly withdrew its 2014 Fact Sheet advising businesses how to differentiate employees from independent contractors under the FLSA.

Instead, they reposted the 2008 version. In practical terms, there’s probably no real effect. The statute and the regulations that would govern the analysis haven’t changed between 2008 and 2014. But the 2014 version (cached copy here) also included some Obama-DOL commentary, advising that “most workers” are employees under the proper analysis. The old/new 2008 version doesn’t say that.

In any event, what businesses need to know is that courts apply an Economic Realities Test when deciding Who Is My Employee? under the FLSA.

The FLSA is the federal statute requiring non-exempt employees to be paid minimum wage and overtime. It does not apply to independent contractors, which is one reason why misclassification matters. If you thought your worker was properly classified as an independent contractor, then the minimum wage and overtime requirements did not apply. If the worker was misclassified and was really an employee, your business may be held liable for failing to pay minimum wage and overtime.

And for those of you who read all the way to the end of this post hoping to be rewarded with more information about the outcome of Episode 1: Selling Hot Dogs, there’s this from Wikipedia:

Winning team: Hydra, with total sales of $52,286.
Reasons for win: Hydra used their celebrity status to drastically up-sell the hot dogs and Gene Simmons used his contacts to put impressive numbers. Piers Morgan also came up with an idea whereby anyone who paid $100 or more for a hot dog would get to have their picture taken with one of the celebrities, encouraging passers-by to make more substantial donations.

Good job, Piers. You should be proud.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

03.15.18
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Strip Clubs Nailed for $8.5 Million in Settlement of Independent Contractor Misclassification Claims

Independent contractor misclassification settlement $8.5 million spearmint rhinoI learned there’s a chain of strip clubs called the Spearmint Rhino. I didn’t know that was an option for rhinos. The rhinos I’ve seen at the zoo smell nothing like spearmint.

This club was paying its dancers as independent contractors. As we’ve seen in other “exotic dancer” cases, that can be an expensive decision.

This time it cost The Rhino $8.5 million. A class of 8,000 ladies reached a deal after claiming they should have been treated as employees under Caliufornia and federal wage and hour laws. The class members claimed they were denied overtime, denied a minimum wage, denied meal and rest breaks, and had their tips misappropriated.

In other words, they didn’t feel like they had much to dance about.

What happens now to The Rhino? Does it reclassify its dancers as employees? Who knows. Who cares.

I will, however, be asking the zoo if there’s anything they can do about the rhino smell. It seems there may be a minty version of the beast.

 

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

03.12.18
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Arbitrator or Court: Who Decides Who Decides?

New prime v olioviera - who decides who decides

Who decides who decides? That’s as fun to write as it is to think about.

On TV, sometimes the parties agree that Judge Judy can decide. (Here’s how that works.) But sometimes, the parties disagree over who decides. What happens then? Who decides who decides?

That’s an issue the Supreme Court is going to consider, as it relates to arbitration agreements for independent contractors in the transportation industry.

The dispute stems from an arbitration agreement between Dominic Oliviera, an independent contractor (although he’s not so sure of that), and New Prime, Inc., a trucking company. Their arbitration agreement says that all disputes go to arbitration, including those about the scope of what gets arbitrated. In other words, the arbitrator gets to decide whether something is subject to arbitration. (That’s not an unusual clause, by the way.)

Our protagonist Mr. O tried to bring a lawsuit, claiming wage and hour violations by New Prime. In response, New Prime pointed to the contract and said the issue had to be arbitrated. Not to be outwitted, however, Mr. O then pointed to an exception in the Federal Arbitration Act (FAA). The FAA is the federal law favoring arbitration of disputes, but the FAA contains an exception. The FAA doesn’t apply to employees in the transportation industry.

I hope I haven’t bored you because here’s where it gets interesting.

If the FAA exception applies, Mr. O doesn’t have to arbitrate and he can go to court with his wage and hour claims instead.

But the exception only applies (it seems) if he is an employee. If he’s an independent contractor, the FAA should still apply, which means that New Prime can still force him into arbitration.

Now here’s where it gets really weird.

The agreement says that the arbitrator gets to decide whether the matter is subject to arbitration. But Mr. O says he’s an employee and therefore he’s not bound by the arbitration agreement. If he’s not bound by the arbitration agreement, then New Prime can’t force him to go to the arbitrator to decide whether the dispute is subject to arbitration. So, who decides who decides?

Still with me? Here’s the bottom line. There are two important questions that the Supreme Court has agreed to consider in this case:

(1) Whether a dispute over applicability of the Federal Arbitration Act’s Section 1 exemption is an arbitrability issue that must be resolved in arbitration pursuant to a valid delegation clause; and
(2) whether the FAA’s Section 1 exemption, which applies on its face only to “contracts of employment,” is inapplicable to independent contractor agreements.

For businesses using mandatory arbitration agreements, these are important issues.

Last week, in this post, we addressed Issue #2. But Issue #1 is also pretty important for businesses with arbitration agreements in the transportation industry. If the validity of those agreements is contested, who decides whether they are valid?

If the arbitrator gets to decide what is subject to arbitration, the realist deep inside you (he’s roommates with the pessimist) expects that the arbitrator will keep the case. In other words, the most likely ruling by the arbitrator — who is paid by the parties by the hour to conduct the arbitration — is that the matter is going to be subject to arbitration. After all, that’s what the contract says, and if the contract didn’t apply, then the arbitrator never would have gotten involved in the first place.

This case won’t be decided until next year.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

03.01.18
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Despite New DOL, Independent Contractor Misclassification and Joint Employment Remain Risky

What effect of withdrawal of DOL memos

In June 2017, the DOL withdrew its Obama-era 2015 and 2016 informal guidance on joint employment and independent contractors. The memos covered federal wage and hour law (FLSA). Eight months later, what effect has that decision made?

Essentially none.

Remember, the 2015 and 2016 memos did not change the law on independent contractor misclassification or joint employment. Rather, the memos were an attempt by the Wage & Hour Administrator, David Weil, to summarize existing law – but with a pro-employee leaning. The memos selectively interpreted court decisions that supported Weil’s view of the world, i.e., that most workers are employees. When Weil left, the DOL said goodbye to his interpretations as well.

But … Continue reading →

02.22.18
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Lessons From Cambodian Dancing Arrests: Don’t Draw Extra Attention to Your Independent Contractors

Tips for avoiding independent contractor misclassification claims

Screenshot from telegraph.co.uk

Ten European tourists face up to a year in Cambodian prison after being arrested for “pornographic dancing,” according to The Telegraph. Apparently, they went to a villa barbeque party and took pictures of themselves, clothed, dancing in suggestive poses.

Readers take notice: When barbequeing in Cambodia, do not draw unneeded attention to yourself by simulating sex positions and posting the pictures on social media.

When dealing with independent contractors, it’s also a good idea not to Continue reading →