Ultimate Survival Alaska: The Most Detailed Test for Independent Contractor Misclassification Yet! (And Bears!) (Maybe)

Alaska independent contractor definition workers compensationReality TV seems to fit Alaska like antlers on a caribou, but apparently much of what we see on TV is fake, according to this article by Tom Kizzio in the L.A. Times. Kizzio derisively charges that state subsidies have caused the proliferation of shows about bush people, lack of indoor plumbing, and living off the land, despite some being filmed near suburbs with multiple Safeways.

I say “derisively” because Kizzio wrote a book called Pilgrim’s Wilderness: A True Story of Faith and Madness on the Alaska Frontier, which chronicles a pioneering family in the (real) bush who turns out to have a past worthy of reality TV. That is, Kizzio planted his flag in the same mud flat. Maybe Kizzio’s just jealous that his book didn’t get a show.

Reality TV in Alaska may be full of fakes, but one thing Alaskans apparently take seriously (other than their annual oil subsidies) is precision in defining what it means to be an independent contractor.

We’ve written about all sorts of balancing tests, like Right to Control Tests and Economic Realities Tests, and we’ve written about stricter ABC Tests and the proliferation of state law variations, some of which apply only to certain types of state laws like workers compensation or unemployment.

The Alaska legislature has passed a new law that contains one of the most specific tests yet, an ABCDEFGH test that includes subparts under G and H and which applies only to the definition of “independent contractor” for workers compensation purposes.

I know most of my readers will not be grappling with the complexities of this Alaskan workers comp statute in their day-to-day business dealings, but this new law is a good illustration of how every state seems to want to define “independent contractor” its own way. The multitude of definitions means a labyrinth of red tape and confusion for any business that operates in multiple jurisdictions. In some places, your independent contractor may be properly classified; in other places, not so much.

The abundance of tests for Independent Contractor vs. Employee was already mind-numbing, but this new test is perhaps the most detailed and specific yet. Many of these factors appear in other tests as factors to be considered and weighed, but this test is different in that — like an ABC Test — each item must be present for someone to be a contractor.

Here’s Alaska’s new test, which applies only to workers compensation law:

A person is an independent contractor for the purposes of this section only if the person: 

(A) has an express contract to perform the services; and

(B) is free from direction and control over the means and manner of providing services, subject only to the right of the individual for whom, or entity for which, the services are provided to specify the desired results, completion schedule, or range of work hours, or to monitor the work for compliance with contract plans and specifications, or federal, state, or municipal law; and

(C) incurs most of the expenses for tools, labor, and other operational costs necessary to perform the services, except that materials and equipment may be supplied; and

(D) has an opportunity for profit and loss as a result of the services performed for the other individual or entity; and

(E) is free to hire and fire employees to help perform the services for the contracted work; and

(F) has all business, trade, or professional licenses required by federal, state, or municipal authorities for a business or individual engaging in the same type of services as the person; and

(G) follows federal Internal Revenue Service requirements by

(i) obtaining an employer identification number, if required;
(ii) filing business or self-employment tax returns for the previous tax year to report profit or income earned for the same type of services provided under the contract; or
(iii) intending to file business or self-employment tax returns for the current tax year to report profit or income earned for the same type of services provided under the contract if the person’s business was not operating in the previous tax year; and

(H) meets at least two of the following criteria:

(i) the person is responsible for the satisfactory completion of services that the person has contracted to perform and is subject to liability for a failure to complete the contracted work, or maintains liability insurance or other insurance policies necessary to protect the employees, financial interests, and customers of the person’s business;
(ii) the person maintains a business location or a business mailing address separate from the location of the individual for whom, or the entity for which, the services are performed;
(iii) the person provides contracted services for two or more different customers within a 12-month period or engages in any kind of business advertising, solicitation, or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.

Whew! That’s information overload. I doubt most of you read all the way through. You skimmed, right? Sort of fake-read your way through it? That’s ok. (I did too.) Thanks for jumping to the bottom and joining me again.

I’ve gotta leave you now, though. I checked the guide on my TV, and I don’t want to miss reruns of Bristol Palin’s reality show about “her amazing journey through life” (actual description from imdb), or, to translate the hyperbole of Alaskan reality tv into a simpler more truthful description, her state-subsidized show about being a single mom.

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

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Dept of Labor May Redefine Joint Employment with New Rule, Hints Labor Sec’y

DOL may issue new rule for joint employment

Rules are important for avoiding chaos, as I am reminded daily by one of my favorite twitter accounts, @CrimeADay. That’s where I learned that it’s a federal crime to operate a manned (or unmanned) submersible in national park waters without a permit, thereby ruining my weekend plans. (18 USC 1865 & 36 CFR 3.19). I also learned it is a federal crime to bring a child to a cockfight before his or her 16th birthday, thereby ruining my winter plans for father-daughter bonding activities. (7 USC §2156(a)(2)(B) & 18 USC §49(c).)

The Department of Labor (DOL) thinks rules are important too. Taking a page from the NLRB, which last week issued a Notice of Proposed Rulemaking to redefine “joint employment” under federal labor law, the DOL may be about to follow suit.

In a speech to members of the American Hotel & Lodging Association and the Asian American Hotel Owners Association, Labor Secretary Alex Acosta disclosed that the DOL is working on a proposal to redefine joint employment, presumably under the Fair Labor Standards Act (FLSA), which requires the payment of overtime and a minimum wage.

Joint employment is a hot button issue in the hospitality business, where outsourcing functions like housekeeping is commonplace, and where joint employment can mean the hotel operator is liable for for wage and hour violations by other entities who are supplying labor.

As we have discussed in previous posts, the tests for joint employment are different depending on which law is being applied. That means that even if the NLRB revises the definition of joint employment, that new test would not apply to the FLSA. The DOL would need to write a separate rule that would define joint employment under the FLSA.

According to Acosta, that new rule may soon be on the way.

Until then, remember that it is illegal to take a fishing boat into the danger zone of the Potomac near the Naval Surface Warfare Center while they’re firing guns, aerial bombing, using directed energy, or other hazardous operations, unless the patrol boats let you in. (33 USC §3 & 33 CFR §334.230(a)(2).)

Thanks, @CrimeADay!

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

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NLRB Proposes New Definition of Joint Employer; 60-Day Comment Period Starts Now

NLRB logoWhen seeking musical inspiration for a post on the NLRB’s joint employment standard, look no further than the Barenaked Ladies’ 1994 album, Maybe You Should Drive. Like an on-again, off-again relationship, the Board keeps changing its joint employment standard. Between 2015 and today, the test has been, at various times:

  • Direct control (pre-Browning-Ferris, 1984-2015),
  • Indirect control (Browning-Ferris, 2015-Dec. 2017),
  • Direct control (Hy-Brand overrules Browning-Ferris, Dec. 2017-Feb. 2018), and
  • Indirect control (Board vacates Hy-Brand, restoring Browning-Ferris, Feb 2018-present).

But with this newest change coming in the form of a proposed regulation, the proposed change can be expected, once it’s enacted, to remain in effect long term.

Cue the Barenaked Ladies, in “Everything Old Is New Again” (1994):

Everything old is new again, everything under the sun.

Now that I’m back with you again,

We hug and we kiss, we sit and make lists,

We drink and I bandage your wrists.

The proposed new standard would make it much more difficult to establish that a business is a joint employer.

The new test will help franchisors, who need to protect their brand and marks, but do not exercise day-to-day control over hiring and scheduling of a franchise owner’s employees. The new test will help businesses that subcontract labor and that want to ensure certain tasks are performed but do not exercise day-to-day control over how the work is performed or over how subcontractor hires, schedules, and supervises its employees.

In a Notice of Proposed Rulemaking released late last week, the NLRB proposes a new regulation to interpret the National Labor Relations Act. New 29 CFR §103.40,which would define joint employer.

Under the proposed regulation, an employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.

There’s a lot packed into that definition:

  • The proposed joint employer must share or codetermine the workers’ terms and conditions of  employment;
  • These terms have to be essential terms of employment, such as hiring, firing, discipline, supervision, and direction;
  • It is not enough to have the right to control these terms; the proposed joint employer must actually exercise this control;
  • The control must be direct, substantial, and immediate; and
  • It is not sufficient to exert control that is limited and routine.

“Limited and routine” control means directing another business’s employees as to what work to perform, or where and when to perform it. Under the new rule, that will not be enough to show joint employment. Control that is not “limited and routine” would include providing direction on how to do the work — in other words, supervision.

For those of you asking, “So what? Who cares?” (my parents, for example), here’s why the change matters.

Under the new rule, a business that retains another company to perform work but has no control over that company’s hiring, compensation, scheduling, or supervision:

  • Will no longer be obligated to collectively bargain with that other company’s unionized workers;
  • Will no longer be held jointly liable for that other company’s unfair labor practices; and
  • Will no longer be drawn into collective bargaining or unfair labor practice disputes with that other company’s employees.

It’s a big deal. Unions won’t like it since the new rule will reduce their influence, but the new rule is a common sense, pro-business proposal that will add predictability and certainty to economic and legal relationships.

So what’s next?

There is a now a 60-day period for comment. The Board will then have the opportunity to consider the comments and revise or reject the proposed rule.  The soonest the rule can be implemented is late 2018 but more likely early 2019.

Then, assuming the rule is implemented, we go back to the standard that existed before Browning-Ferris, but with a lot more clarity and permanence. Everything old is new again. But this time, the change should be long-term since it will be memorialized in a  federal regulation.

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

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Loss of Control? New Trademark Bill Would Help Franchisors to Reduce Joint Employment Risks

C52476FF-F79A-4A4C-A1B2-5C359ADBCBB9

The Van Halen song, “Loss of Control,” supposedly is intended to poke fun at the punk rock scene, turning everything up to high volume and high frequency. It is not a song to fall asleep to. If the lyrics took more than ten minutes to write, I’d be as surprised and disappointed as if I found a brown M&M in the Van Halen dressing room.

The lyrics consist of a few basic lines and then repeating the phrase “Loss of Control” over and over and over again at high speed. A copy of David Lee Roth’s handwritten lyrics can be found here.

Franchisors constantly struggle with how much control they can exert over their business model and over franchisees without becoming a joint employer of the franchisee’s employees. On one hand, they need brand consistency to project an image to the public and to ensure that a reliable product or service is being offered, regardless of franchise location. On the other hand, day-to-day decisions like hiring and scheduling should be left to the individual franchise owner.

One area where franchisors absolutely must exert control is over their trademarks. They need to ensure that their marks are used consistently and appropriately and that individual franchise owners don’t use the marks in unapproved ways.

A new bill introduced in Congress aims to help franchisors protect their marks in a way that does not increase the risk of a joint employment finding.

The proposed Trademark Licensing Protection Act has bipartisan support, having been co-introduced by House Small Business Committee Chairman Steve Chabot (R-OH) and Rep. Henry Cuellar (D-TX).

If passed, it would declare that when a mark is licensed to a related company (such as a franchisee), any control exerted over that mark “for the purpose of preserving the goodwill, reputation, uniformity, or expectation of the public of the nature and quality of goods or services associated with the mark” would not be evidence of an employer-employee relationship or of joint employment.

This clarification would be helpful to the franchise industry. Franchisors are under constant attack with claims of joint employment. This bill would help protect them against joint employment claims while helping them to avoid a loss of control.

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

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“Maybe Later”: California Legislature Declines Business Community’s Request to Fix ABC Test

California ABC Test legiuslative efforts fail 2018

Peter Gabriel’s 1986 album, So, includes the song “Don’t Give Up.” It is a mournful duet with Kate Bush that must not be included on anyone’s workout playlist. The blend of an inspirational title and weepy output, though, seems appropriate for this post.

Today we’re following up on the state of independent contractor misclassification in California, five months after the Dynamex decision and its contractor-hatin’ ABC Test.

This summer, in response to Dynamex, California businesses that rely on independent contractor gig workers engaged in a coordinated effort to persuade the California legislature to suspend the Dynamex ruling and to reinstate a common sense balancing test for determining Independent Contractor vs. Employee.

For now, they have failed.

California’s 2018 legislative session just ended. The Democratically controlled Assembly and Senate declined to consider any legislation that would affect the Dynamex ruling and its new ABC Test.

In a recent interview with California’s Capital Public Radio, three weeks before the legislative session closed, Assembly Speaker Anthony Rendon admitted that he is a much weaker hitter than the Washington Nationals third baseman who shares his name and has 19 more home runs this year than the Speaker. (Actual quote unavailable.) But, more relevant to this post, Rendon also said that there would be no action this year on legislation to define Who Is My Employee?

“Ultimately, this decision is about the future of the way work looks. And that requires us to be thoughtful and deliberate,“ Rendon said. “And there’s no way we can be thoughtful and deliberate in three weeks.”

Senate President pro tem Toni Atkins, who may or may not have been in the late-80s-early-90s soul/R&B group Tony! Toni! Toné!, expressed similar sentiments: “The California Supreme Court voted unanimously for this new test. I agree with Speaker Rendon that forging any legislative review or response to their decision in just three weeks isn’t workable.”

Let’s break that down.

When my oldest daughter was little and didn’t want to do something, she developed a polite way of saying “no f-ing way.”  She’d say, “Maybe later.”  We all knew what that meant.

I am hearing the same thing from Rendon and Atkins when they say that three weeks wasn’t enough time to draft new legislation. All they had to do was reinstate the status quo before Dynamex, which was a well-established balancing test for determining whether someone is an employee or an independent contractor.

But instead they gave us the legislative equivalent of “maybe later.” I won’t be putting that on my workout playlist either. And it’s not gonna get worked out any time soon. The ABC Test in California is here to stay. (Cue weepy mournful background music.)

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

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When Are Shareholders Also Employees? (Disney-Themed Version)

When are shareholders considered employees

I have always believed that in the song made famous by Happy, Dopey, Sneezy and friends, they were saying “Off to work we go,” but I just checked a few sites for lyrics and the lyrics all show the dwarves singing, “It’s home from work we go.” Can this be true? Have I been mixed up all these years about which way the dwarves were going to dig dig dig with a shovel or a pick?

Work can be confusing. A non-cartoon-dwarf scenario that can be confusing is trying to determine whether shareholders in a business are also employees of that business. In today’s post, we examine that question by celebrating the 15th anniversary of a 2003 Supreme Court case. (Happy Anniversary, case! 🎂)

Like many tests for determining Who Is My Employee?, this one comes down to control and the familiar Right to Control Test.

In Clackamas Gastroenterology Associates, P. C. v. Wells, an employee of this Oregon-based medical clinic tried to sue for disability discrimination under the federal Americans with Disabilities Act (ADA). To bring claim under the ADA, though, the plaintiff must show that her employer has 15 or more employees.

The clinic had four owner/shareholders who were also physicians. If they were also employees, then the clinic had 15 employees and Ms. Wells could pursue her ADA lawsuit. If these physicians were just shareholders and not employees, then the clinic had fewer than 15, and Ms. Wells would be SOL.

The dispute made its way to the U.S. Supreme Court. The Court ruled that the proper way to determine whether the physician/shareholders counted as employees was to apply a Right to Control Test. But which version?

The standard Right to Control Test tries to distinguish between an employee and an independent contractor. Because the question here is a bit different, the test had to be adapted to fit the situation.

The Court decided that these six factors were most important for deciding whether the physician/shareholders were also employees:

1. Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;
2. Whether and, if so, to what extent the organization supervises the individual’s work;
3. Whether the individual reports to someone higher in the organization;
4. Whether and, if so, to what extent the individual is able to influence the organization;
5. Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and
6. Whether the individual shares in the profits, losses, and liabilities of the organization.

Like the traditional Right to Control Test, this is a balancing test. Some factors may weigh in one direction, some may tilt the other way. Ultimately, a judge (or jury) needs to weigh the factors and make a determination.

In this case, the Supreme Court did not do the weighing. Instead, it articulated the test and sent the case back to the Oregon district court to weigh the factors.

So for Ms. Wells, the case left the Supreme Court and went back to the federal court in Oregon. And so the real question is: For Ms. Wells after the Supreme Court’s ruling, was it “off to court we go” (headed back to Oregon) or “home from court we go” (leaving D.C.)? I bet she never thought about that.

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

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Does California’s ABC Test Violate Federal Law? Truckers Sue, Saying It Does

Trucker Dynamex ABC Test California

The 1976 song, Convoy, is about a fictional trucker rebellion, protesting the 55 mph speed limit, tolls, and mandatory log books to ensure that drivers limit their hours. The song is full of trucker slang and includes CB conversations among Rubber Duck, Pig Pen, and Sodbuster. The truckers crash road blocks and flee the police and reinforcements from the Illinois National Guard. Here’s a fun little article about how this truckers’ protest anthem became a hit single.

The truckers are protesting again.

On July 19, the Western States Trucking Association filed a federal lawsuit, alleging that the California Supreme Court’s new ABC Test (set forth in the Dynamex case) for Continue reading