A Swedish company has constructed airbag jeans for motorcyclists, designed to inflate for protection in the event of a crash. The denim-like fabric is water-repellent and abrasion-resistant. You can learn more here.
When riding a motorcycle, it’s smart to anticipate the possibility of injury. The same is true when engaging temps from a staffing agency.
Here’s what I mean. At some point, you’ll have a temp who requires reasonable accommodations for disabilities. The expense to accommodate might be small. But it might not be. Who pays for it, you or the staffing agency?
Last week, the EEOC announced a $119,000 settlement with a staffing company that rejected an applicant because of disabilities. The applicant, who is deaf, had been placed at a client. Before the applicant was to appear for work, a manager at the staffing agency cancelled the assignment, informing the applicant that the client did not have sign language interpreters available. The client, incidentally, was ready and willing to employ the applicant.
The EEOC’s news release doesn’t say whether the applicant actually needed an ASL interpreter or whether the client was planning to pay for one. But providing an ASL interpreter can be a reasonable accommodation. In a staffing agency relationship, who pays for reasonable accommodations needed by temps?
The best advice here is to plan ahead and put on those airbag jeans. Your contract with the staffing agency can address who pays for reasonable accommodations. All it takes is a short clause in the agreement. If the agency is paying, make sure there’s no markup on those expenses. Few staffing agency agreements address who pays for reasonable accommodations. But they should.
If you add a clause, differentiate between Title I and Title III obligations. Title I of the Americans with Disabilities Act (ADA) prohibits disability discrimination in employment. That’s the one you want to focus on. Title III of the ADA addresses public accessibility. You’ll pay for the wheelchair ramps and accessible doorways at your facility (Title III), but you may be able to shift the expenses of Title I compliance to the agency.
It’s also a good idea to make sure managers know to involve HR if disability or accommodation issues arise. You don’t want a manager saying “we can’t accommodate that” and ending a temp’s assignment.
Airbag jeans will be sold for $499 a pair. Reasonable accommodations may cost more. Either way, it’s smart to plan ahead and build protections in to your staffing agency agreement.
On March 7, I’ll be speaking at the 10th Annual Labor Relations and Employment Law Master Class Series, addressing recent developments in the contingent workforce area. I’ll be addressing joint employment and staffing agency relationships, and I plan to offer a list of ten items that should be in your staffing agency agreements but probably aren’t
Sign up here to learn more. There is no charge to attend the webinar.
What Companies Using Temps In New Jersey Need to Know
According to the National Constitution Center, there were 14 original copies of the Bill of Rights, with one sent to each of the 13 states and another kept by the federal government. The Center also reports, however, that four of the states — Georgia, Maryland, New York, and Pennsylvania — lost their copies. North Carolina’s was stolen by a Union soldier during the Civil War but recovered in 2002 through an FBI sting. (“Hey buddy, I’m lookin’ to buy a Bill of Rights. Ya know anyone?”)
New Jersey kept its copy, but also just added some new stuff. Sort of.
This month, New Jersey passed the Temporary Workers Bill of Rights. It’s less sweeping than the original 1791 Bill of Rights, but it co-opts the important sounding name to get everyone’s attention and to show constituents that the lawmakers are doing really important things that warrant re-election, financial support, the undying love of chatbots, etc.
The Temporary Workers’ Bill of Rights imposes new burdens on staffing agencies and the companies using temp workers. This post will focus on the obligations imposed by the companies using the temp workers.
Does the Bill apply to your industry?
The Bill applies to temp workers assigned by a temp staffing firm to work in any of the following industries, using Bureau of Labor Statistics (BLS) designations:
33-90000 Other Protective Service Workers
35-0000 Food Preparation and Serving Related Occupations
37-0000 Building and Grounds Cleaning and Maintenance Occupations
39-0000 Personal Care and Service Occupations
47-2060 Construction Laborers
47-30000 Helpers, Construction Trades
49-0000 Installation, Maintenance, and Repair Occupations
51-0000 Production Occupations
53-0000 Transportation and Material Moving Occupations
If you’re not in one of these industries, stop reading and get on with your day.
What obligations does the Bill impose on the users of temp labor?
1. Equal Pay. This sounds fair but may be problematic in practice. Temp workers must be paid “not less than the average rate of pay and average cost of benefits, or the cash equivalent thereof” of the user’s similarly situated employees.
I see two immediate problems here.
First, one of the benefits of using a staffing agency is the ability to pay the temps less until they prove themselves and earn an offer of direct hire. No longer. Now you’ll have to pay the same amount as you pay your regular workers, plus the markup.
Second, how is the staffing agency going to know the wages paid to your similarly situated regular workers and the value of the benefits package you provide them? Presumably you’ll have to tell the staffing agency.
But the staffing agency is not your confidant or fiduciary. It has multiple clients, probably including your competitors. Do you really want the staffing agency to know what your cost of insurance is, or what you pay your regular workers, or the full suite of benefits you offer? The staffing agency will have to adjust what it charges you — and your competitors — based on what each of its clients pay their similarly situated worker. That sounds like a pretty useful set of data for anyone wanting to know what competitors are doing.
You can (and should) designate this information as confidential when disclosing it to a staffing agency, and you should make sure your staffing agency agreement includes an obligation to protect confidential information. But is the information really that safe from prying eyes? If a competitor or temp worker is involved in litigation, couldn’t this information be subject to subpoena? Once you reveal this information, you lose a good bit of control over it.
2. Freedom to direct hire. Under the new law, temp workers must be free to accept offers of direct hire. Staffing agencies cannot restrict the workers’ ability to accept offers of direct hire. The agency can impose a “placement fee” on its client (you), but the amount is limited by statute.
The amount of the placement fee cannot exceed “the equivalent of the total daily commission rate the temporary help service firm would have received over a 60-day period, reduced by the equivalent of the daily commission rate the temporary help service firm would have received for each day the temporary laborer has performed work for the temporary help service firm in the preceding 12 months.”
For purposes of contracting, any provisions prohibiting direct hire for limited periods of time need to be removed. Instead, staffing contracts (in NJ, for these job classifications) should permit direct hire but may charge a permitted placement fee.
3. Reimbursement of tax obligations. The user of services is required to reimburse the temp agency for wages and “related payroll taxes.” Presumably this is already basked into the markup, but now it’s required.
4. Joint and several liability. The law imposes joint liability for any violations of the equal pay or direct hire provisions. Consider what that means for equal pay. You might have to disclose to the temp agency what you pay your similarly situated employees, but you don’t control the temp agency’s payroll practices. If they mess up and pay the temp worker less than the law requires, the law says you’ll be jointly liable.
Who said anything about fair?
Be sure your staffing agency agreement includes robust indemnity provisions. The agreement should also create a contractual obligation for the temp agency to pay workers all amounts they are due under the law so that, if the agency fails to do so, you can point to a breach of contract when seeking indemnity. Indemnity claims based purely on the law could be subject to challenge since the law also says there is joint liability.
Conclusions
This Temporary Workers’ Bill of Rights applies only to certain industries in New Jersey but, for users of temps in these industries, the law creates important new obligations.
For violations, the law allows for a private right of action and carries a six-year statute of limitations.
If you use temp labor in New Jersey in one of the covered industries, be sure you understand the new requirements. This would be a good time to go back and revisit your staffing agency agreements. They may need some tidying up.
Also consider requiring temp workers to sign individual arbitration agreements as a condition of being placed at your worksite. This strategy can help insulate you from a class action filed against both the temp agency and your company. Class actions against both entities are a particular concern, given the joint liability section of the new law.
“Don’t Look Back” was the title track on Boston’s second album, released in 1978. The album version came in at six minutes, but a radio edit brough it down to four.
This is a practice I never understood. People used to listen to the radio for hours at a time, but six minutes was too long for one song? Why is it better to ingest two three-minute songs per six minutes than one six-minute song? But maybe I’m the wrong person to ask. My idea of an excellent album is Tales from Topographic Oceans by Yes. The album consists of four songs, each about 20 minutes long, and was inspired by a footnote in a book about Hindu texts by the yogi Paramahansa Yogananda.
But this is getting way off track.
I chose “Don’t Look Back” as the theme for today’s post because it’s good advice for life, but bad advice for drafting arbitration agreements.
For businesses that make widespread use of independent contractors, one of the best strategies for protecting against misclassification claims is by having a robust arbitration agreement with a class action waiver. But too many times those agreements don’t look back.
Lately I’ve seen a couple of decisions in which arbitration agreements were found not to cover particular claims, when those claims arose from events that happened before the agreement was signed. I think those cases were wrongly decided, since arbitration covers the process for resolving disputes, regardless of when they arise. But it makes good sense to draft in a way that cuts off this line of attack.
I have recently started adding a sentence to my arbitration agreements that goes something like this: “Covered disputes also include disputes relating to past events, including those that predate this Agreement.”
Today’s tip is to go back and look at your arbitration agreements. If they aren’t clear about covering claims based on earlier events, consider adding this clarification next time you update the agreement.
Now for those of you who would like an earworm for the day, here you go:
Don't look back, ooh, a new day is breakin' It's been too long since I felt this way I don't mind, ooh, where I get taken The road is callin', today is the day
This headline does not refer to the Chinese spy ballon.
Instead, I’m thinking about 1968. Jimmy Page and John Paul Jones had joined up to form a new band after the breakup of the Yardbirds. Drummer Keith Moon of The Who supposedly said the project would go down like a lead balloon.
One of the largest balloons, of course, is the zeppelin. The zeppelin was a passenger airship used until the Hindenberg disaster in 1937. So the band named itself Led Zeppelin, dropping the ‘a’ in Lead so people wouldn’t mispronounce the name of the band.
In 1971, the band released Led Zeppelin IV, which included the song “Going to California” and this lyric:
Spent my days with a woman unkind Smoked my stuff and drank all my wine Made up my mind to make a new start Going to California with an aching in my heart
For today’s post, I’m going to California with an aching in my heart.
Cities in California have upped their game when going after companies that use independent contractors. They’re taking the lead (not led) in bringing their own lawsuits.
In January 2023, the City of San Francisco secured a $5.25 million settlement to cover 5,000 independent contractor delivery drivers. The lawsuit alleged a failure to comply with the city’s health care security and paid sick leave ordinances, which apply to employees.
In October 2022, San Diego’s city attorney settled its own independent contractor misclassification lawsuit for $46.5 million. That deal covered 300,000 independent contractor delivery drivers.
In 2021, San Francisco reached agreement on another delivery driver misclassification lawsuit, settling for $5.3 million to cover 4,500 local drivers.
The mountains and the canyons start to tremble and shake The children of the sun begin to awake (watch out)
States are following a similar playbook, as we recently saw when New Jersey obtained a $100 million settlement, alleging that a rideshare app company failed to pay into the state unemployment insurance fund for independent contractor drivers.
It seems that the wrath of the gods got a punch on the nose And it's startin' to flow, I think I might be sinkin'
Government-initiated lawsuits can be particularly dangerous because arbitration agreements and class action waivers are ineffective. The governments are fighting for funds they think are rightfully theirs.
They also have political motives driving their prosecutions. Officials facing re-election want to be able to show their constituents they’re making a difference and fighting for workers’ rights (and ignoring, as usual, the fact that most IC drivers want to remain ICs).
Throw me a line, if I reach it in time I'll meet you up there where the path runs straight and high
The trend of government-backed compliance efforts is going to continue and will likely increase. Companies making widespread use of independent contractors should be proactive in evaluating these relationships, the contracts, and the local laws to build a comprehensive defense strategy — before getting sued.
Please join me and my colleagues for the 10th Annual Master Class Series on Labor Relations and Employment Law. The 2023 program will be offered virtually on Tuesdays from Feb. 7 through April 11, 2023. Sessions are one hour, 2-3pm ET.
This years’s topics include:
The New Employment Laws: Out with the Old and In with the Unknown
Remote Work in Transition: Trends and Compliance Considerations
The New Union Organizing Model: The Force of Gen Z
Debriefing the Dobbs Decision: Unpacking What Employers Face in the Aftermath of the Overturning of Roe v. Wade
Contingent Workforce Update: The Gamemakers Are At It Again
Workplace Privacy: The Ever-Increasing Risks of Breaches and Maintaining Data and Information
Back to the Future Part II: The NLRB and the Uncertain State of Labor Law
Take the Target Off Your Back: Avoiding Common Wage and Hour Practices That May Lead to Litigation
Federal Agencies Are Talking About You – and You Can’t Just Ignore It Anymore
Unique Issues in Workplace Investigations: Not Your Typical ‘How To’
I will be presenting on March 7, 2023:
Contingent Workforce Update: The Gamemakers Are At It Again
In The Hunger Games, Seneca Crane and Plutarch Heavensbee make up the rules for the games as they go along. The players never quite know what they’re getting into. While companies in the contingent workforce space don’t face literal death upon a misclassification or joint employment finding, the ramifications can be pretty harsh. Taking their cue from the gamemakers, the Department of Labor and the National Labor Relations Board keep changing the rules of the game. The states are updating their tests too. Learn what’s changing in 2023, and may the odds be ever in your favor.
There is no charge to attend. All sessions are virtual.
Feel free to invite your colleagues or other connections, including outside of your organization. When you register, please include my name as your BakerHostetler contact.
There’s an island in Quebec that’s larger in area than the lake in which it sits. René-Levasseur Island was supposedly formed by the impact of a meteorite 214 million years ago, although eyewitness accounts differ. The land mass became an island in 1970, when the Manicougan reservoir was flooded, merging two crescent shaped lakes that surrounded the area.
I like fun geography facts, and an island larger than the lake in which it sits is a fun fact. But feels a bit aggressive for the Canadians to merge two crescent shaped lakes to turn this land mass into an island. I’m sure they had their reasons. If nothing else, it looks good on a map.
The Department of Labor is also being aggressive, but they’re not flooding any reservoirs. Instead, they’re channeling their aggression toward independent contractor misclassification.
In a news release this month, the DOL announced that it had obtained a consent judgment for $5.6 million against a national auto parts distributor and an Arizona logistics firm for allegedly misclassifying 1,398 drivers as independent contractors. The award included back wages and liquidated damages.
The DOL had alleged that, by misclassifying the drivers, the companies failed to meet minimum wage requirements, failed to pay overtime rates, and failed to keep required timekeeping records. These failures each were violations of the Fair Labor Standards Act (FLSA).
The award covered an eight-year period between April 2012 and March 2020.
I see three takeaways here:
First, the DOL is being aggressive in filing lawsuits when it thinks independent contractors have been misclassified. This consent judgment shows how expensive these claims can be for companies that improperly classify workers. Companies using independent contractors needs to be proactive in evaluating their risks and taking steps to minimize those risks. There are lots of ways to reduce risk if you plan ahead, before you’ve been sued or investigated.
Second, this case is a reminder that companies who classify delivery drivers as independent contractors are at heightened risk. Federal and state agencies and the plaintiffs’ bar seem to be filing a disproportionate number of claims involving delivery drivers. If your business uses delivery drivers who are classified as independent contractors, you may be at an increased risk of an audit or lawsuit.
Third, remember the DOL’s proposed new rule for independent contractor classification under the FLSA? (Read more here, here, and here.) The DOL wants to change the current test for who is an employee under the FLSA, replacing a regulation adopted by the Trump Administration in 2020. But cases like this one show that the current regulation is not impairing the DOL’s ability to enforce what it perceives as misclassification. The DOL’s many recent successes — as posted in DOL news releases — show that the DOL is doing just fine under the current rule when it comes to misclassification enforcement. The new rule is a solution without a problem.
Large judgments like this one seem shocking, but they are a reminder of the substantial dangers of misclassification.
Learn more by joining me at the 10th Annual 2023 BakerHostetler Labor Relations and Employment Law Master Class, all virtual, one hour every Tuesday starting February 7, 2023. My program on Contingent Workforce issues will be on March 7, 2023. Registration is free.
An author of romance novels died in 2020, committing suicide after online bullying. Or so it seemed. But a few days ago, Susan Meachen posted on Facebook to say she was back. Not in a risen-from-the-grave sort of way. She says she faked her own death and is very much alive. The story has been covered by CNN and BBC, and I don’t know whether anyone has yet figured out whether Meachen died or someone is now posting under her name.
One thing that seems more clearly dead, though, is the legal principle of agency deference in Ohio. This important decision arose out of a contractor dispute.
In a 7-0 decision, the Ohio Supreme Court ruled that under Ohio law, the judiciary is never [italics in original] required to defer to an administrative agency’s interpretation of the law, even if the statute is ambiguous. Only the judiciary has the authority to interpret the law for purposes of a judicial proceeding.
The Court held that an agency’s interpretation of the law is merely one view that a court may consider. The Court also stressed that an agency’s interpretation of common words is entirely irrelevant since courts are well equipped to interpret common words. Deference to an agency’s interpretation will depend on how persuasive a court finds the agency’s interpretation to be. A court might be more likely to defer if there is an ambiguity over a technical matter over which the agency has expertise, but even then, deference is never required.
The judicial branch is never required to defer to an agency’s interpretation of the law. As we explain, an agency interpretation is simply one consideration a court may sometimes take into account in rendering the court’s own independent judgment as to what the law is.
First, it is never mandatory for a court to defer to the judgment of an administrative agency. Under our system of separation of powers, it is not appropriate for a court to turn over its interpretative authority to an administrative agency..
Now assume that a court does find ambiguity and determines to consider an administrative interpretation along with other tools of interpretation. The weight, if any, the court assigns to the administrative interpretation should depend on the persuasive power of the agency’s interpretation and not on the mere fact that it is being offered by an administrative agency. A court may find agency input informative; or the court may find the agency position unconvincing. What a court may not do is outsource the interpretive project to a coordinate branch of government.
The case arose when an engineering firm applied for an engineering license in Ohio. Seems uneventful, except the firm listed an independent contractor as its full-time manager. Ohio law requires a firm to identify a responsible full-time manager to receive a license. The Ohio Board of Registration for Professional Engineers and Surveyors denied the license on the grounds that a full-time manager could not be an independent contractor. The Board said that a manager had to be a W2 employee.
But the statute requires only that there be a full-time manager. It doesn’t say who can be a manager. The Board determined that an independent contractor could not be a “full-time manager” because independent contractors (if properly classified) are not controlled by their client. In other words, how could the firm be managed by someone it cannot control?
That’s a great question from a practical standpoint. If the contractor is properly classified, it might be a terrible idea to designate an independent contractor as your firm’s full-time manager. But that doesn’t mean it’s prohibited by the licensing statute.
The Ohio Supreme Court explained that the statute requires the Board (“shall”) to grant a license when a firm identifies a full-time manager and meets the other criteria. The Court ruled that the Board, as an administrative agency, has no right to impose additional requirements that are not in the statute, such as that the full-time manager cannot be an independent contractor.
The Court used this dispute to lay down a marker on an important issue of law — When must a court defer to an agency’s interpretation of the law? In Ohio, the answer is never.
This issue comes up often at the federal level too, and you’ll hear a lot more about this issue following the recent announcement by the Federal Trade Commission (FTC) that it plans to pass a regulation making non-compete agreements illegal. The FTC probably does not have the legal authority to do that. A law to prohibit non-competes would almost definitely have to come from the legislature, not an executive agency. If the FTC goes through with its plan, the issue is likely to end up in front of a federal court, which is likely to rule that the FTC does not have this authority. The US Supreme Court’s conservative majority has sent signals that it will be less inclined to defer to agencies than in the past, and it would not be surprising to see the US Supreme Court issue a ruling at some point that looks a lot like this Ohio decision.
The bottom line here is that the era of agencies making new law through regulation may be coming to an end. Agencies can interpret ambiguities in statutes, and they can provide more detail about legal requirements when authorized to do so. But they cannot impose new requirements when not specifically authorized to do so. The path taken by the Ohio Supreme Court may be a sign of similar things to come at the federal level.
In terms of typical independent contractor issues, this post is a bit off topic. But the issue is an important one, and it arose out of a contractor dispute, so I just decided to just go for it and write this post, whether it’s what you were expecting or not.
Kind of like Susan Meachen did recently when she posted on Facebook. Or didn’t post. We still don’t really know.
In Denbighshire, Wales, the Howatson family lives in a small house that sits… wait for it… in the middle of a roundabout.
In the early 1980s, after the family had been in the house for 20 years, local authorities told them their property sat smack in the middle of where a roundabout was to be built. The family refused to sell, and they now have lovely 360-degree views of people driving around their house all day and night.
The Department of Labor is taking is a more direct approach in its effort to update the worker classification test under the Fair Labor Standards Act. But it’s a slow process, and it will be several more months before we see a final rule.
But this post will provide a status update. Long story short, we’ll see a new rule when the DOL gets around to it.
In October 2022, the DOL released its proposed new test for determining who is an employee under the Fair Labor Standards Act (FLSA). The proposed rule generated more than 50,000 comments in response. I posted some initial reactions to the proposed rule in this article here.
The proposed rule identifies seven factors to consider when determining whether an independent contractor has been misclassified under the FLSA:
1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and the employer;
3. Degree of permanence of the work relationship;
4. Nature and degree of control;
5. Extent to which the work performed is an integral part of the employer’s business;
6. Skill and initiative; and
7. Additional factors.
Under federal law, the rulemaking process involves three main steps. First, the agency posts a proposed new regulation. That’s what the DOL did in October.
Second, there is a public comment period, in which anyone can submit a comment to the DOL. The most effective comments tend to assist the agency in evaluating its proposed rule, such as explaining likely unintended consequences or identifying concerns with how it is written. Comments can also offer legal arguments as to why the agency’s proposed rule is not consistent with the law it is supposed to be interpreting.
Finally, after reviewing the comments, the agency will publish a final rule. The final rule might differ from the proposed rule, or it could be the same. Or the agency can jettison the proposed rule entirely and do nothing. Here that last option is unlikely. The DOL will almost certainly issue a new rule.
On December 13, I submitted a lengthy comment on behalf of Flex, the trade organization representing app-based rideshare and delivery platforms. The full comment is available here, and I thought it might be helpful to summarize the main points for this audience.
The comment included two parts.
Part One argues that the DOL should not abandon the current rule (the 2021 Rule), which was passed less than two years ago. The 2021 Rule was adopted after a thorough rulemaking process and comment period, and the rule was developed based on a detailed analysis by the DOL of decades of case law. The 2021 Rule focused on two core factors, rather than offering a multitude of factors that have no pre-assigned weight. The 2021 Rule offered more predictability for businesses and contractors, and predictability in the law is — to put it bluntly — good. A regulation should add clarity, and the 2021 Rule added clarity.
Part One also pointed out that the 2021 Rule had done little to damper the DOL’s efforts at combatting misclassification. The DOL has published a long list of successes in obtaining settlements and judgments in the last three months alone.
Abandoning the 2021 Rule would also be arbitrary and capricious, meaning it might not survive a legal challenge, and we urged the DOL not to make a change.
Part Two argues that even if the DOL decides to abandon the 2021 Rule, the proposed new rule needs some work. Part Two focused on seven aspects of the proposed new rule that the DOL should change.
The key thing to remember is that the DOL wants to go back to a multi-factor test. Multi-factor tests have been around for a long time, but the devil here is in the details. If you read the DOL’s description of each factor and how it should be applied, the DOL is putting its fingers on the scale, taking every close call (and some that aren’t close) and resolving them in favor of employee status.
I will list the seven arguments below to provide a general sense of the key points. But, since this is supposed to be a quick read format, I’m not going to wade into the details. You can read the full comment if you like.
From the Table of Contents to Part Two:
1) In Factor #1, the Commentary about “Managerial Skill” Should Be Deleted or Revised Because It Fails to Account for the Realities of 21st Century Work.
2) Factor #2 Should Be Substantially Revised to Remove Provisions That Are Illogical, Incompatible with Economic Realities, and Contrary to FLSA Case Law.
3) Factor #4 Should Remove the Commentary That Legally Required Control May Be Relevant Evidence of Control Because This Commentary Is Contrary to Controlling Case Law, Contrary to this Department’s Own Guidance, and Not Probative of the Economic Realities of a Relationship.
4) In Factor #4, Use of Technology to Supervise Should Not Be Referenced as a Relevant Control Factor.
5) Factor #5 Should Preserve the Current “Integrated Unit of Production” Analysis and Should Not Adopt a Flawed “Integral Part” Analysis That is Contrary to Case Law and Legally Unsupported.
6) Any Final Rule Should Preserve the Helpful Subregulatory Guidance in Fact Sheet #13, Clarifying That Certain Factors Are Not Relevant.
7) Any Final Rule Should Replace the Term “Employer” with “Principal” or a Similarly Neutral Term.
And now onto Step Three of the DOL’s rulemaking process. Last week, the Biden Administration published its overall regulatory agenda for 2023. It included a May 2023 placeholder for a proposed final rule. That’s just a best guess at this point, and with more than 50,000 comments for the DOL to review, the actual release date may be several months later. But the DOL, at least at present, appears prepared to move forward with a new rule to determine independent contractor vs. employee status under the FLSA.
We’ll continue to monitor developments, in a roundabout way.
A chess-playing robot took enforcement a bit too seriously at a recent tournament in Moscow. Facing a 9-year old human opponent, the robot grabbed and broke the boy’s index finger when the boy reached toward the board when it was the robot’s turn to move. When you’re a robot, rules are rules.
The robot had been in use for 15 years (and the boy had been in use only 9). Neither robot nor boy had any known history of delinquency, but this sounds like a textbook case of bullying. And there’s video!
In an unrelated matter, New York Governor Kathy Hochul was not going to be bullied by the state legislature into signing a recently passed bill that would have imposed new requirements on the use of individual independent contractors.
Hochul vetoed the proposed Freelance Isn’t Free Act on the grounds that it imposed inappropriate burdens on the NY State Department of Labor. In her veto statement, she wrote that the state DOL “could not implement the legislation effectively” because it required the DOL to oversee private contracts between businesses and non-employees. That’s well outside the DOL’s mission of enforcing labor protections for employees.
The law would have required written contracts with individual freelancers, with various types of mandatory disclosures in each contract.
The proposed law was a statewide version of New York City’s Freelance Isn’t Free Act, which NYC enacted in 2016. A summary of the NYC law is here. In 2017, the NYC Department of Consumer Affairs published an additional set of rules implementing the act and adding new restrictions that were not in the original law.
Because the 2022 legislative session has ended, the NY state assembly cannot override her veto, but the bill could be reintroduced in 2023.
If the assembly wants to try again, it might try another version that does not involve the DOL, since this is not a misclassification bill and is not a matter between employers and employees. For the bill to be effective, it would need a suitable yet aggressive enforcer of the new rules.
I know of a chess-playing robot in Moscow that might be available.
If you google “what to watch for 2023,” you’ll mostly get tips on soon-to-be-released movies and streaming video shows. You’ll get grammatically impossible generic hype like “movies we can’t wait to see” (except the whole point is that you have to wait to see them) and you’ll get grammatically impossible niche hype like “The most anticipated Korean dramas and movies we can’t wait to watch in 2023.”
We won’t peddle hype in this post, and you’ll literally have to wait for all of the things addressed below. But here are five important developments to watch for in 2023.
1. The test for Independent Contractor vs. Employee is likely to change, at least under the Fair Labor Standards Act (FLSA). The Department of Labor proposed a new multi-factor test, and the period for public comment ended December 13. The DOL is likely to roll out a new test in 2023. It will replace the current core factors test described here.
2. The test for Joint Employment is likely to change, at least under the National Labor Relations Act (NLRA). In September, the NLRB proposed a new test for determining when joint employment exists under the NLRA. You can read more here. The public comment period has closed, and we can expect a new test sometime in 2023.
3. The NLRB is likely to rule that independent contractor misclassification, by itself, is an unfair labor practice. The NLRB General Counsel has expressed an intent to reverse the Velox Express decision from 2019, in which the Board ruled that misclassification was not an automatic ULP. More information is here. Now that the Board majority has switched from Republican to Democrat, expect a decision in 2023 that creates an automatic ULP when there’s a finding of worker misclassification.
4. Expect state legislatures to keep changing the tests for Independent Contractor vs. Employee. Some states will try to make it harder to maintain independent contractor status by passing ABC Tests, in either a standard or strict version. A few conservative states may go the other way and adopt the latest version of the Uniform Worker Classification Act proposed by ALEC. The law would create a safe harbor for independent contractor classification if certain requirements are followed, including having a written contract. Versions of this law have been passed in West Virginia and Louisiana. You can read more here. Expect Oklahoma to be next.
5. Expect significant rulings on California independent contractor law. Several important cases are pending. These include Olson v. State of California, which challenges the constitutionality of AB 5. Oral argument was held in the Ninth Circuit in July 2022. In another case, the California Court of Appeal is considering the legality of Prop 22, the successful ballot measure that helped to protect independent contractor status for rideshare and delivery drivers using app services. Oral argument in that case, Castellanos v. State of California, was held in December 2022.
The law regarding contingent workforce is constantly changing, and 2023 looks to be another year of significant transformation. As always, it will be a good idea to watch these new developments carefully, as they will likely have a significant impact on companies using independent contractors and other contingent workforce arrangements.
Who Is My Employee? 