Slip Slidin’ Away? Truckers’ Fall Short in Bid to Overturn California’s Dynamex Standard (Plus: Bonus Quiz for Paul Simon Fans)

Truckers Western States dynamex independent contractor misclassificationIt seems a little presumptuous that when Paul Simon released the single, “Slip Slidin’ Away,” he released it as one of two new songs on his 1977 Greatest Hits, Etc. album. How is it a greatest hit before it’s been released? But sure enough, the song rose to #5 on the Billboard charts. Today’s Challenge: Ten bonus points will be awarded to anyone who can name the other new song that debuted on Simon’s 1977 Greatest Hits, Etc. compilation. The answer is at the end of the post.

In July, we wrote about “Convoy,” a 1975 song about a fictional trucker rebellion, as a way to introduce a new lawsuit filed by the Western States Trucking Association. The lawsuit seeks to invalidate California’s burdensome ABC Test (the Dynamex test), which is now used to determine who is a contractor and who is an employee under California wage and hour law.  The truckers argued that the law — as applied to truckers — was preempted by federal laws that seek to promote uniformity in the interstate transportation industry.

Based on a recent decision in a California federal court, the truckers’ hopes of invalidating Dynamex may be Slip Slidin’ Away.

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“This is a Cabinet”: DOL Proposes New Definition of Joint Employer, Seeks to Clear Up a Confusing Label

This post was originally published as a BakerHostetler Employment Alert on April 3, 2019. Cabinet joint employmentSometimes it’s obvious what something is, and you don’t need a label. Other times it’s not so obvious, and you do need a label. Then there’s the rare instance when it’s obvious what something is, but someone feels compelled to supply a label anyway. That third scenario is what I saw when I went to my daughter’s volleyball tournament last weekend and snapped this photo of a cabinet in the lobby. The label is small, but if you look closely, you’ll see that it helpfully declares the item to be a “cabinet.” It further announces, in red handwriting, that the item has been “sold,” thereby allaying my concerns that my daughter was spending her Saturday playing volleyball in a den of cabinet thieves.

The second scenario – label needed – is the focus of this Alert. And the territory is familiar ground ‒ joint employment.

It’s rarely obvious what that phrase means, and companies that use workers supplied by other companies have been seeking clarity for some time now. Ignoring Ronald Reagan’s famous quip about the nine most terrifying words in the English language, the Department of Labor (DOL) announced on Monday that it’s here to help.

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We’ve Got Baby Steps Toward a New Definition of Joint Employment Under the FLSA.

Baby steps joint employment FLSA new rule

I still don’t know what this is, but I got it from Wikipedia.

According to Wikipedia, which knows everything, or thinks it does, Baby Steps is the name of a Japanese manga series by Hikaru Katsuki. I have no idea what that means, but apparently it’s a story of some sort, which I infer from the following description: “The story is centered on Eiichirō Maruo, a first year honor student who one day decides that he is lacking exercise.”

This does not make me want to watch it.

I will, however, be watching the baby steps being taken by the Department of Labor’s Wage and Hour Division (WHD). On February 28, the WHD submitted a proposed new rule on joint employment to the White House Office of Information and Regulatory Affairs (OIRA). The new rule would modify the meaning of “joint employment” under the Fair Labor Standards Act (FLSA), which is the federal law governing minimum wage and overtime requirements.

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“Flooding” Tactic Creates New Risk for Using Mandatory Arbitration Agreements with Independent Contractors

flood arbitration independent contractorsIn the Biblical story of Noah’s Ark, a world-engulfing flood destroys everyone except Noah, his family, and his mini zoo. A similar story appears in the Quran, and a much earlier world-engulfing flood was described in the Epic of Gilgamesh, a Babylonian poem dating back to the 19th Century BC, featuring Utnapishtim as our hero, a fellow who was awarded with immortality but whose name (unfortunately, IMHO) appears much less frequently on the Social Security Administration’s list of most popular baby names than our more recent pal, Noah.

A more recent trend in flooding comes from our friends in the plaintiffs’ bar. A popular tactic by companies wishing to avoid class action misclassification lawsuits has been to require independent contractors to sign arbitration agreements with class action waivers. These agreements force misclassification clams into arbitration on an individual basis, where each individual single claim has little value. By forcing claims into individual arbitration, there’s much less incentive for plaintiffs’ lawyers to take these cases since each case is worth very little. It’s only in the class action arena that these claims are worth big money.

But according to a recent article in Bloomberg Law, some of the larger, more organized plaintiffs’ firms are fighting back by flooding companies with mass arbitration filings. Continue reading

Supreme Court Ruling May Stop Enforcement of Some Contractors’ Arbitration Agreements

New Prime v Olivieri double decker bus

The year 1925 was a banner year for transportation. Walter Percy Chrysler founded the Chrysler Corporation, London introduced its first double decker bus, and Malcolm Campbell became the first person to exceed 150 mph in an aero-engined car, accomplishing the feat at Pendine Sands in Wales. (Thanks, Wikipedia!)

Meanwhile, back in the States, American courts had developed a habit of not enforcing arbitration agreements, and Congress was determined to change that. In 1925, Congress enacted the Federal Arbitration Act (FAA), which is the law that allows parties to agree to arbitrate disputes and which tells courts to respect those agreements, subject to a few limited exceptions.

Those exceptions were at issue in the Supreme Court case of New Prime v. Olivieri, decided last week in an 8-0 decision. 

The Court ruled that:

(1) If there is a question about whether the FAA applies to an arbitration agreement, a court — not an arbitrator — decides whether the FAA protects the arbitration agreement. 

(2) The FAA’s exception — which says the FAA does not cover workers in the transportation industry — applies not just to employees in the transportation industry but also independent contractors. In other words, the FAA does not protect arbitration agreements entered into by independent contractors in the transportation industry.  

For business owners who wish to use arbitration agreements with their workers, what does this ruling mean?

I.  Who decides who decides?

Sometimes an arbitrator decides whether a dispute is subject to arbitration, and sometimes a court decides. Last month in the Henry Schein case, the Supreme Court held that an arbitrator can decide, in most instances, whether a dispute is covered under an arbitration agreement.

But last week’s New Prime case draws a distinction about who decides if the issue is whether the FAA applies to the dispute.

So, to simplify: On the issue of who decides whether a dispute is subject to an arbitration agreement, what’s the rule now? 

1. If the issue is whether the FAA protects the arbitration agreement, a court decides whether the FAA applies or not. (That’s the New Prime decision.)

2. If the FAA does apply and the issue is whether a particular dispute is subject to the agreement to arbitrate, then the arbitrator decides whether a dispute is subject to the agreement to arbitrate — assuming that the arbitration agreement has delegated to the arbitrator the ability to decide. (That’s the Henry Schein decision.)

The last sentence in Point 2 is the reason companies should consider adding a clause to their arbitration agreements saying that the arbitrator decides questions of arbitrability.

II.  How does the New Prime ruling apply to arbitration agreements with independent contractors? 

For independent contractors not in the transportation industry, this ruling does not apply. Arbitration agreements with independent contractors are generally enforceable and are protected by the FAA.

But how do we know the FAA doesn’t apply to all independent contractors in interstate commerce?

To answer that question, we need to head back to the Year 2001, a year after the electronic calendar shifted away from 19xx and technically-inclined doomsday prophets foretold of planes falling out of the sky. Shortly after mankind endured this potential calendar-caused calamity, the Supreme Court issued its decision in Circuit City Stores v. Adams.

The issue in Circuit City was whether the FAA applies to arbitration agreements between employers and employees. There is a carve out provision in the FAA, saying that the law favoring arbitration does not apply to “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

The issue in Circuit City was whether the carve out for “contracts of employment” of “workers engaged in foreign or interstate commerce” was intended to be broad and apply to all employees in interstate commerce or just those in the transportation industry. What was the intended meaning of “workers engaged in … interstate commerce”?

In Circuit City, the Court ruled that:

(1) the FAA generally does apply to arbitration agreements between employers and employees, but

(2) the FAA does not apply to workers in the transportation industry.

The Court decided that the phrase “workers engaged in … interstate commerce” was intended to refer only to workers in the transportation industry, not all workers. Arbitration agreements with employees in industries other than transportation would be enforceable under the FAA.

But that decision left open an important issue: What about independent contractors in the transportation industry? Do they have “contracts of employment”? Does the FAA apply to their arbitration agreements or not?

Fast forward to last week’s New Prime case.

The Supreme Court ruled that when the FAA was written in 1925, the phrase “contracts of employment” was understood to mean all work engagements, not just employer-employee relationships. Our understanding of the word “employment” has changed over time and, if that phrase were used in a statute today, it would likely refer only to true employer-employee relationships. But in 1925, it meant all work.

The Court therefore ruled that the FAA’s carve out applies to all workers in the transportation industry, regardless of whether such workers are employees or independent contractors. This means that arbitration agreements signed by employees or independent contractors in the transportation industry are not covered by the FAA, and therefore their agreements to arbitrate disputes are not protected by the FAA. Those disputes might have to go to court.

So what happens now?

First, the ruling is narrower than it may seem. The Court ruled only that the FAA did not apply to independent contractors’ arbitration agreements in the transportation industry.  It did not rule that these arbitration agreements were automatically void.

Many states have their own statutes that protect arbitration as a means for resolving disputes. Companies with workers in the transportation industry should check whether there is a state law that can be applied to protect these arbitration agreements.  If it would be reasonable to apply that state’s law, then companies should consider choosing that state’s law in the arbitration agreement’s Choice of Law provision. The right state’s law might still be able to save the arbitration agreement. We can expect further litigation on this subject, but here’s a tip for now. Try to pick a state with a favorable arbitration statute if your workers are in the transportation industry.

Second, we can expect the next battle to be over the meaning of the phrase, “transportation industry.” Does the “transportation industry” include only workers who transport goods across state lines? Or does the “transportation industry” include independent contractor drivers who transport passengers across town (such as ride share) or who deliver your pizza?

In Circuit City, the Supreme Court looked favorably on other court decisions that had defined the “transportation industry” to mean those workers “actually engaged in the movement of goods in interstate commerce.” If that holds true, then local drivers of passengers and late-night food cravings should be considered not part of the “transportation industry.” The FAA, therefore, would still apply to those workers.

But we can expect the plaintiffs’ bar to argue for a broad interpretation of the “transportation industry.” We can now expect to see arguments that rideshare drivers and local delivery drivers are in the “transportation industry” and that their arbitration agreements are not protected by the FAA. I think that argument is incorrect, but I do expect to see it.

I would expect Courts of Appeal (and perhaps eventually the Supreme Court) to adopt a narrow view of the “transportation industry,” meaning that the FAA still applies to independent contractors who transport people or make local deliveries. I expect the courts to rule that the carve out from the FAA exempts only those workers (employees and contractors) who routinely transport goods across state lines.

For now, here’s what you need to know:

  • Arbitration agreements with independent contractors in the “transportation industry” are not protected by the FAA. It may be more difficult to enforce those arbitration agreements unless they are governed by the law of a state with its own arbitration statute.
  • Arbitration agreements with independent contractors outside of the transportation industry should remain enforceable under the FAA.

And the bottom line for me is that maybe it’s time for self-driving cars.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Orlando on Jan. 24, Philadelphia on Feb. 26, or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Fecal Matter Meets Electrical Wind Machine: NLRB Scrambles to Re-Evaluate Joint Employment

NLRB rulemaking update browniong-ferris Hits the fanAccording to the British site, The Phrase Finder, the expression When the shit hits the fan “alludes to the unmissable effects of shit being thrown into an electric fan.” That’s lovely. The Cambridge Dictionary (also U.K.) describes the idiom a bit more delicately: “also, when the shit flies, [when] a situation suddenly causes a lot of trouble for someone.”

Thank you, British internet!

In any event, this expression seems to capture the predicament the NLRB suddenly finds itself in after the D.C. Court of Appeals issued its unexpected ruling a couple weeks ago in the ongoing Browning-Ferris case, which we wrote about here.

The ruling vastly complicated the NLRB’s efforts to adopt a more pro-business definition of “joint employment” that would require direct control over essential terms of employment before joint employment could be found. The D.C. Court of Appeals ruled that the meaning of “joint employment” under the National Labor Relations Act is determined by the common law Right to Control Test, and that the NLRB has no authority to change the definition in a way that is inconsistent with the common law meaning.

The common law Right to Control Test, to the current Board’s dismay, allows for a finding of joint employment when control is reserved, even if the right to control is not actually exercised. That ruling is contrary to the definition being proposed by the NLRB as part of its ongoing effort to enact a new regulation through the rulemaking process.

Since the D.C. Court of Appeals ruling, here’s what’s been happening:

First, two key Democratic lawmakers sent a letter to Board Chair John Ring, asking that the Board abandon its rulemaking effort in light of the court’s ruling. Nice effort, but that’s not likely to happen.

Second, “in light of the unique circumstance” posed by the court’s decision, the Board has again extended the period for the public to submit comments on the proposed rule. The new deadline is January 28, 2019, with reply comments due February 11, 2019. This is the third time the Board has extended the comment period. The second extension inspired one of my favorite posts, “Amazon Users (espec. Cindy, Amy & kris), Please Don’t Submit Comments On the NLRB’s Proposed Joint Employment Rule,” which if you missed, it’s not too late.

So what happens next?  The Board has a few options:

1. It can change the proposed rule to allow for a finding of joint employment when a company reserves the right to exercise control, even if the control is indirect and is never actually exercised, but only if the right to control covers “essential” terms and conditions of employment. That change would be consistent with the D.C. Court of Appeals ruling, but it’s not as sweeping a change as current pro-business Board majority would like.

2. It can plow forward with its current rulemaking plan and ignore the D.C. Court of Appeals. The NLRB typically ignores decisions by the U.S. Courts of Appeal on the basis that there are 12 regional federal Courts of Appeal and they don’t always agree, while on the other hand, the NLRB’s authority is national, not regional. This approach often results in circuit splits, in which Courts of Appeal issue contradictory rulings, a situation that generally results in the U.S. Supreme Court deciding the issue once and for all. If the NLRB takes this approach, a circuit split could develop, and the Supreme Court would be likely to get involved, but it would probably take years before that wound its way up to the Supreme Court.

3. It can ask the full slate of D.C. Court of Appeals judges to re-hear the case. This is called an en banc proceeding. Since the decision was 2-1, there could be some momentum toward the full slate of judges agreeing to reconsider the case, but even if that happens, there is no guarantee the ruling would be any different.

4. The D.C. Court of Appeals decision can be appealed to the Supreme Court. The Supreme Court could decide to hear the case, or it could decline and allow the law to further develop. The Supreme Court often waits to hear what other Courts of Appeal have to say before it issues a final decision. But even if the Supreme Court takes the case, there is no assurance that the NLRB will get the ruling it wants.

Here’s why. On one hand, the newly constituted Supreme Court is more conservative and is regarded as more pro-business, which would appear to suggest support for the outcome that the pro-business NLRB would want — authority to narrow the definition of joint employment to situations in which control is directly exercised, not merely reserved.

But on the other hand, the current Supreme Court seems less and less inclined to defer to agencies’ interpretations of statutes. While the current Supreme Court may be sympathetic to the outcome desired by the NLRB, it is unlikely to be sympathetic to the process by which the NLRB wants to achieve that outcome. The Supreme Court’s current members seem inclined to limit the authority of federal agencies to re-interpret the law.

There are lots of ways the joint employment saga might play out. But for now, it’s fair to say that the D.C. Court of Appeals decision was unexpected and messy, in a way that alludes to the unmissable effects of excrement being thrown into an electric fan (as the Brits might say).

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Orlando on Jan. 24, Philadelphia on Feb. 26, or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Join Me at Baker Hostetler’s 2019 Master Class on Employment Law (Three Locations)

2019 master class logoPlease join me and my colleagues in the Employment Group at Baker Hostetler for the 2019 Master Class on Labor Relations and Employment Law.  This year’s event will take place in three locations:

I will be presenting on the Gig Economy: Labor Relations Issues, with my colleague Peter Fischer.  We’ll cover 2018-19 developments in joint employment (there are many!) and the future of portable benefits for gig economy workers.

One of the best parts about the format of the Master Class is the ability to customize your day. Each attendee will choose 6 of 12 possible classes to attend and will receive a customized schedule. We’ve added several new hot topics to this year’s program, including #MeToo, Artificial Intelligence, and Union Organizing through Social Justice Campaigns.

To register, click here, or you can contact me directly at tlebowitz@bakerlaw.com.  If you list me as the attorney who invited you, I will have your admission fee waived.

More information is available by clicking the links to any of the cities listed above.

I hope to see you there!

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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