California Businesses May Need Emotional Support Clown When New Independent Contractor Law Takes Effect

Emotional support clown independent contractor misclassification

An Auckland, New Zealand man sensed he was about to fired from his job in the ad industry. His employer scheduled a meeting and said he could bring someone with him for emotional support.

He brought a clown.

As the employer provided the man with his separation papers, the clown made balloon animals — a poodle and a unicorn — to try to lighten the mood. The clown also mimed crying as the employer explained the termination.

Afterward, the man described the performance of his emotional support clown as “overall supportive” but “sort of noisy.”

California businesses may want to hire their own emotional support clowns as they try to decide how to respond to Assembly Bill 5 (AB 5), which has passed both houses and now awaits Governor Newsom’s signature to become law.

AB 5 makes it harder to classify workers in California as independent contractors.  Once it takes effect, it will instantly convert many thousands of independent contractors into employees.

Here’s how. AB 5 codifies the ABC Test invented by the California Supreme Court in the Dynamex case and then extends it.  In April 2018, the California Supreme Court ruled that a strict ABC Test would be used for determining whether someone is an independent contractor or an employee under California’s Industrial Wage Orders, which cover minimum wage, overtime, meal and rest breaks, and a few other wage-related subjects.

Under AB 5, the Dynamex ABC Test will also be used to determine whether someone is an employee under all portions of the California Labor Code and the Unemployment Insurance Code.  That means independent contractors in California will be presumed to be employees of the entity for which they perform services under these laws, unless the business can prove all three of the ABC Test factors below:

A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

B) The person performs work that is outside the usual course of the hiring entity’s business; and

C) The person is customarily engaged in in independently established trade, occupation or business of the same nature as that involved in the work performed.

As discussed here, Part B of the test is the hardest to meet.

Unless all three factors of the test are satisfied, the workers will be considered employees under California law, and all of the following state law requirements will apply:

  • Minimum wage
  • Overtime, if not exempt, including daily overtime
  • Meal and rest breaks
  • Reimbursement of expenses
  • Paid sick leave
  • Paid family leave
  • Various notice, poster, and wage statement requirements
  • Timekeeping record requirements
  • Unemployment coverage
  • Workers compensation coverage
  • Paycheck timing requirements
  • On-call, call-back, and standby pay requirements
  • Travel time payment requirements
  • Final paycheck requirements
  • Commission rules

This is not intended to be a complete list of all California laws that apply to employees, but these are some of the most likely areas where businesses would find themselves to be in a state of noncompliance if their independent contractors are deemed to be employees under AB 5.

There are a number of exemptions to the bill, but they are narrowly crafted.  Barbers and estheticians, for example, are not affected.

If signed, the law will take effect January 1, 2020, although some provisions may be applied retroactively.

This bad news leads to the obvious question you astute readers will ask: So what are my options if I use independent contractors in California?

I am putting the finishing touches on The Playbook: Now That California Has Passed AB 5, What Are the Options for Businesses Using Independent Contractors?

The Playbook will be available at no cost and will be released as a BakerHostetler Client Alert. I will post a link here, once it is available.

In the meantime, let me know if you’d like more information about how AB 5 might affect your business. If you can’t reach me, I’m probably on the phone, trying to hire my own emotional support clown.

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

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

Do Over for California’s ABC Test? Retroactivity Issue is Headed Back to the State Supreme Court

Independent contractor ABC Test cow

“Placido Domingo’s pretty great, but I also love Pavarotti.”

In Hampshire, England, there is a veterinarian who sings opera to cows.

Now if your spidey-sense is as tingly as mine, you’ll immediately realize there is something wrong with this picture. It’s obvious, right? It should be an opera singer who sings opera to cows, not a veterinarian. Vet school does not include the proper classical training.

While this Hampshire vet has apparently not realized he is out of his lane, the Ninth Circuit Court of Appeals last week did acknowledge it was operating out of its lane in a major case involving independent contractors. The Ninth Circuit is withdrawing a major decision it released in May 2019 and sending that issue to the California Supreme Court instead.

In May, we wrote about the ruling by the federal Ninth Circuit Court of Appeals that’s being withdrawn. In that case, the Ninth Circuit ruled that California’s ABC Test (the Dynamex Test) for deciding the Independent Contractor vs. Employee question would apply retroactively. (You can read my seething critique of that ruling, Vazquez v. Jan-Pro, here.)

The Dynamex decision is the one in which the California Supreme Court made up an ABC Test as the new standard for determining whether someone is a contractor or an employee under California’s wage and hour laws (claims of overtime, minimum wage, meal and rest breaks, etc.). The ramifications are enormous for California businesses.

Now back to the May 2019 Vazquez ruling. In that case, the Ninth Circuit ruled that California businesses should have been applying the ABC Test that was made up in Dynamex, even though that test did not yet exist. Seems pretty unfair, doesn’t it? Very unfair.

Last week, the Ninth Circuit withdrew its ruling in the May 2019 Vazquez case. This is half good news, not all good news.

The Ninth Circuit didn’t concded that its May 2019 decision was wrong (even though it was, heh heh). Rather, the Ninth Circuit decided that — like a veterinarian singing opera to cows — it had been operating out of its lane. The Ninth Circuit now says that the California Supreme Court — not the federal Ninth Circuit Court of Appeals  —  should be the one to decide whether the ABC Test applies retroactively.

The California Supreme Court case is definitely one to watch. Industry groups from around the country are likely to weigh in. Many will file amicus briefs (non-party “friend of the court” memos) to try to persuade the court that retroactivity would be unfair and would have significant negative effects on California businesses and the state’s economy.

For now, the question of whether the Dynamex ABC Test applies retroactively is again unresolved. That means there is a period of a few years extending back from April 2018 in which nobody knows what the test is for determining whether someone was then an employee or an independent contractor under California’s wage and hour laws.

That’s important because the are a lot of lawsuits alleging that independent contractors are misclassified. Some have been decided, some have not. Could some cases that were already decided be reopened?

We’ll keep an eye on this case as it makes its way through the California Supreme Court. We’ll also be watching for new developments among bovine opera aficionados. I want to know whether the cows think this veterinarian singer is any good.

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

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

Opinion Piece Asks California Not to Be the Pigeon in this Photo

Pigeon head Tuileries - independent contractor misclassification Todd LebowitzI took this picture last week in Paris, walking through the Jardin des Tuileries with my family, just outside the Louvre.  

If you think of the statue as being ride-share giants Uber and Lyft, and if you think of the California state legislature as the pigeon, you’ll know why Uber and Lyft’s chief executives joined forces to write this opinion piece in the San Francisco Chronicle.  

As we explained here, California seems likely to pass a bill that would rewrite California law in a way that will instantly convert many — perhaps most — independent contractors into employees.  The bill would take the ABC Test created last year in the Dynamex case and apply it to the entire California Labor Code, as well as to state unemployment law. (Currently, the ABC Test applies only to state wage and hour claims, and a more neutral balancing test applies to other state law claims.)

The law, if passed, would undoubtedly fuel new claims against Uber and Lyft, alleging that ride-share drivers are employees under state law.

In the opinion piece, the companies argue in favor of legal reform, but in a way that does not threaten to change drivers into employees.

The Uber-Lyft proposal would secure three new types of protections for ride-share drivers, while safeguarding their status as independent contractors. The proposal would:

  1. Set up a portable benefits system for gig workers, including retirement savings accounts, paid time off, and lifelong learning opportunities;
  2. Create a drivers’ association, in partnership with state lawmakers and labor groups, to represent drivers’ interests and administer benefits; and
  3. Establish a new driver pay system that includes greater earnings transparency for the work performed between accepting a ride and dropping off a passenger after accounting for reasonable expenses.

So why can’t Uber and Lyft just do these things on their own? Because if they did, the current legal system would likely treat those acts of goodwill as evidence that Uber and Lyft were treating the drivers as employees.

Current labor laws were not written with the gig economy in mind. The law right now is an all-or-nothing proposition — independent contractor or employee. The modern economy, though, requires a middle ground — an alternative that allows app companies to provide greater benefits and protections to drivers without running the risk that these well-meaning gestures could convert the drivers into employees.

Pigeons are going to poop on statues forever. Marble heads provide a comfortable spot for loosening the ol’ avian bowels, and we all know it’s hard to find a good public toilet these days. But some things should not be set in stone. Let’s hope the California assembly backs off of the fast track for A.B. 5 and instead tries something new. The system proposed in the joint Uber-Lyft opinion piece would help drivers and would help the gig economy continue to thrive. 

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

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

A New Low for California’s Independent Contractors? ABC Test May Be Adopted for the Whole Labor Code

Death valley for independent contractors - california dynamexCalifornia is the home of both the highest and the lowest points in the continental U.S. — Mt. Whitney at 14,495 feet and Death Valley at -282 feet. As far apart as these two sites are on the altimeter, they’re less than 100 miles apart on the odometer.

That’s a lot of up and down. If you follow California’s developing law on Independent Contractor vs. Employee tests, you’ve also seen a lot of ups and downs recently. If a pending bill passes (as expected), businesses using independent contractors may be about to experience a new low.

Remember the Dynamex case? As explained here, that’s the California Supreme Court decision that enacted a strict ABC Test for determining whether someone is an employee or an independent contractor under California’s wage orders. As we discussed here, though, the ABC Test only applies to certain state law employment claims. Other less stringent tests still apply when analyzing whether a contractor should really be considered an employee under other state employment laws.

But that may be about to change.

Assembly Bill 5 would adopt the Dynamex ABC Test as the way to determine whether someone is an employee under all parts of the California Labor Code and under state unemployment law.

In its current form, the law would exempt certain licensed professions from being subject to the ABC Test. Extensive lobbying efforts are underway by various trade associations to carve other trades out of the law as well. For those professions excluded from the law’s reach, the test for determining whether a contractor is really an employee would be the S.G. Borello balancing test, a much less stringent standard than the Dynamex ABC Test.

The bill is now pending before the state senate. If it passes, it will become even harder to be a legitimate independent contractor in California. The state with one of North America’s highest peaks will become a virtual Death Valley for contractors trying to maintain their independent status.

We’ll continue to follow the status of this bill.

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

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

Which Claims Are Covered by the Dynamex ABC Test? Here’s a Chart for California. (Time to Give Up on Positive Thinking?)

Chart Dynamex which claims does the ABC Test cover in California

Cook before eating?

A Mongolian couple died from the bubonic plague earlier this month after eating raw marmot meat. An official from the World Health Organization told the BBC that the couple ate the rodent because they believed it would bring them good health. It didn’t.

Positive thinking can be powerful, but not as powerful as bubonic plague.

California businesses that use independent contractors should be similarly cautious about any positive thinking. After a series of court decisions and a new opinion letter from the California Labor Commissioner, use of the Dynamex ABC Test for determining Independent Contractor vs. Employee is expanding.

Which claims now use the Dynamex test for determining Independent Contractor vs. Employee? Here’s the latest list — at least according to the California Labor Commissioner and my reading of recent court decisions:

Dynamex ABC Test applies:

  • Overtime;
  • Minimum wage;
  • Reporting time pay;
  • Record keeping (including itemized pay stub obligations);
  • Business expense reimbursement for cash shortages, breakage, or loss of equipment;
  • Business expense reimbursement for required uniforms, tools, and equipment; and
  • Meal and rest periods.

It depends:

To determine Independent Contractor vs. Employee for these claims, the Labor Commissioner and a California Court of Appeal instruct that the Dynamex ABC Test applies if the claim is focused on enforcing payment of minimum wage, overtime, and other obligations set forth in the Wage Orders. If not, then the ABC Test does not apply.

The general rule, according to the opinion letter, is that the Dynamex ABC Test applies to any claims that seek to enforce obligations described in one of the Industrial Wage Orders

The opinion letter does not carry the weight that a court decision does, and it makes some assumptions that the California Supreme Court did not make when it adopted the ABC Test in Dynamex. So there’s always a chance that the California Supreme Court might rule that the scope of the Dynamex test is supposed to be limited to a narrower range of claims. But this is California, so that does not seem likely. In other words, don’t sample that marmot meat.

Dynamex does not apply (we think):

  • Workers’ compensation claims;
  • Unemployment claims;
  • Wrongful termination;
  • Discrimination, harassment, or retaliation;
  • Tax obligations; and
  • Employee benefit obligations.

For these claims, either the S.G. Borello balancing test should apply if the claims are asserted under California law. For tax and employee benefit claims asserted under federal law, the Right to Control Test will apply. Read more here to understand how one California Court of Appeals determined which test applies to which claim. (Including entirely unnecessary references to G-L-O-R-I-A Gloooooria!)

One of the reasons independent contractor misclassification claims can be so challenging to defend is because different tests apply to different claims. This is not just a California problem.

The same problem exists under federal law, with one test applying to federal wage and hour claims (FLSA), another test applying to tax, benefits, and discrimination claims, and a moving target as to which test applies under federal labor law (NLRA).

Here is a similar chart, showing which test applies to which federal law claims.

In California, it’s getting harder and harder to prove independent contractor status, especially for claims applying the Dynamex ABC Test. Many Californians are into zen, meditation, and positive thinking, but the power of positive thinking might not get you too far when it comes to trying to preserve independent contractor status. There are still defenses, and it’s still possible to maintain independent contractor status in California, but it’s not easy.

Fighting misclassification claims in California can sometimes feel like eating raw marmot meat. It might seem like a good idea at first, but then you could end up with bubonic plague.

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

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

Not Even Cher Could Turn Back Time, But the Ninth Circuit Just Did; Dynamex Test Now Applies Retroactively in California

Clock independent contractor misclassification dynamex

In a mediocre and overplayed 1989 pop song, Cher sang about how she wished she could turn back time. If she could turn back time, according to the song, she’d take back those words that’ve hurt you and you’d stay.

The music video for “If I Could Turn Back Time” takes place on the deck of the battleship USS Missouri, which the U.S. Navy allowed because it believed the video could help boost recruitment. (How, exactly?) The song reached number one on the pop charts in Australia and Norway, causing me to question the collective judgment of the citizens of these otherwise fine nations.

As Cher well knew, you can’t turn back time. Doing so would cause all sorts of problems. As we will now see in California.

On May 2, the Ninth Circuit Court of Appeals ruled that California’s Dynamex decision (from April 2018) must be applied retroactively. In the Dynamex case, the California Supreme Court had ruled that a strict ABC Test should be used to determine whether workers are considered employees or independent contractors under California’s wage orders.

You can read more about the test here, but what’s most important for now is that the test is really hard to meet. That’s why in Vazquez v. Jan-Pro Franchising International, Jan-Pro argued that since it was being sued for events that took place before the Dynamex ruling, its lawsuit should be decided under the test that was used before the Dynamex ruling. Jan-Pro argued that the Dynamex decision made up new rules in the middle of the game, and Jan-Pro should not be held to the new, made-up rules for time periods before the new rules were made up.

That seems logical to me, but not to the Ninth Circuit. Instead, the Court of Appeals ruled that Dynamex must be applied retroactively. The Court’s reasoning makes little sense.

The Court based its decision on the general rule that new statutes are applied prospectively, but court decisions are applied retrospectively. That makes sense as a default rule — but only if the court decision is interpreting the text of a statute or is applying a well-known rule to a set of facts. 

The ABC Test was invented by the California Supreme Court in its April 2018 Dynamex ruling. That test did not exist in any California statute enacted by the legislature or in any regulation. Before the Dynamex case, no business in California had any reason to believe that an ABC Test was the test — especially since for decades a different test had been used. The Dynamex decision, therefore, was much more like the enacting of a new statute than the judicial interpretation of a long-standing law. 

In fact, the Ninth Circuit’s decision last week goes so far as to admit that the Dynamex decision was, in essence, the adoption by California’s Supreme Court of a Massachusetts statute that had never been passed by California’s legislature.  The Ninth Circuit ruling includes this sentence, which precisely demonstrates my point:  “Thus, by judicial fiat, California incorporated Massachusetts’ employment classification statute into its labor laws.” Before April 2018, Massachusetts had an ABC Test, by statute. California did not.

Judicial fiat! That quote says it all. Judicial fiat is when the judiciary (not the legislature) creates a new law. It is a term most commonly used to criticize a judicial decision as going too far and usurping the role of the legislative branch.  But here the Ninth Circuit concedes that’s what the California Supreme Court did in Dynamex.  Since the Dynamex decision adopted a Massachusetts statute by judicial fiat, then the only fair way to apply that rule is to treat it like a statute and apply it only prospectively. But no.

It seems blatantly unfair for a court to make up new rules by adopting a different state’s statute — one that California’s legislature never adopted — and then to hold California’s businesses liable for failing to comply with a set of rules that did not yet exist.

So, Todd, tell me how you really feel.

Anyway, that’s now the law in California. The ABC Test invented by California’s Supreme Court in the Dynamex court now applies when determining whether someone is an employee under California’s wage orders, even for time periods before the test was invented.

You can read more about the Dynamex decision here and here.

California business are being advised to consider moving to Australia.

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

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

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.

Continue reading