Up North, Uber Can’t Make Drivers Go to Amsterdam to Sue. (Wait, What?)

exposI bought a Montreal Expos t-shirt last week. Why? I needed some new work clothes.

I’ve been emailing with a friend in Ontario about the difference between the U.S. and Canada when it comes to coronavirus precautions, and we both agree it’s a good idea to keep the border closed for now. Did you see the Maid of the Mist pictures showing the Canadian boat with six well-distanced (and undoubtedly polite) passengers and the American boat packed like it’s 2019. Canada has hardly any cases. Anyway, I digress. As usual.

While Canada is on my mind, I’ll share a recent decision by the Supreme Court of Canada. The ruling will allow a proposed $400 million class action against Uber to proceed in Ontario on the issue of whether drivers are misclassified as independent contractors.

At issue was the validity of Uber’s arbitration agreements for drivers in Canada. The agreement required drivers to arbitrate any disputes in Amsterdam, following the rules of the International Chamber of Commerce and Netherlands law. Wait. What? Yes.

And there’s this: Filing a case would cost a driver US $14,500 in up-front administrative fees.

The Court’s opinion called the arbitration clause “unconscionable,” and Uber responded by confirming to The Star that it planned to update its arbitration agreements accordingly.

Gig economy platforms are under attack in Ontario, much like in the U.S. Think of Ontario as Canada’s version of California or Massachusetts but with better access to poutine.

According to The Star, the Ontario labour relations board ruled earlier this year that couriers for a food delivery app were not true independent contractors and therefore had the right to join a union. Drivers using the Uber Black platform are also challenging their classification as contractors. American expats are challenging the use of a superfluous U by the labour relations board.

Lesson: If you’re going to require arbitration, be reasonable. Amsterdam might be a nice place to visit (see the Vondelpark!), but it’s too much of a stretch to require an Ontario rideshare driver to go there to file a claim. Next time, try Greenland?

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

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Do Not Break Glass: Arbitration Clauses May Shatter in Agreements with Independent Contractor Delivery Drivers

largest-glass-blown-sculpture

Photo: CGTN/CFP

When your kids were little, did they ever run around in places they shouldn’t, causing you to fear what would happen if they broke something? Well you’re not alone. The world’s largest glass-blown sculpture sits in a museum in Shanghai. At least it did until recently. On May 30, two children accidentally broke it while running through the museum playing. There was a protective belt to try to prevent this sort of thing, but the kids ran right through it.

The moral of the story is that protective belts are not always good enough. The same is true when it comes to independent contractor agreements. One of the most useful protective belts we can install to protect against misclassification claims is a well-drafted arbitration clause with a class action waiver. That forces any independent contractor who claims to be an employee to fight that battle on an individual basis in front of an arbitrator. No court, no class action.

But this protective belt doesn’t always work, especially in the transportation industry.

Arbitration agreements with class action waivers work well in most industries. Under the Federal Arbitration Act (FAA), these agreements are generally enforceable, and they’ve saved many a large company from having to face gigantic misclassification class actions.

But the FAA has an exception. It doesn’t apply to transportation workers engaged in interstate commerce. There’s been lots of litigation over what that means and how broad the exception is.

A pair of decisions last week tried to address this question with respect to last-mile delivery drivers.

Both cases assumed the last-mile drivers were transportation workers engaged in interstate commerce, even though they generally did not cross state lines.  (We don’t know how the US Supreme Court would rule on that question). Since the FAA did not apply, the question then became whether the arbitration clauses and class action waivers were enforceable under state law.

Two courts, two cases, and two states resulted in two very different outcomes.

The New Jersey Supreme Court ruled that arbitration agreements with delivery drivers are enforceable under New Jersey Arbitration Act, even if not under the Federal Arbitration Act (FAA).

But a federal appeals court took the opposite view of the same issue under Massachusetts law, ruling that a class action waiver in an arbitration clause is void because it is contrary to Massachusetts public policy.

So what does this mean for companies who use independent contractors in the transportation industry?

Depending on the facts and the court, the FAA might or might not apply. If the FAA does not apply, the question of whether the arbitration clause and class action waiver can be enforced will depend on state law.

That means companies need to be very careful in drafting their choice of law provisions and their severability clauses. If parts of the arbitration clause are unenforceable because of the class action waiver, will the whole clause be cut or just the class action waiver? If a court severs only the class action waiver, could you end up in class arbitration? The contract should also anticipate that possibility, and the arbitration clause should contain language prohibiting the arbitrator from hearing a class action. The effect of that clause would be to force the class action back to federal court. Most companies, if faced with a class action, would prefer to defend class claims in court rather than in arbitration.

These two cases highlight the importance of considering these issues when drafting independent contractor agreements in the transportation industry. While different state laws may lead to different outcomes, your contract should plan for the worst and be written to protect against the least desired outcome.

And if you are put in charge of security at a museum, try a better protective belt.

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

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Silver Linings? DOL Looks to Adopt New Independent Contractor Test Before Year End

canoe

The past few months have included many silver linings — more family time, a Lake Michigan vacation, and professional cornhole on TV. I’ve also learned new things — governors have more power than I thought, remote work is more doable than many of us thought, and there’s such a thing as professional cornhole.

Now the Department of Labor wants us to learn something new too — about independent contractor status. (Too many long dashes so far? I’m flagging myself for excessive use.)

Last week the DOL published a notice that it intends to fast-track a new regulation covering the test for independent contractor vs employee under the Fair Labor Standards Act.

What would that test look like? The DOL gave no hints, but here is my educated guess.

The test for independent contractor status under the FLSA is an Economic Realities Test.  That is a court-created test, it’s well-established, and it’s not likely to change. If the DOL did try to change it, I don’t think the courts would follow the new regulation anyway. So the DOL is going to have to work more around the edges.

I expect the regulation to define more precisely the factors to be taken into account under the Economic Realities Test. Right now, different courts use different versions of it. Some uniformity would be helpful.

I also expect some examples to help illustrate how the factors should be applied. Look for sample fact patterns that seem like close calls but perhaps would be deemed supportive of independent contractor status under a new DOL interpretation.

We can expect the DOL will gently place its fingers on the scales, making it a bit easier to maintain independent contractor status under the FLSA. Don’t expect a full rewrite of the test.

The DOL will want to implement the new rule quickly, in case a new administration takes over in January. Look for a proposed regulation shortly, a quick public comment period, and a new regulation on the books late this year.

Hopefully by the time we see a final rule, we can watch real sports on TV and demote cornhole to livestream only. That way both people who care could still watch.

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

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Here’s a Question I Was Asked Three Times This Week (and the Answer)

Zippy sunset Charlevoix

Zippy on vacation

The word “sunset” can be used to signify many things. My personal favorite is the one pictured here. That’s Zippy enjoying the view this past weekend in Charlevoix, Michigan.

Another meaning of Sunset” is to fade out or to discontinue. That’s the meaning I’m after here.

One question came up multiple times this week, with some slight variations. Here it is, along with the answer.

Question:  When the pandemic began, we laid off an employee. We now have some work for that employee, but not as much as before. Can I bring back the employee as an independent contractor?

Answer:  Sunset that idea. Let it fade away. Discontinue that thinking. Probably not.

Any time the same individual receives a W-2 and a 1099 in the same calendar year, red flags go up. It’s a strong indicator of misclassification. If the worker’s work was employment before the pandemic, it’s almost certainly employment now — even if the hours are reduced or the recall is for a limited time.

Remember, the Employee vs. Independent Contractor question is answered by looking at the facts related to the work and how it is performed, regardless of what the parties call the relationship. If you’re bringing back an employee to perform similar work, you should probably be bringing that employee back as an employee.

In the IRS’s handbook for Worker Classification Determinations, the Service instructs its agents that when a worker has received a W-2 and a 1099 in the same year, the agent is to perform a full status review. It’s a likely sign of misclassification. Also, you probably don’t want the IRS to do a full anything.

There may be situations where it’s ok, such as if the laid off worker quickly established her own business, advertised to the public, secured other clients, and wants to bring on your business as a new client. But it’s pretty unlikely all that has happened since March.

The pandemic has given us all enough to deal with. Let’s not add a misclassification claim to the list of concerns.

Remember, it’s ok to bring back an employee as a part-time employee, or for a limited time with a projected end date. But retain the worker’s status as an employee.

And for those looking to get away during the pandemic, I highly recommend finding a beach house on Lake Michigan. Can’t beat these views!

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

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New Seattle Sick Pay Law for Gig Workers: Squishy or Full of Venom?

jellyfish

Horrifying images not intended to scare children. Thanks, PBS Learning.

I learned this week that a species of jellyfish found off the coast of China, Japan, and Korea can weigh up to 440 pounds. There’s a video here, and the size of this thing is terrifying.

In Finding Nemo, I learned that you can bounce on the fleshy heads of jellyfish without getting stung, and this creature has an abundantly fleshy head. The tentacles, though, are a different story. There are a lot of them. So the lesson here is that when approaching a Nomura’s Jellyfish, as they are called, be thoughtful in how you approach.

Which brings me to the City of Seattle. Seattle has been relentless in looking for ways to provide gig workers benefits of some kind, without getting caught up in the Independent Contractor vs. Employee question. The city has been aiming to grant gig workers certain rights, whether they are employees or not.

Seattle’s strategy is to aim for the jellyfish’s head, not wanting to get caught up in the tentacles of a dispute over whether the gig workers are employees or not.

In its latest head shot, Seattle has enacted an ordinance requiring transportation network companies and food delivery network companies (app based) to provide paid sick time to gig workers who perform services in Seattle. The requirement applies regardless of whether the workers are contractors or employees. The law was signed on June 12, 2020.

This move may signal a new strategy for states and localities that wish to provide benefits to gig workers. They can require benefits for gig workers, regardless of whether the workers are deemed employees.

This approach, if it works, may introduce other problems for app-based companies.

If companies start providing benefits such as paid sick leave to workers they consider to be independent contractors, that fact could be used against them as evidence the workers are being treated as employees.

In other words, this ordinance sets a trap. App-based companies will still be able to argue that they are providing sick leave only because they are required by local law, but surely the plaintiffs’ bar will argue that providing sick leave is evidence of employment status.

It’s a dangerous game, trying to bounce of the heads of the squishies while avoiding the sting. We’ll see how it plays out. In the meantime, obey beach hazard signs and try to avoid getting stung.

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

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New Rules for Drivers? California’s ABC Test Could Change Again in 2021

Worst parking.jpg

Rebellious? Indifferent? Clueless? I’m still trying to understand how this car thought it was ok to take up FOUR parking spaces in the parking lot at a Walgreens near my house.

Any one of the spaces seems suitable for a car of ordinary proportions. I have parked in most of these four spots before, and my experiences were uniformly positive. I’d give four stars to each spot. Reliable, met expectations. Near enough to the store entrance. Picking just one of the four would be an excellent way to start your shopping experience.

When people don’t like the rules they’re expected to follow, one approach is to try to change the rules. That’s what ride share and delivery app companies are doing in California.

Late last month, these companies achieved an important milestone, reaching the 625,000 signature threshold for a November ballot initiative that, if passed, would change the test in California for determining Employee vs. Independent Contractor. The measure will now appear on California ballots, giving voters the chance to override A.B. 5 for ride share and delivery app companies.

If the initiative passes, the new ABC Test would not apply to workers in the app-based rideshare and delivery business. Instead, those workers could stay classified as independent contractors, but the app-based companies must ensure that the drivers receive a predetermined level of compensation and benefits, including:

  • Earnings Minimum. The measure would require app-based companies to pay at least 120 percent of the minimum wage for each hour a driver spends driving—but not time spent waiting for requests.
  • Health Insurance Stipend. The measure would require rideshare and delivery companies to provide a health insurance stipend of about $400 per month to drivers who regularly work more than 25 hours per week (not including waiting time). Drivers who average 15 driving hours per week but less than 25 driving hours would receive half as much.
  • Medical Expenses and Disability Insurance. The measure would require that companies buy insurance to cover driver medical expenses and provide disability pay when a driver is injured while driving.
  • Rest Policy. The measure would prohibit drivers from working more than 12 hours in a 24 hour period for a single rideshare or delivery company.
  • Other. The measure would require that rideshare and delivery companies have sexual harassment prevention policies and conduct criminal background checks and safety training for all drivers. It also would prohibit discrimination in hiring and firing.

The measure would also prevent cities and counties from passing further restrictions on driver classification.

I wrote more about this bill here, leading the post with a harrowing flight selection option offered on my United app.

So if you‘re reading this post from the Left Coast, get out and vote in November. You can make a meaningful change in the way that California approaches the question of Who Is My Employee? In the meantime, drive safe, wear your mask, and park within the lines.

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

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Better Flow? Will New Bill Allow More Benefits for Independent Contractors — Without Risking Misclassification Claims?

toilet gig workers plumberA Sheboygan man was recently sentenced to 150 days in jail and probation for repeatedly clogging women’s toilets with plastic bottles. According to the Sheboygan Press, the serial toilet clogger told police he gets urges to do odd things, like look for bottles in the garbage to plug toilets.

I get urges to do odd things too, like scour local newspapers for stories like this one. But since I’m sharing this important knowledge with readers, I figure it’s for the greater good. (Repeat:) For the greater good. (See Hot Fuzz, my nominee for best movie ever.) 

Two recently introduced bills in Congress seek to protect the greater good when it comes to gig workers. In the current legal environment, digital marketplace companies are reluctant to do anything to provide assistance to independent contractors who use their platforms, since courts and agencies tend to use such good deeds as evidence that the contractors should really be classified as employees. For digital marketplace companies that rely on an independent contractor model, such a finding can cause serious damage to normal business operations — even worse than the mess caused by an overflowing bottle-clogged ladies’ toilet.

The Helping Gig Economy Workers Act of 2020 would permit digital marketplace companies to provide payments, health benefits, training, and PPE to users of the digital marketplace without these good deeds being used as evidence — in any federal, state, or local proceeding — that the company has misclassified its independent contractors or is acting as a joint employer. The bill would protect companies throughout the duration of the COVID-19 crisis.

The bill is co-sponsored in the House by Rep. Carol Miller (R-WV) and Rep. Henry Cuellar (D-TX), with a companion bill sponsored by four Republicans in the Senate.

Historically, Democrats have opposed any legislation that would solidify independent contractor status for workers, instead advocating for bills that would convert more contractors to employees. Will the COVID-19 crisis be a turning point?

With independent contractor delivery services needed now more than ever, will there be a push to allow companies to provide greater protection for these workers without fear that their good deeds will be used against them in a misclassification claim?

That remains to be seen. If this bill gains any momentum, it could be the equivalent of pulling a bottle out of the clogged toilet of independent contractor misclassification laws. (I concede the analogy is a stretch, but I’m doing my best here.)  This bill could signal a shift toward a philosophy of promoting greater benefits for independent contractor gig workers, rather than aiming solely to convert them all to employees. I’m not sure it will, but it might. This is one to watch.

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

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Worried about ABC Tests? Here’s What You Have to Look Forward to.

balloons-1786430_1280

Recent coronavirus-related conversation in my house, after cancellation of planned spring break vacation, loss of kids’ summer internships, suspension of in-person college classes, and more than one day of snow in May:

Lisa: This is getting ridiculous. We need something to look forward to.

Me: 2021?

It may feel like there’s not much to look forward to lately, but if you’re into watching state bills on independent contractor misclassification, I’ve got some exciting news for you! Not really. No one’s into that. But I’m going to share anyway.

Seven states are currently considering bills that would adopt strict ABC Tests for determining whether someone is an employee or an independent contractor. What do I mean by “strict ABC Tests”? I mean the same test California recently adopted in Dynamex and under Assembly Bill 5. I mean the test where anyone performing services is presumed to be an employee unless all three of these things are proven, with part B being the hardest to meet:

(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.

So which states are vying for the title of Miss California? Here are the 7 states with bills currently pending that, if passed, would adopt a strict ABC Test:

  • Massachusetts – would expand test to unemployment
  • Michigan
  • Minnesota
  • New Jersey – switching from looser part B
  • New York
  • Pennsylvania – for gig-based platforms only
  • Rhode Island

I’ll continue to minor these bills, mainly because I know no one else wants to. But at least we all have something to look forward to.  Happy new year?

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

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Not Your Ordinary Haircut: Does Your Sexual Harassment Policy Prohibit Harassment by Contractors?

Harassment policy independent contractor

From the Library of Congress digital collection.

This photo came with the description: “One of a series of images of a man harassing a woman as he cuts her hair.” Tip: don’t try this at home.

There are (unfortunately) many ways to harass a woman, most without scissors. Harassment can be by supervisors or fellow employees, but sometimes it comes from independent contractors.

Your company has a sexual harassment policy. Does it prohibit harassment of employees by contractors and other non-employees?

It should. Federal law creates a claim for sexual harassment if the harassment is by another employee, especially a supervisor. But the path toward a sexual harassment claim against a company for conduct by its independent contractors is less obvious. A hostile work environment claim can be asserted if a company knows of — and permits — a work environment that includes harassment by contractors, but a company’s control over contractors and their actions is going to be more limited than its control over its employees.

Your policy should fill the gap.

By creating a policy that takes a stance against harassment by independent contractors and other third parties, your company enhances its position in the event of a claim. Plus, it’s the right thing to do. If you hear of such a claim, investigate it. You may need to do something about it. That may include terminating the relationship with the contractor.

The policy should also say that conduct may be in violation of company policy even if the conduct is not prohibited by law. In other words, you are not conceding that you can control what your contractors do, and you are not conceding that there’s a viable legal claim. But you are taking a position against harassing behavior as a matter of policy.

The caption at the bottom of the photo above is small, but it says, “Getting his hair banged.”  I haven’t the slightest idea what that means, but it sounds bad. I would prohibit that too.

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

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“Who Was That Masked Man?” It Could be Your Independent Contractor.

who was that masked manFrom 1949 to 1957, The Lone Ranger ruled the airwaves. As recounted in the all-knowing wikipedia: “At the end of each episode, mission completed, one of the characters would always ask the sheriff or other authority, ‘Who was that masked man?’ When it was explained, ‘Oh, he’s the Lone Ranger!,’ the Ranger and Tonto would be seen galloping off with the cry, ‘Hi-Yo, Silver! Away!’ catching the attention of one of the townspeople crossing the street.”

Today, the answer to “Who was that masked man?” is likely to be, “Oh, he’s the lone maintenance guy on third shift” or “Oh, that’s Wilbur, our accountant.”

With many states now requiring employees and customers to wear face coverings, should the same be required of your company’s independent contractors? If you require contractors to wear face coverings, is that the type of control that could weigh in favor of employee status?

The practical answer is that, as the nation tries to emerge from the coronavirus pandemic, it’s a good practice to require everyone who works onsite — employees, customers, and independent contractors — to wear face coverings. The use of face coverings can be made mandatory as a condition of entering your facility. That is a site safety measure, not evidence of control that would convert your contractor to an employee.

But what about when the contractor works remotely, perhaps interacting with customers or working independently offsite? In that case, follow common sense and any applicable state and local law. For independent contractors who work on their own or in their homes, it’s probably not necessary to impose any specific face covering requirement. But that doesn’t mean they should freely expose their titillating chins and lips to the adoring masses. In your contracts with independent contractors, it is always wise to require that they comply with all applicable laws when performing any part of the services. That catch-all requirement is going to capture whatever face covering rule applies in that state at that time. The contractor should be required to do whatever the state or local law requires. Different states have different requirements.

What about staffing agency workers who work onsite? Can you safely impose the same face covering requirements on them as with your W-2 employees? Yes, and you should. Anyone working in your facility needs to comply with the applicable state and local work rules. That includes staffing agency workers at your location.

When the popular show’s run ended, Clayton Moore, who played the Lone Ranger, used to make public appearances in his distinctive mask. But in 1979, the Wrather Corp., which owned the rights to the character, sued Moore to make him stop wearing the mask in public. Moore reverted to wearing green-tinted sunglasses with his cowboy outfit, hardly an acceptable substitute for our heroic roughrider.

In 1985, the Wrather Corp. relented and allowed Moore to again don the mask. As he told the Los Angeles Times in 1985, “Playing the Lone Ranger made me more considerate of my fellow man.”

In today’s COVID-19 climate, you can follow the Lone Ranger’s ethos and require face coverings. It’s a small gesture that will make you more considerate of your fellow man.

Hi-yo!

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

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