We’re Blogging about Logging! (I know, lame headline, but true)

Logger Ohio workers compensation independent contractor

The lyrics, “Come fly with me, come fly, come fly away” are instantly associated with Frank Sinatra (although, troublingly, the Michael Buble version appeared higher in my google search for a link to the lyrics). It is a little known fact* that the original version of the song was an ode to woodsmen and forestry workers and went something like this: “Come log with me, come log, come log away.”

In the original* lyric, Ol’ Blue Eyes invites a fellow logger to chop wood with him — not for him. That same distinction (with, not for) made all the difference in a recent court decision denying workers compensation benefits to a logger.

In 2013, logger James Chapman was cutting trees somewhere in Gallia County, Ohio. Chapman needed some help and asked James Green, another experienced logger, to cut down some of the trees at a rate of $80 a day. Green agreed.

Three days after embarking on this great adventure, a tree fell on Green. It is unclear whether anyone was around to hear it or whether it made a sound. Green hurt his neck, back, left hip, and head.

Green filed a workers’ comp claim, alleging that Chapman hired him and that the injury was incurred in the course of that employment. Ohio’s Bureau of Workers’ Compensation denied the claim, finding that Green was not an employee of Chapman. Green appealed and lost again.

Like other states, Ohio requires an employer-employee relationship for workers’ compensation coverage to be available. Ohio uses a Right to Control Test to determine whether someone is an employee or an independent contractor.  (Other states use other tests.)

Here, the court ruled that Chapman merely told Green which trees to chop down. Come chop with me, not for me.  Chapman didn’t tell Green how to cut down the trees or when to do it. Chapman didn’t supervise him either. Green was an experienced logger and was told at the outset that he was not being retained as an employee. He was being given a task — cut down those trees over there — and then it was up to Green to use his experience and judgment to determine how to accomplish that task. Those facts, the court ruled, are indicative of an independent contractor relationship, not employment.

Green’s workers’ compensation claim was therefore denied, which made Green sad, and which could have been the inspiration for Sinatra’s 1962 recording of “Pick Yourself Up.”**

*Not a fact.

**Also not a fact.

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

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How Best to Describe the Effect of Dynamex? Led Zeppelin Songs

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A lot has been written about the Dynamex case, but not enough has been written about it using references to Led Zeppelin songs. I am here to fill the void. Here is a musically-themed update. We’re Going to California. You’re welcome.

Dazed and Confused. Last week, a gaggle of California businesses and trade associations sent a letter to Gov. Brown and the Cal. Legislature, asking for relief from the Dynamex decision and its court-created ABC Test for independent contractor misclassification claims. The letter correctly says, “With one judicial opinion, nearly 30 years of established law has been overturned virtually overnight.”

Communication Breakdown. The letter argues that any change in the standard for determining Who Is My Employee? should be made by the legislature, not the courts. The Industrial Wage Commission, which wrote the wage orders at issue in the Dynamex case, was defunded 15 years ago, before mobile apps existed and before the gig economy took off. So why is a new rule applicable to the new economy coming from a court, instead of the legislature?

When the Levee Breaks. The letter argues that the impact of the Dynamex decision may be massive, disrupting well-established industries and independent contractor relationships. The decision “hinders California as a national leader in the innovation economy.” Businesses feel Trampled Under Foot.

Babe I’m Gonna Leave You. Businesses relying on independent contractor models may leave California. This ruling makes it even more difficult to do business in the Wacky Republic.

What Is and What Should Never Be. Assuming that is a question, the answer is: The Dynamex ruling. (Another acceptable answer would have been: People who walk really slow in airports.)

Hey Hey What Can I Do. The letter asks the legislature to pass a law that eliminates the ABC Test and re-introduces a common sense balancing test like in S.G. Borello.

That’s all I have for now. But before I go, I feel compelled to give a hat tip to my favoritely (?) named Led Zeppelin song, Boogie with Stu.

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

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What Do Rabbits, Swedish Massage, and this Misclassification Study Have in Common?

Independent contractor miscalssification study Georgia State UniversityAccording to the DailySignal.com, the National Institute of Health recently spent $387,000 to determine the health effects of Swedish massage on rabbits. I have not read the study, but I independently conclude that the massages were relaxing and helped to decrease some of the daily stresses faced by small burrowing mammals.

And that brings us to a study being conducted at Georgia State University, partially funded by a similarly wasteful $250,000 grant from the Department of Labor. It’s a study on independent contractor misclassification.

The study is examining 12,000 federal court decisions between 2008 and 2015 to try to determine “the ways in which federal district courts draw the line between employee and independent contractors.” Using text mining and big data tools, the study hopes to uncover “the legal tests that courts used [and] the factors that exerted the most influence on judges’ decisions.”

This is dumb.

This is like watching 12,000 baseball games to try to figure out why umpires sometimes call runners out and sometimes call runners safe. We don’t need to watch 12,000 baseball games to figure that out. We can just look at the rule book instead. The rules explain how to determine when the runner is safe or out. The rules tell you the factors to look at.

Misclassification law works the same way. There are different rules that apply to different laws in different states in different circumstances. When a misclassification claim arises, we just have to look at the proper rule, which tells us the factors to consider. Then we look at the facts and apply the rule and the factors.

The point is, we already know the rules. And we already know the factors. They’re in the rules. We don’t have to examine 12,000 cases to try to reverse engineer the rules and the factors. Just look them up.

Perhaps my frustration is misplaced. Maybe they’ll uncover something new. I doubt it. Meanwhile, I am still thinking about whether it’s even possible to massage a rabbit.

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

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Hoisted! Worker’s misclassification claim dooms his own lawsuit

Independent contractor claimThe phrase “hoisted with his own petard” is a Shakespearean idiom used in Hamlet, meaning “to cause the bomb maker to be blown up with his own bomb.” I know this because Wikipedia.

Sometimes this can happen in a lawsuit. Plaintiff Kyle Johnson, retained by a South Carolina firm to perform consulting services, claimed he was misclassified and should have been an employee. He alleged wage violations, wrongful termination, and various other employment law claims, most of which relied on his central premise — that he was really an employee, not an independent contractor.

His claim with the best acronym, however, was his SCUTPA claim — South Carolina Unfair Trade Practices Act. A SCUTPA claim exists where someone has taken money through deceptive trade practices in a way that negatively impacts the public interest. Johnson alleged that the defendant violated SCUTPA because it misclassified him “in order to avoid payroll taxes, overtime pay and other employment-related expenses.” This, he claimed, was against the public interest.

Not so, said the court.

If he’s an employee, as he claimed, then he can’t make a SCUTPA claim. Employer-employee disputes are private, not matters of the public interest.

Had Johnson gone along with his classification as an independent contractor, he would have had a business-to-business relationship, and he might have been able to bring his SCUTPA claim. By alleging he was misclassified and really an employee, he blew up his own claim.

A “petard” is a small bomb used for blowing up gates and walls when breaching fortifications. In Johnson’s case, it can also be used to blow up one’s own lawsuit. Boom.

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

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Cartels in Seattle? Court Decision May Stop Independent Contractor Drivers from Forming Quasi-Unions

Seattle uber unions cartelUsually when “cartels” are in the news, we’re hearing about El Chapo or other organized drug trafficking operations. But the word “cartel” refers to any combination of independent enterprises joining together to fix prices. The City of Seattle is trying to create ride sharing cartels. The city wants the Teamsters to represent your independent contractor ride share drivers. Really, the Teamsters.

The U.S. Chamber of Commerce is fighting back, reminding our brothers and sisters in the Emerald City that we still have federal antitrust laws. Antitrust laws prohibit the formation of cartels to fix prices. Seattle claimed it was immune from federal antitrust laws and, at first, a federal court in Seattle agreed.

But last week, the federal Court of Appeals stepped in and confirmed that, yes, the federal antitrust laws do apply, even in the Great Northwest. Here’s the ruling.

Here’s what the stir is all about.

In late 2015, Seattle passed a law creating quasi-unions for ride share drivers. We wrote about it here. The ordinance had the city overseeing the collective bargaining processes and didn’t call these collective groups “unions.” Seattle says they’re not unions. Then Seattle picked the Teamsters Local 117 to represent the independent contractor ride share drivers. Still not a union???

The law has not yet gone into effect, and its validity is in question. If antirust laws prohibit independent contractors from colluding on pricing, how can Seattle create a process to encourage independent contractors to collude on pricing?

Last week’s decision by the Ninth Circuit Court of Appeals confirms that federal antitrust laws do apply, even to cities that claim to have good intentions and great music.

The case now goes back to a federal court in Seattle to decide whether Seattle’s ordinance violates federal antitrust laws. I’m betting it does.

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

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California’s New Killer Bee: How Should Businesses Deal with Part B of California’s New Independent Contractor Test?

California ABC test Dynamex Killer Part BAccording to pestworld.org, Africanized honey bees have been known to chase people for more than a quarter mile once they get excited and aggressive. This is why they earned the nickname “killer bee.”

In its recent Dynamex decision, the California Supreme has introduced its own Killer B into California wage and hour law. This new Killer B could make plaintiffs’ lawyers excited and aggressive, chasing down businesses that use independent contractors and filing lawsuits alleging they are really employees. Those lawsuits could really sting!

Today we look at two questions: What is the new Killer Part B, and what do businesses need to know about it?

What’s the Issue?

Several states now use ABC Tests to determine whether a worker is an employee or independent contractor, at least under certain state laws. California joined the party with its 4/30/18 Supreme Court decision (Dynamex), adopting an ABC Test to determine who is an employee under most of California’s wage and hour laws.

Part B of the new California test can be difficult to meet. To be a true independent contractor, the worker must be performing work that is outside the hiring party’s “usual course of business.” We’ll call this a Strict ABC Test.

Some states have a more forgiving version of an ABC Test, allowing Part B to be satisfied if the worker performs the services either outside the usual scope of business or off of the hiring party’s premises. New Jersey, Illinois, and Connecticut use the more forgiving test. We’ll call that version the Standard ABC Test.

What’s the Concern with Part B in California’s New Test?

Part B can be hard to meet.  Lots of workers who are otherwise independent contractors will be considered employees because of Part B — especially under a California-style Strict ABC Test. If the type of services being provided are within the hiring party’s “usual course of business,” the worker must be treated as an employee under California’s wage orders.

Although this Strict ABC Test is new to California employers, it’s not new to multi-state employers. Massachusetts has been using a Strict ABC Test for its wage and hour laws since 2004, when it passed the Massachusetts Independent Contractor Law. In 2008, the Massachusetts Attorney General’s Office issued an advisory memo on its interpretation of the law, especially Part B.

What Can We Learn From Massachusetts?

The key to success under Part B is establishing that the contractor’s services are outside of the “usual course” of your business. That means the contractor does something that your business doesn’t do.

Companies should consider taking steps to define more precisely its “usual business,” and then memorialize that in multiple ways — internally, externally (website: About Us page?), and contractually in agreements with independent contractors.  Keep in mind the importance of differentiating between the scope of what your business does and the scope of what the independent contractor will be doing.  If you want to satisfy Part B, these things should be different.

You may need to define the scope of your services more narrowly. For example, if your business sells appliances but retains independent contractors to install them, you might take steps to define the scope of your business as “selling appliances but not installing them.” Consider adding language to your contracts, website, and other documents to make this distinction clear.

This is just one of many strategies that businesses in California and Massachusetts should be prepared to implement. Being proactive is the key to avoiding claims of independent contractor misclassification. Evaluate and modify your independent contractor relationships and contracts now, not after you have been sued.

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

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What is California’s new ABC Test, and What Does It Mean for Businesses?

Dynamex ABC test california

What just happened?

Last week, we reported here on the California Supreme Court’s Dynamex decision. Today’s post takes a deeper dive.

In Dynamex, the California Supreme Court adopted one of the strictest tests in the nation for determining whether a worker is an employee or an independent contractor. The new test is used to determine whether a worker is an “employee” under California’s Industrial Wage Commission (IWC) wage orders. The wage orders require “employees” to be paid minimum wage and overtime, and to receive meal and rest breaks (unless exempt). Under this new test, a lot of independent contractors might now be “employees.”

The new test is an ABC Test. Unlike the balancing tests that start with the scales set equally, the new Dynamex ABC Test begins with the presumption that any worker performing services for your business is your employee. Guilty until proven innocent.

To overcome that presumption, the business must meet all three prongs of the new ABC Test. To prove that the worker is an independent contractor (and that the California wage orders do not apply), the business must be able to show:

(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, and
(B) the worker performs work that is outside the usual course of the hiring entity’s business, and
(C) the worker is customarily engaged in an independently established trade, occupation, or business.

If the business fails to meet all three prongs of this test, the worker is an employee for purposes of the wage orders. Case closed. Done deal. The other factors don’t even matter.

What does that mean? You must provide the worker a minimum wage, overtime, and meal and rest breaks (subject to exemptions, if applicable). It doesn’t matter that you have an Independent Contractor Agreement, and it doesn’t matter if the worker agrees to be an independent contractor status. (Here’s why.)

What was the basis for the California Supreme Court’s decision?

The Court’s decision was based on its analysis of the definition of “employ” under the IWC wage orders. The Court concluded that this definition was intended to cover a broader range of relationships than common law employer-employee relationships.

The wage orders define employ as “to engage, suffer, or permit to work.” This language originated in 1916, with the passage of state laws designed to prevent the exploitation of child laborers. The idea was that if you allow children to work for you, you are going to follow certain legal requirements. To prevent funny business, an intentionally broad definition of “employ” was used.

Those familiar with the federal Fair Labor Standards Act (FLSA) will recall that it too uses a broader definition of “employ” than most other federal laws. The FLSA definition of employ is “to suffer or permit to work.” That sure sounds a lot like the California definition, so shouldn’t California just apply the same Economic Realities Test as used to determine whether someone is an employee under the FLSA? Oh, my dear sweet naive friend, that would be too simple. And California doesn’t like simple.

The California Supreme Court went out of its way to point out that California came up with its language first and that it never intended to follow the FLSA test. Really, it says that. So there.

In Dynamex, the California Supreme Court concluded that where the definition of “employ” is “to engage, suffer, or permit to work,” the intent is to cover a broader range of individuals than common law employees and, from now on, the way to determine whether someone is an “employee” under the “engage, suffer, or permit to work” standard is to apply the new ABC Test. The IWC wage orders use this broad definition, and so the wage orders will now apply to any relationship where an individual provides services, unless all three prongs of the ABC Test are met.

But why change now?

If you are asking yourself why the test would change now — when that same definition has been in place for 102 years, when there has been no new law passed by the California legislature, and when no new regulations have been enacted — the answer is what you tell your kids when you’re too tired to explain why: Because I said so.

Really. The Court just said so. Nothing in the law has changed. The new, strict ABC Test did not come from a new law. It came from Massachusetts. Thank you, Massachusetts. Next time just send lobster rolls.

What about the other wacky California employment laws?

Most California employment laws use a more traditional definition of employee, not the broad “engage, suffer, or permit to work” definition. Under these other laws, therefore, the test for determining whether someone is an employee is (we think) unchanged. For the most part, the S.G. Borello test should continue to apply.

The S.G. Borello test stems from a 1989 California Supreme Court decision and is a hybrid Right to Control/Economic Realities balancing test.

Under S.G. Borello, the primary question is whether the hiring party retains the right to control the worker, both as to the work done and the manner and means in which it is performed. If yes, the worker is an employee. If it is unclear, then secondary factors are considered.

Secondary factors include:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his or her 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; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

The court or agency then mixes all of these factors into a witch’s cauldron, blends them together, sprinkles in a pinch of eye of newt, waits for the smoke to clear, and then declares that, based on an analysis of the multiple factors, the worker must be an … (insert answer here). The S.G. Borello test is a balancing test, subject to interpretation. It’s gray.

California does have some other strict tests. The Dynamex ABC Test is not the only one. For example, strict tests apply in the construction industry and for the performance of work where a license is required but not obtained. Under those scenarios, like under IWC wage orders, it’s much harder to maintain independent contractor status than it is under a law that applies the S.G. Borello test.

What about federal laws? Do those still apply too?

Hahahahahahaha! You bet they do! Employers in California are still required to follow the FLSA, which determines whether someone is an employee by using an Economic Realities Test. Yes, lucky California business owners, this means your worker could be an employee under the strict ABC Test imposed by Dynamex and therefore subject to California minimum wage and overtime rules; but, at the same time, the same worker might be a legitimate independent contractor under the Economic Realities Test and therefore not subject to federal minimum wage and overtime law. Well that’s confusing.

Right to Control Tests govern the determination of whether someone is an employee under federal tax law, anti-discrimination law, and employee benefits law. As we discussed here, it’s certainly possible to be an employee under one law but an independent contractor under another law.

With the introduction of the strict Dynamex ABC Test, that will happen more often, ensuring full employment for lawyers like me.

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

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