by Todd Lebowitz

Snakes! And Other Things to Watch for in 2024

*This is a venomous Eastern Brown Snake, native to Australia. Stay away.*

Tennis star Dominic Thiem knew what to watch for in his match this past weekend in Brisbane. It was on-court hazard he couldn’t ignore.

Play was interrupted when a “really poisonous snake” slithered onto the court near the ballkids. The intruder, an Eastern Brown Snake, “has the unfortunate distinction of causing more deaths by snake bite than any other species of snake in Australia.” The snake’s venom causes “progressive paralysis and uncontrollable bleeding,” which is not one of the on-court hazards typically of ballkidding.

(I don’t know if ballkidding is the real word for this, but it should be. Or ballkiddery maybe. I also learned from the snake bite article that the proper term for being bit by a venomous snake is “envenomation,” which is a word I hope to use elsewhere in a sentence sometime in 2024. So there’s a New Year’s resolution. [@Lisa, take note, I made one, even though you {correctly} say I am no fun because I won’t play the New Year’s Resolution game.])

The Eastern Brown Snake is not present in the U.S., so we don’t have to watch for any in 2024.

But here are several other things that could bite you in the behind in 2024 if you’re not paying attention:

1. New DOL test for independent contractor misclassification. The DOL issued its proposed new rule in October 2022 and targeted the fall of 2023 for release of a new final rule. The proposed rule would identify seven factors to consider when evaluating whether someone is an employee under the Fair Labor Standards Act (FLSA). The final rule will likely be very similar. We’re still waiting, and the final rule could be released at any time.

2. The new NLRB test for joint employment takes effect Feb. 26, 2024. Unless it doesn’t. The new rule is being challenged in both a federal district court in Texas and the U.S. Court of Appeals in D.C. Either court could quash the rule. The new rule will substantially expand who is a joint employer under the NLRA, even for worksites without unions.

3. Increased state and local enforcement activity. States and localities are filing their own lawsuits alleging worker misclassification. The New Jersey Attorney General recently filed a major lawsuit. The California Attorney General and California localities have been pursuing misclassification lawsuits too. Remember this: As much as I advocate for individual arbitration agreements with class waivers, they have no effect on enforcement actions brought by a state or local government. These lawsuits pose a substantial risk, and the governments love to issue one-sided accusatory press releases when they file the lawsuits.

4. The feds are doing this too. The DOL is bringing its own enforcement actions and publicizing them.

5. State and local laws that affect independent contractor classification and joint employment. We’re seeing legislative activity in three main areas:

(a) laws to change the tests;
(b) laws that provide a safe harbor for independent contractor classification if certain protections are provided to the workers (Cal. Prop 22, this proposed Mass. state law); and
(c) Freelancers laws that impose various requirements when retaining a solo independent contractor (currently: NY, IL, Los Angeles, Minneapolis, Seattle, NYC, Columbus).

6. State laws that criminalize worker misclassification. Take a look at recent legislation passed in NY State and Rhode Island.

7. State laws governing the use of temporary workers. Look for more states to enact laws like the Illinois Day and Temporary Worker Services Act (amended in Aug. 2023) and the New Jersey Temporary Workers’ Bill of Rights (enacted in Aug, 2023). These laws force companies that use staffing agencies to disclose the wages and benefits being paid to direct employees.

8. California’s AB 5 is still being challenged. This is the law that codified the ABC Test for most independent contractor relationships. But it also included a grab bag of miscellaneous and arbitrary exceptions. A full en banc Ninth Circuit has agreed to rehear Olson v. State of California, which challenges the constitutionality of AB 5.

Wishing you a happy, healthy, and litigation-free 2024.

Best wishes,
Todd

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12.04.23

by Todd Lebowitz

Beware of Falling Tortoises: Large Fines Are the Law for Willful Misclassification in California

Aeschylus (525-456 BC) was a Greek playwright and is often described as the father of tragedy. While only seven of his estimated 70+ plays have survived, the story of his death remains solidly entrenched atop the list of all-time oddest deaths (if it’s true).

Apparently, Aeschylus died after being struck in the head by a tortoise dropped by an eagle which had mistaken his head for a rock suitable for shattering the shell. That qualifies as a surprise ending to an otherwise successful career.

Today’s post is intended to help businesses in California avoid their own surprising deaths, sans tortoises.

Businesses using independent contractors in California are reminded that misclassification risks extend beyond the usual laws you’d think to be worried about. The California Labor Code has a special section devoted to making willful misclassification of workers illegal, period, end stop, and the law imposes substantial fines.

In other words, if you are working with independent contractors who should — under California law — be classified as employees instead, your business may be subject to substantial fines, even if you are not violating any of the laws addressing overtime, meal and rest breaks, reimbursement of expenses, etc.

Under Labor Code section 226.8, “willful misclassification” of independent contractors is, by itself, unlawful. Penalties start at “not less than” $5,000 and “not more than” $15,000 for each violation. If the Labor and Workforce Development Agency or a court determines that the violations are part of a pattern or practice, the fines jump to “not less than” $10,000 and “not more than” $25,000 for each violation.

Violators will also be required to post a notice on their website or in a location accessible to the public.

If your business is registered with the Contractors’ State Licensing Board, violations will also be reported to the Board for disciplinary proceedings.

The law defines “willful misclassification” as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” The law applies to “any person or employer,” raising questions as to whether individuals may be penalized too.

So if you’re doing business with independent contractors in California, be aware of the usual range of potential violations — overtime, meal and rest breaks, wage statements, expense reimbursements, etc. But also be aware that willful misclassification is, by itself, unlawful. Fines under Labor Code section 226.8 should be something you’re aware of. Enforcement is more frequent and more likely than being hit in the head by a falling tortoise.

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11.20.23

by Todd Lebowitz

Tips for Avoiding Liability for Injuries by Contractor Employees, Thanks to Laura Branigan

Raise your hand if you remember songs by Laura Branigan? How about “Gloria”? Or this lyric? You take my self, you take my self control?

The song “Self Control” is about stepping into the nightlife, with a bit of seedier, seductive angle. The lyrics, though, remind us of another reason not to exert control over an independent contractor’s employees.

Suppose you retain a contractor to replace the roof on your building. The contractor has legitimate employees, and one falls through a weak spot on the roof. That’s a worker’s comp claim, and you’re not liable for some kind of premises liability claim, right?

The answer may depend on whether you’ve exerted control over the contractor’s employees.

Let’s look at California law, but the same principle can often be applied elsewhere. (Check your state’s law.) Under the Privette doctrine, a property owner who hires an independent contractor is liable to the contractor’s employee for injuries sustained on the job only if (1) the owner exercises control over any part of the contractor’s work in a manner that affirmatively contributes to the worker’s injuries, or (2) the employee is injured by a concealed hazard that is unknown and not reasonably ascertainable by the contractor.

The keys points in avoiding premises liability claims are, therefore:

Don’t exert control over how your contractors’ employees do their job, and
Make sure any hazards are marked or disclosed.

You could have other problems if the contractor misclassifies its workers and treats them as individual subcontractors. But avoiding control can also help you avoid joint employer liability in that situation.

The bottom line here when dealing with contractors’ employees is to avoid Laura Branigan’s idea of the nightlife: Don’t take their self, don’t take their self-control.

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07.24.23

by Todd Lebowitz

Cry If You Want To: Individual Arbitration Agreements Can’t Stop PAGA Claims

A Nigerian comedian recently set out to beat the world record for continuous crying, seeking to cry for 100 consecutive hours. I expect that many new parents would object right here and point out that this record is bullsh@# because their infants have cried continuously for twice that long. But let’s assume the record here is for adult crying. Lacking the stamina of a newborn, the comedian failed miserably.

After six hours, the man experienced headaches, a swollen face, and lost his vision for 45 minutes.

A California Supreme Court decision last week may cause businesses to shed a few tears, but the ruling was no surprise, and companies just need to be prepared.

Remember how we love individual arbitration agreements as a tool for avoiding class action lawsuits? Companies that make widespread use of independent contractors should have these agreements in place, and most do. Courts generally enforce these agreements, which require claimants to bring any claims on an individual basis, not as part of a class action.

In California, there was an open question about whether an individual who is subject to an individual arbitration agreement could nonetheless bring a PAGA claim in California. PAGA refers to the Private Attorneys General Act, a California state law that allows “aggrieved individuals” to bring a claim on behalf of the state government, seeking relief for other employees. It’s not a class action but, to a defendant company, it feels like one.

In Adolph v. Uber, the California Supreme Court ruled that an individual whose claims are subject to an individual arbitration agreement may still be considered an “aggrieved employee” who can bring a PAGA claim seeking to remedy a defendant’s Labor Code violations against other employees.

The ruling was no surprise to the business community, but it clarifies an important point of law. You can read more about the decision here, in this BakerHostetler alert.

Businesses do not need to do anything differently on the preventive side, as a result of this ruling.

Businesses making widespread use of independent contractors should continue to require the contractors to sign individual arbitration agreements with class action waivers. While these agreements cannot prevent PAGA claims, they can often be used to delay PAGA claims. The agreement can include a clause requiring the parties to jointly request that any PAGA claim be stayed while the individual claim is arbitrated. This delay may frustrate the purpose of the PAGA claim, especially if your business prevails in arbitration against the individual.

So for now, nobody needs to follow the lead of the temporarily blind Nigerian comedian. Instead, follow the advice in this song:

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07.17.23

by Todd Lebowitz

Free Lancers? Fourth Major US City Now Requires Written Contracts for Freelance Workers

In ancient and medieval warfare, cavalrymen who fought battles with lances were known as lancers. Actually, they were probably known as whatever Assyrians or Normans or Persians called lancers in their languages, but that’s not important right now.

I should share that my junior high, Palmetto, was also known as the Lancers when I attended in the 1980s. I don’t know if they are still the Lancers, but I do know that they are no longer Palmetto Junior High. Instead, the school is now known as Palmetto Middle School, which is unfortunate and a bit cruel to the teenage cheerleaders who must wear the school’s initials across their chests.

Medieval lancers might have been paid, or might not. Don’t know, don’t care. I know that PMS Lancers are not paid. But this post is not about free lancers. It’s about freelancers. And that space makes a lot of difference.

Los Angeles is the latest major city to pass an ordinance that imposes several strict requirements when retaining freelancers. The Freelance Worker Protection Ordinance took effect July 1, and L.A. now joins NYC, Seattle, and Minneapolis as cities that require a written contract when retaining a solo independent contractor.

This L.A. law is not a TV drama where “office politics and romance often distract the legal staffers from matters in the courtroom.” No, this L.A. law is more boring. This law applies when retaining a solo contractor who will earn $600 or more in a calendar year. If that’s the case (see what I did there?), then these rules now apply:

Must have a written contract that includes:
- name, mailing address, phone, email of both hiring party and freelance worker,
- itemization of services to be provided,
- rate and method of compensation, and
- date by which payment is due, or manner for determining due date.
Payment must be made by the due date or, if none is specified, within 30 days after services are rendered.
Both the hiring party and freelancer must retain records for 4 years.
Any waiver of these requirements is unenforceable.

The NYC, Seattle, and Minneapolis ordinances also require written contracts with similar contents when retaining solo independent contractors who will earn about the same amount. The NYC law applies to work worth $800 in one project or in the aggregate over 120 days. The Minneapolis law applies to work valued at $600 in a calendar year or $200 in a single week. The Seattle law applies to work valued at $600 in a calendar year.

Businesses and individuals who retain solo independent contractors in these cities need to be aware of these laws, which apply even if the hiring party is located elsewhere.

Hiring parties who fail to comply may be liable for double damages, fines for not providing a written contract, penalties for late payments, and attorneys’ fees. The most egregious violators may also be subjected to cavalry charges and lance attacks. Maybe.

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07.03.23

by Todd Lebowitz

Still a Chunky Stew: California’s ABC Test Survives Supreme Court Challenge

The song “Rock & Roll Stew” was released by Traffic as a single, off its excellent 1971 album, The Low Spark of High Heeled Boys. The stew is a reference to the messy life of playing gigs in clubs around the world. (This stew, of course, refers to the meal, not the anthropomorphic similar-sounding Stu, as referenced in Led Zeppelin’s “Boogie with Stu,” with this Stu being a real person, namely Ian Stewart, who was the Rolling Stones’ road manager and piano player and who sat at the keyboard one day to help Jimmy Page tune his guitar, a collaboration that resulted in this mostly improvised song, which is catchy and fun.)

Stew, according to allrecipes.com, is like a soup but chunkier. When making a stew, you can toss in meats and vegetables and whatever else you’re trying to get rid of in your refrigerator to make room before you go to Costco.

A messy chunky stew also seems like a good description of California’s ABC Test, which seems straightforward enough at first but, in reality, is chock full of meaty exceptions, most of which seem completely arbitrary.

The exceptions to the ABC Test are laid out in California Labor Code sections 2776 through 2785. The structure of the California law goes basically like this: When determining if someone is an employee or an independent contractor, use the ABC Test except in a whole bunch of situations or professions or circumstances, in which you would not use the ABC Test. There are dozens and dozens of exceptions to the ABC Test, and you just about need a decision tree to figure them out. The lines that have been drawn to determine whether some of the exceptions apply can also be maddening to understand, and they too seem arbitrary.

In a case brought by Mobilize the Message LLC, some of these lines were challenged on the grounds that they violate the First Amendment.

More specifically, the argument was that the law creates two classes of canvassers and distributors of literature, with different outcomes depending on whether they are engaging in political speech. The law allows promoters of consumer goods and distributors of newspapers to be classified as independent contractors, but it subjects promoters of political campaigns to the ABC Test, making it much more likely that they would be deemed employees.

Mobilize the Message LLC argued that the law discriminated against political speech by imposing more substantial burdens on those who engage in it than those who do not.

In October 2022, the Ninth Circuit rejected the challenge, ruling that there was no First Amendment violation. The petitioner then sought review by the U.S. Supreme Court. But late last month, the Supreme Court declined to take the case.

That means the Ninth Circuit ruling will stand, and the ABC Test — with its arbitrary lines — lives another day, even if the law subjects workers engaging in political speech to a different set of rules.

The ABC Test remains a messy stew, chock full of meaty (and vegetable-y) exceptions. But businesses operating in California have no choice but to learn it and digest it, no matter how chunky and confusing the mystery meat may be.

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03.26.23

by Todd Lebowitz

You Get What You Need: Prop 22 Upheld, and It’s a Model Other States Should Follow

The Rolling Stones’ song, “You Can’t Always Get What You Want” features the London Bach Choir and addresses the predominant themes of the 1960s — love, protest, and drugs. There’s some controversy as to whether Mr. Jimmy refers to vagrant Minnesotan Jimmy Hutmaker, who supposedly uttered the famous lyric-to-be during a chance 1964 encounter with Jagger at Bacon’s Drugstore, or Jimmy Miller, a record producer who also played drums on this track instead of Charlie Watts.

“You Can’t Always Get What You Want” is also a suitable theme for the main problem that dominates every aspect of independent contractor misclassification. The problems is that the laws are binary. A worker is either an employee who receives all of the protections of employment laws, or an independent contractor, who receives none. The exceptions creating a middle ground have been sparse.

But if you try sometimes.

California voters tried and succeeded in creating a middle ground in 2022, when they passed Prop 22. Prop 22 guarantees independent contractor status for rideshare and delivery drivers if a series of conditions are met, and then the app companies are required to provide a range of protections for drivers, including minimum rates of pay, a health insurance stipend, accident insurance, sexual harassment prevention, safety training, and rest requirements.

Prop 22 was and is a model for the middle ground that has been missing.

But Prop 22 has also been under attack. In a case called Castellenos, the SIEU and other worker advocates have argued that Prop 22 violates the California constitution and had to be invalidated. Without Prop 22, rideshare and delivery drivers could be subjected to California’s ABC Test for determining drivers’ status.

As you may have read, a California Court of Appeals ruled earlier this month that Prop 22 did not violate the California Constitution and could take effect, except for one small part of the law governing future amendments. The dispute will likely be heard by the California Supreme Court, so the fight isn’t over.

The point I want to make, though, is that Prop 22 carves out a middle ground that should be a model for other states to follow. It guarantees workers certain protections while allowing them to operate their own businesses as independent contractors.

The unions and worker advocates calling for the protection of worker rights routinely ignore the surveys showing that a vast majority of drivers prefer independent contractor status. Much of the noise on this issue is coming from a vocal minority.

The Prop 22 model is a middle ground that provides workers with protections they otherwise lack, while allowing workers to retain their preferred independent contractor status and flexibility.

We’ll continue to watch whether the California Supreme Court decides to hear this dispute but, either way, Prop 22 should be held up as a model for other states to follow, carving out a middle ground that balances the concerns of all sides. Worker status does not have to be binary. Binary laws that mandate employee or independent contractor status, with no middle ground, do not reflect the realities of the modern gig economy.

It’s time for reform.

You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.

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03.26.23

by Todd Lebowitz

You Get What You Need: Prop 22 Upheld, and It’s a Model Other States Should Follow

But if you try sometimes.

Prop 22 was and is a model for the middle ground that has been missing.

The Prop 22 model is a middle ground that provides workers with protections they otherwise lack, while allowing workers to retain their preferred independent contractor status and flexibility.

It’s time for reform.

You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.

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03.20.23

by Todd Lebowitz

Could California’s AB 5 Get Cut Off? Ninth Circuit Ruling Keeps Case Alive

When I hear the name Lorena, my mind automatically goes back to 1993, which is probably true for many men about my age. That’s the year when Lorena Bobbitt brought a kitchen knife into the bedroom and cut off her husband John’s member while he was sleeping. She then tossed it in a field near the house, alerted police where to find it, and became an overnight celebrity for having taken revenge after years of alleged domestic abuse.

John later tried to cash in on the detachment, forming a band called The Severed Parts and appearing in two pornos called John Wayne Bobbitt Uncut and Frankenpenis.

It was a different Lorena who grabbed headlines last week, when the Ninth Circuit Court of Appeals considered whether it’s unconstitutional to pass a law because of personal animus.

The law is California’s AB 5, and the Lorena is former California assemblywoman Lorena Gonzalez. As a quick refresher, AB 5 is the California law that imposed a hard-to-satisfy ABC Test for determining independent contractor status. Lorena Gonzalez, a driving force behind the bill, was vocal in her animus toward rideshare and delivery app companies.

In Olson v. California, the rideshare and delivery app companies sued to invalidate AB 5, arguing that the law contained dozens of exceptions targeted toward a grab bag of industries, and their exclusion from the list of exemptions was due to animus toward them, rather than reason.

This might have been a hard argument to make, but for Lorena. Congresswoman Gonzalez made frequent public statements against rideshare and delivery companies, claiming they mistreated workers by not classifying them as employees. Gonzalez said she was open to including exceptions in the bill, but not for these companies. The legislature then passed an exemption for other referral-based app businesses, but not rideshare or delivery, even though the business models are basically the same. A few other vocal lawmakers joined Gonzalez with similar public statements targeting the rideshare and delivery app companies. It’s the old familiar “[insert name] said the quiet part aloud” story.

Last week the Ninth Circuit ruled that personal animus is not a legit reason to pass a law. The Court wrote, “We are persuaded that these allegations plausibly state a claim that the ‘singling out’ of Plaintiffs effectuated by A.B. 5, as amended, fails to meet the relatively easy standard of rational basis review.” The Court was referring to the standard used for evaluating equal protection claims under the Constitution. It does not advance a governmental interest to pass a law out of a desire to harm a politically unpopular group of citizens.

The Court’s ruling did not overturn AB 5. The ruling sent the case back to the district court, which will have to reopen the case against AB 5.

For now the law remains in effect, and there is no immediate impact to businesses in California. But the fight to overturn AB 5 has fresh legs and some momentum.

In other words, businesses in California are still subject to the ABC Test — unless you’re a licensed insurance business or individual, physician, surgeon, dentist, podiatrist, psychologist, veterinarian, lawyer, architect, engineer, private investigator, accountant, registered securities broker-dealer or investment adviser, direct sales salesperson, commercial fisherman working on American vessels for a limited period, marketer, human resources administrator, travel agent, graphic designer, grant writer, fine artist, payment processing agent, still photographer or photo journalist, freelance writer, editor, or cartoonist, licensed esthetician, electrogist, manicurist, barber, cosmetologist, real estate licensee, repossession agent, recording artist, songwriter, lyricist, composer, proofer, manager of recording artists, record producer or director, musical engineer or mixer, vocalist, musician engaged in the creation of sound recording, photographer working on recording photo shoots or album covers, independent radio promoter, newspaper distributor working under contract with a newspaper publisher, newspaper carrier working under contract either with a newspaper publisher or newspaper distributor, contracting party in certain types of business-to-business relationships, or referral agency other than for rideshare or delivery — all of which are subject to possible exemptions.

And so you can see the point. The exemptions are a mishmosh created by special interests and lobbying efforts, with no coherent overall theme — except to make sure rideshare and delivery apps are subject to the ABC Test.

We’ll continue to follow this case. Meanwhile, if you’d like to read more about the original Lorena and the incident, there’s a Lifetime movie, an Amazon docuseries, and a whole bunch of articles.

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02.06.23

by Todd Lebowitz

Like a Lead Balloon: Cities Aim to Take Down Worker Misclassification

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.

Who Is My Employee?

Exploring Independent Contractor Misclassification & Joint Employment Issues

Tag Archives: California

Snakes! And Other Things to Watch for in 2024

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Beware of Falling Tortoises: Large Fines Are the Law for Willful Misclassification in California

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Tips for Avoiding Liability for Injuries by Contractor Employees, Thanks to Laura Branigan

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Cry If You Want To: Individual Arbitration Agreements Can’t Stop PAGA Claims

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Free Lancers? Fourth Major US City Now Requires Written Contracts for Freelance Workers

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Still a Chunky Stew: California’s ABC Test Survives Supreme Court Challenge

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You Get What You Need: Prop 22 Upheld, and It’s a Model Other States Should Follow

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You Get What You Need: Prop 22 Upheld, and It’s a Model Other States Should Follow

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Could California’s AB 5 Get Cut Off? Ninth Circuit Ruling Keeps Case Alive

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Like a Lead Balloon: Cities Aim to Take Down Worker Misclassification

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