08.22.22
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Can Independent Contractors Sue For Disability Discrimination?

On Sunday, I visited the American History Museum in Washington, where I came across this poster. Which I love. During World War II, Americans were encouraged to save their used cooking fat, which could be repurposed for manufacturing explosives. According to the University of Illinois, one pound of fat contained enough glycerin to make nearly a pound of explosives.

And that’s how bacon (sourced from a “wonderful, magical animal”?) helped win the war.

A different kind of battle continues to be fought over independent contractors’ rights. As we’ve discussed in many contexts, independent contractors lack many of the rights that employees have. That’s one of the reasons we see so many independent contractor misclassification claims.

One of the rights independent contractors lack is the right to be protected against disability discrimination—at least under federal law. In a recent case before the Sixth Circuit Court of Appeals, a nurse sued the hospital where she worked, alleging interference with her rights under the Americans with Disabilities Act (ADA). The nurse had been unable to work for several weeks after a head injury, and the hospital declined to re-credential her.

The problem for her, though, is that the hospital was not her employer, and so she didn’t have any rights under the ADA. (We can ignore the public accommodation sections of the ADA. They don’t apply here.)

The ADA allows workers to sue their employers for disability discrimination or for interference with their ADA rights. But a worker can’t sue a business that’s not the worker’s employer, even if the business takes action because of a disability.

The law has been clear for a long time that independent contractors cannot sue for disability discrimination under the ADA. This case was a bit different, though, because it dealt with the non-interference clause of the ADA, not the anti-discrimination clause. The court ruled that the same limitation applies to non-interference claims.

The plaintiff had another potential argument, and it was probably the better argument. But her lawyers never asserted it.

You see, the nurse was employed by a physicians’ group when she worked at the hospital. She first tried to sue the physicians’ group, but it went into bankruptcy, and the bankruptcy court disallowed her claim. She then sued the hospital where she performed the work. The hospital, not insignificantly, used to be her direct employer, but she had been rebadged as an employee of the physicians’ group three years earlier.

She probably should have argued that the hospital was her joint employer. But she didn’t. Because she never made the argument, the court didn’t conduct a joint employment analysis, and so we don’t know if the facts could have supported a finding of joint employment. But at least she might have had a viable argument. Maybe. But without any employment relationship, she had no argument and no chance to win. And that’s why the district court dismissed her claim and the Court of Appeals affirmed the dismissal.

There are two takeaways here.

First, independent contractors have far fewer rights than employees. Federal anti-discrimination laws protect employees, not independent contractors. Some state anti-discrimination laws protect independent contractors, but the ADA does not.

Second, when a worker is employed by a vendor or subcontractor, the real danger is joint employment. Your business can be held liable as a joint employer for misdeeds of the direct employer. The dangers of joint employment are even greater when the direct employer goes bankrupt. The whole purpose of joint employment is to make sure there is someone who can make the employee whole for any damages suffered. If your business is a joint employer, it doesn’t matter if you were primarily responsible for the wrong or not. Joint employment means both employers are fully liable for the loss.

You might be saying, hey, wait a minute. If she couldn’t work, how was that an ADA violation? We don’t know if her underlying claim had any legs or not. That’s not the point here. The point is that the court never got into the merits of the claim because it didn’t have to. The hospital had a complete defense. No employment relationship, no claim.

This case serves as a reminder of how important it is to be careful with non-employment relationships. Just like you would have been careful with your bacon grease, back in the 1940s.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.15.22
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Garbage Bird? Don’t Get Poisoned By A Double Hit of Misclassification and Joint Employment

Photo: Benjamin Freeman/Wikimedia Commons (CC BY 4.0)

The natives of Papua New Guinea call the hooded pitohui a “garbage bird,” and they don’t eat it or touch it. As Westerners learned more recently, there’s a good reason for the islanders’ hostility.

The hooded pitohui is the first bird confirmed to be poisonous. The bird‘s feathers emit batrachotoxins, which causes numbness and burning in low concentrations. A heavier does can cause paralysis, cardiac arrest and death. In other words, there’s good reason for keeping the hooded pitohui off the menu.

Numbness and burning may also describe the impact of a recent DOL enforcement action on two contractors in Louisiana. They were dealt a double hit—the DOL found independent contractor misclassification and joint employment.

After an investigation, the DOL’s Wage and Hour Division found that hundreds of painters and drywall workers had been misclassified as independent contractors. The company that retained the workers, PL Construction, failed to pay overtime and failed to maintain accurate time records, both violations of the Fair Labor Standards Act (FLSA).

Adding to the pain, the DOL found that a higher tier contractor, Lanehart, was the workers’ joint employer. That meant Lanehart was jointly liable for the violations—even though it had no control over PL Construction’s pay practices.

The DOL recovered more than $240,000 in overtime back wages for 306 workers.

There are several lessons here, both for companies that retain independent contractors directly and for higher tier contractors that engage subcontractors that use ICs.

1. The DOL considers independent contractor misclassification an enforcement priority. The agency is actively looking for violations.

2. The DOL publishes its wins. That means you can expect a press release naming and shaming your company if the DOL finds that there’s a practice of misclassifying workers. Have you heard the old adage that there’s no such thing as bad publicity? It’s not true.

3. Higher tier contractors are taking a risk if they put their head in the sand and disregard misclassification by their lower tier subs—especially if they plan to direct the work of the lower tier sub’s workers.

Here, the DOL found that Lanehart, the higher tier contractor, supervised PL’s workers and maintained records of who worked when. Lanehart’s supervision and direction made it a joint employer of PL’s workers. Under the FLSA, a joint employer is fully liable for wage and hour violations, even where it had no control over how the lower tier sub paid its workers.

4. A lawsuit is not the only way misclassification claims arise. Federal and state agencies can initiate investigations too. And while arbitration agreements with class action waivers can prevent class action litigation, they can’t stop a federal agency from pursuing claims on its own.

The DOL made its position pretty clear in its press release: “Our investigation shows the costly consequences employers face when they or their subcontractors fail to comply with the law. When we determine a joint employment relationship exists, the Wage and Hour Division will hold all responsible employers accountable for the violations.”

Misclassification hurts. Joint employment doubles the pain. The DOL can inflict an uncomfortable burning sensation, even without sending a a hooded pitohui your way.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.08.22
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Smackdown, Live!: Joint Employer Test Must Consider ‘Reserved or Indirect Control,’ D.C. Circuit Rules

Picture Source: nypl.org

In 2009, the James Brown compilation album The Godfather’s Smackdown, Live! was released. It’s a two-disc compilation of live shows from 1980. I never saw James Brown live, but I did see James Brown’s Celebrity Hot Tub.

The D.C. Circuit Court of Appeals issued a different kind of smackdown, chastising the National Labor Relations Board (NLRB) for ignoring the Circuit Court’s earlier directive about the joint employer test. Believe it or not, this case is another chapter in the ongoing Browning-Ferris saga.

Click here to read the rest, originally posted on the BakerHostetler Employment Law Spotlight blog.

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Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment.

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08.01.22
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Summer of Fun? FTC Announces Plans to Crack Down on Gig Economy

Zippy at her first reggae concert

In my house, we have declared this to be the Summer of Fun, and we’ve committed to going to events around Cleveland that we haven’t tried before. Sometimes the dog gets to come too. Last month, we took Zippy to her first reggae concert. You can tell she enjoyed it because she’s smiling. (Or she’s thirsty. Still not sure.)

No concert t-shirt for Zippy though. They had suitably small sizes but nothing with four arm holes.

The Federal Trade Commission is also trying new things this summer. In a July press release, the FTC announced that one of its new initiatives is a crackdown on gig economy abuses.

The FTC can’t bring independent contractor misclassification cases, but it can bring enforcement actions when it believes there have been unfair or deceptive business practices that disadvantage gig workers.

The FTC announced that “the agency will continue to take action to stop deceptive and unfair acts and practices aimed at workers; particularly those in the ‘gig economy’ who often don’t enjoy the full protections of traditional employment relationships.” The press release then listed several examples of enforcement actions the FTC has been pursuing against gig economy companies. The cases tend to involve deceptive claims about earning opportunities, including for gig workers who use their platforms.

The FTC further announced that it’s teaming up with the NLRB to share information about alleged wrongdoers in the gig space. We already know that the NLRB’s General Counsel is on a mission to crack down on independent contractor business models. The decisions by the NLRB and FTC to join forces only heightens the risks for companies using an independent contractor business model.

Business using an independent contractor model need to remember that misclassification claims are not the only legal risk. Be sure that representations made to independent contractors about potential earning opportunities and other business practices are accurate and realistic.

Otherwise, despite it being the Summer of Fun, with reggae concerts and other goodness, the FTC may soon be on your doorstep, ready to Stir It Up.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.25.22
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Yes, This Applies to You: Why Non-Union Employers Should Be Concerned with the NLRB’s View On Worker Misclassification

Good news for old passengers traveling to New York!

The caption above may be too small to read, but it’s from a recent New York Times article about updates to the airport. The caption says, “An old passenger walkway in the process of being demolished at La Guardia Airport.”

You might not think this applies to you, but I say it’s about time! The idea of a walkway for old passengers doesn’t seem right, and old passengers should be allowed to use the same walkway as everyone else.

Another area where I sometimes hear “this doesn’t apply to me” is when we talk about the National Labor Relations Board’s views on independent contractor misclassification. But even if your business is union-free (meaning no union, not that the union is complimentary), the NLRB’s position on independent contractor misclassification matters. (Also, how is it that we intuitively know caffeine free means there’s no caffeine, rather than there’s lots of it and there’s no extra charge?)

The NLRB wants to make it harder to maintain independent contractor status under the National Labor Relations Act (NLRA).

Here are four reasons your non-union business should care about the NLRB’s views on independent contractor misclassification:

  1. The NLRB’s General Counsel has issued a policy memo indicated that she intends to have independent contractor misclassification declared to be an automatic unfair labor practice (ULP). This spring, the Board issued a complaint in a case that may help it achieve this policy goal. If misclassification becomes an automatic ULP, that would overturn the Board’s 2019 decision in Velox Express, when the Board said it was reasonable for a company to express its opinion that a worker was a contractor, not an employee, even if the company turned out to be wrong.
  2. If the NLRB rules that your contractors are employees, you can hang up a welcome shingle for your favorite union. (Aside: I don’t think anyone would welcome shingles, but you can buy welcome shingles on amazon.) Such a ruling would empower the unions to try to organize your newly-declared employees. If some independent contractors were already feeling mistreated enough to seek employee status, they’ll likely welcome union representation to help them fight back against The Man.
  3. The protections granted to employees under the NLRA apply to non-union employees too. But the NLRA doesn’t apply to independent contractors. Non-union employees have the right to engage in protected, concerted activity without fear of retaliation or reprisal. Contractors don’t. Protected, concerted activity can include more than you might think. Any time two employees get together to object to a business practice, that’s potentially protected, concerted activity. If two contractors jointly complain, the NLRA doesn’t apply.
  4. The NLRB has an information sharing agreement with the Department of Labor (DOL). If the NLRB thinks your contractors are misclassified, they’re probably gonna tell on you. The DOL may then starts its own investigation, viewing your company as an easy target for misclassification, even though the tests for employee status are different under the NLRA and the federal wage and hour laws administered by the DOL.

Like La Guardia, the NLRB is trying to do a little remodeling, but the NLRB’s remodeling is not for the benefit of old passengers. Instead, the Board is trying to make it harder to classify a worker as an independent contractor. The Board also wants to declare worker misclassification to be an automatic ULP.

Whether your workforce is union or non-union, businesses should pay attention. This is a rebuild that’s worth watching.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.18.22
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Watch Your Back, AB 5! Ninth Circuit Case Could Wipe Out California’s ABC Test

Yes, that’s a goat on my back.

This weekend we tried goat yoga. Highly recommended. It was a mix of basic yoga (my kind of yoga) to help get me stretched out, but held in a pen with goats who know no boundaries.

We then toured the farm, which featured llamas, long-haired pigs, guinea hens, a few obligatory dogs, and several varieties of goats, including the kind of fainting goats featured in that George Clooney movie.

Having to watch my back during yoga was something I signed up for and was part of the fun. Not so for California’s AB 5, which should be watching its back after what we saw at the Ninth Circuit last week.

The Ninth Circuit held oral argument in a case brought by Uber called Olson v State of California. Uber is arguing that AB 5 is unconstitutional.

While it’s hard to predict cases based on oral argument, the three judges on the panel seemed pretty sympathetic to Uber’s argument, which is that the statute arbitrarily picks winners and losers, i.e., the exemptions make no sense from an equal protection/due process standpoint.

Unlike the strict ABC Test in Massachusetts, the California ABC Test codified in AB 5 (and later AB 2257) contains loads of exceptions. The statute says to use the ABC Test to determine employee vs independent contractor status for all workers — except for dozens of categories of workers and various other situations.

Let’s not pretend. We all know this bill was written to target ride share and delivery app companies. The unfairness of making this law apply to everyone soon became apparent and led to the insertion of dozens of exceptions. If an exception applies, the Borello balancing test applies instead of the ABC Test.

The exceptions just about swallow the rule, and a law targeting a handful of companies presents constitutional problems. Or so the argument goes.

We can expect a decision in the next few months, and this is one to watch. Unlike me at goat yoga, imagining a decision that strikes down or severely limits AB 5 is not a big stretch.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.18.22
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Watch Your Back, AB 5! Ninth Circuit Case Could Wipe Out California’s ABC Test

Yes, that’s a goat on my back.

This weekend we tried goat yoga. Highly recommended. It was a mix of basic yoga (my kind of yoga) to help get me stretched out, but held in a pen with goats who know no boundaries.

We then toured the farm, which featured llamas, long-haired pigs, guinea hens, a few obligatory dogs, and several varieties of goats, including the kind of fainting goats featured in that George Clooney movie.

Having to watch my back during yoga was something I signed up for and was part of the fun. Not so for California’s AB 5, which should be watching its back after what we saw at the Ninth Circuit last week.

The Ninth Circuit held oral argument in a case brought by Uber called Olson v State of California. Uber is arguing that AB 5 is unconstitutional.

While it’s hard to predict cases based on oral argument, the three judges on the panel seemed pretty sympathetic to Uber’s argument, which is that the statute arbitrarily picks winners and losers, i.e., the exemptions make no sense from an equal protection/due process standpoint.

Unlike the strict ABC Test in Massachusetts, the California ABC Test codified in AB 5 (and later AB 2257) contains loads of exceptions. The statute says to use the ABC Test to determine employee vs independent contractor status for all workers — except for dozens of categories of workers and other situations.

Let’s not pretend. We all know this bill was written to target ride share and delivery app companies. The unfairness of making this law apply to everyone soon became apparent and led to the insertion of dozens of exceptions. If an exception applies, the Borello balancing test applies instead of the ABC Test.

The exceptions just about swallow the rule, and a law targeting a handful of companies presents constitutional problems. Or so the argument goes.

We can expect a decision in the next few months, and this is one to watch. Unlike me at goat yoga, imagining a decision that strikes down or severely limits AB 5 is not a big stretch.

AB 5, watch your back.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.11.22
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Dead End for Class Certification? Ninth Circuit Provides Roadmap for Defending Independent Contractor Misclassification Class Claims

For businesses using independent contractor vendors, misclassification claims are usually well-suited for class certification. A plaintiff’s path toward certifying a class can be relatively smooth when all vendors of a particular kind are treated as contractors. The argument goes that if one is misclassified, all are misclassified.

But a new Ninth Circuit ruling may help businesses change the path toward class certification into a dead-end road.

Click here to read the rest of the post, originally published on BakerHostetler’s Employment Class Action Blog.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.05.22
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Hear This: Ballot Measure to Limit Mass. ABC Test is Blocked

Have you heard? There’s a baby goat in Pakistan who may have set the world record for Longest Ears by a Goat. The ears are each 1.6 feet long. Which also means there’s category for Longest Ears by a Goat.

The goat, named Simba, reportedly trips on its ears, which are so long that they drag on the ground. That’s a problem, I hear.

I’m also hearing of a problem in Massachusetts, but it’s of a different sort entirely.

Efforts to add exceptions to Massachusetts’ ABC Test for independent contractor misclassification have been scuttled by the state’s Supreme Judicial Court. A ballot measure modeled after California’s Prop 22* would have created exemptions to support independent contractor status for app-based rideshare and delivery drivers. The Court, however, ruled that the proposed ballot measure covered too many subjects and could not lawfully be placed on the ballot.

What does all this mean?

As many of you know, Massachusetts has the toughest test in the nation when it comes to classifying independent contractors. Under Massachusetts wage and hour law, a worker is deemed an employee unless —

A) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and

B) the service is performed outside the usual course of the business of the employer; and,

C) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

That’s a strict ABC Test, like California’s. But California’s ABC Test has a slew of exceptions, memorialized in AB 2257, formerly AB 5. The Massachusetts Independent Contractor Law has no exceptions, which makes Massachusetts a favorite venue for plaintiffs’ lawyers who like to bring misclassification cases.

With the ballot measure struck down, voters will not have an opportunity to pass a Prop 22-like bill in Massachusetts that would have allowed app-based rideshare and delivery drivers to maintain independent contractor status, so long as certain requirements were met.

States with ABC Tests continue to pose significant compliance risks for businesses that rely on independent contractors. It’s easy to trip and fall, regardless of the size of one’s goat ears.

*California’s Prop 22 is in limbo too. As explained here, a state court ruled the ballot measure unconstitutional. The issue is now on appeal.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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06.27.22
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Strap Yourself In: NLRB’s Joint Employer Rule is About to Change Again

Strap yourself in. It’s going to be a bumpy ride.

I drove behind this band of safety-conscious paddle boarders near Chicago recently. The guy in back is secured in by bungy cord. At least he looks comfortable.

The NLRB is about to make things a lot more uncomfortable for businesses concerned about joint employment.

As discussed here, the NLRB made clear earlier this year that it wants to revamp the independent contractor vs. employee test under the National Labor Relations Act.

Expect a new rule on joint employment to drop any day. The NLRB indicated several months ago that the joint employment rule was a target in its rulemaking agenda, and the expected release date is July 00, 2022.

Like most of you, I switched from the Julian calendar to the Gregorian calendar in 1752. While the changeover caused 11 days in September 1752 to be lost, I missed the memo about inserting a 0th day in July, starting 270 years later. Since I could find no way to mark the expected release date in my iPhone, I’ll give the NRLB the benefit of doubt and assume the date is a placeholder for “sometime in July.”

On Friday, it will be “sometime in July.” So get your bungy cord ready. You may need to take steps to better protect your business against joint employment risks.

The new rule will displace the current Trump-era regulation, which currently requires direct and substantial control over essential terms and conditions of employment before joint employment can be found.

Expect the new rule to track the Browning-Ferris standard imposed by the Board in 2015. Under Browning-Ferris, when one company has the right to control aspects of the work, joint employment exists — regardless of whether control is actually exerted, and regardless of whether the control is over wages, hours, scheduling or anything else that fits within the meaning of essential terms and conditions.

Joint employment under the NLRA can have several effects:

1. It can force you to the bargaining table for matters involving workers you did not consider to be your employees.

2. It can open the door to bargaining units that include workers you didn’t think were your employees.

3. It can open another door to bring union organizing activity into your business – through non-employee workers.

4. It can convert illegal secondary picketing into lawful primary picketing. If another company’s employees picket your site but the workers turn out to be your joint employees, they have the right to be there.

5. Each business that is a joint employer may be found jointly and severally liable for the other’s unfair labor practices.

When the new rule is posted, we’ll discuss what employers should do in response. Until then, enjoy the summer and try paddle boarding. But try to use a car with enough seats.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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