Tag Archives: California

12.27.22
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What to Watch for in 2023: Big Changes May Be Coming for Independent Contractor and Joint Employment Laws

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.

Wishing you all a happy and healthy 2023!

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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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12.05.22
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Hairy Situation: Misclassification Settlement Disputes Settle for $6.5 Million; Multiple Tests Would Have Applied

If you have a beard at least 8 inches long, here’s an opportunity you might not have considered. At a bar in Casper, Wyoming, a group of bewhiskered patrons tied their beards together to take the world’s record for Longest Beard Chain.

How long? 150 feet, shattering the previous record of 62 feet, set by a shaggy German crew in 2007.

But that wasn’t even the hairiest highlight of the weekend. Down the street was the National Beard and Moustache Championships, a visual delight featuring moustache categories such as best handlebar, Dali, freestyle, and uber-stache, and partial beard categories including best friendly sideburns, goatee freestyle, musketeer, and Fu Manchu.

Meanwhile, 1,000 miles to the west, a different sort of hairy situation was nearing conclusion for several operators of gentleman’s clubs or nightclubs or strip joints, depending on your preferred terminology.

Last week, a federal district court in San Francisco approved a settlement that combined multiple class action claims of independent contractor misclassification brought by exotic dancers. The settlement covered more than 8,000 dancers and included a total payout of $6.5 million.

The cases were complicated by a number of legal issues, including the fact that — because of the timing of the lawsuit — the question of whether the dancers were contractors or employees was to be determined using different tests for different claims. The dancers’ classification for their California wage order claims would be determined using an ABC Test, but their classification under other Labor Code claims would be determined using the Borello balancing test, which is a California hybrid of Right to Control and Economic Realities Tests.

The class period covered 2010 through 2018, so the Dynamex decision applied to the wage claims, but AB5 had not yet been enacted, which left the Borello test to govern the Labor Code claims. This post explains the complicated situation that existed at the time. Had the class covered the period from January 2020 forward, the ABC Test likely would have been used to determine classification under all of the California claims.

But there were also Fair Labor Standards Act (FLSA) claims. The FLSA uses an Economic Realities Test to determine a worker’s classification, but that test is fluid too. The Economic Realities Test used by most courts is different from the test that was written into the current FLSA regulations in 2020, which is different from the test the DOL recently proposed to enact in a new set of regulations currently under consideration.

So for these class members, there were at least three different tests that would determine whether they were employees or independent contractors under different laws. That’s kind of like trying to determine who had the best musketeer or Fu Manchu but with everyone’s facial hair tied together in a 150-foot beard chain.

There are a few takeaways here for the rest of us.

First, misclassification claims by exotic dancers remain common. The business model needs some internal review. But that’s probably not your concern.

Second, the settlement is a good reminder of how complicated it can be to determine a worker’s classification when multiple laws apply. Different tests apply to different laws, even within the same state. The dancers, had they gone to trial, might have been employees under some laws and contractors under other laws.

Third, there are significant costs in reclassifying contractors to employees. The settlement required the clubs to reclassify their dancers to employees, which means the dancers would become eligible for unemployment, workers’ comp coverage, and protection under the anti-discrimination and leave laws that apply to employees.

Regardless of your business, it’s always a good idea to proactively review independent contractor relationships to see how well they would withstand a classification challenge in court. Misclassification cases are high stakes and can take many twists and turns. Sort of like the facial hair in the Full Beard Freestyle category. (Photos here.)

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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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11.14.22
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Rick Springfield & Joint Employment: L.A. County Liable in FLSA Overtime Suit, Despite No Control Over Payroll

Rick jams!

If I ask you to name a song by Rick Springfield, you’ll say “Jessie’s Girl.” If I ask you to name another, you’ll look at me with a blank stare. But there’s another song you probably know. I forgot all about it too until I heard it on the 80s channel last week.

“Don’t Talk to Strangers” was released in 1982 and, around May of that year, spent four weeks at #2 on the Billboard charts. (Bonus Trivia Question: Can you name the #1 song in May 1982? The answer is below.)

Springfield had a couple of other hits too. Remember “Love Somebody” and “I’ve Done Everything for You”? Good times.

Anyway, the State of California and County of Los Angeles are hardly strangers, and they not only talk, but they collaborate on social services programs. That collaboration led to a lawsuit raising joint employer questions under the Fair Labor Standards Act (FLSA).

The State of California and the County of Los Angeles administer an In-Home Supportive Services (IHSS) program, which allows low-income elderly, blind, or disabled residents of the county to hire a provider to help them with daily living activities. The State of California runs the program at a state level, through state regulations, but the counties play a role in administering the program too.

Under a 2013 DOL regulation covering domestic workers, these workers were entitled to overtime pay under the FLSA. Until late 2015, however, the regulation was vacated while a court reviewed it. The state began paying overtime in 2016.

In this lawsuit, one of the IHSS providers filed suit against Los Angeles County, seeking FLSA overtime wages for 2015, while the rule was vacated and under review.

The county responded that the state, not the county, was the employer; and therefore the county could not be liable for the state’s failure to pay overtime in 2015. The district court agreed and ruled that the state, not the county, was the employer. The county would not be liable for the unpaid overtime. Or so it thought.

In a recent decision, however, the Ninth Circuit Court of Appeals reversed that conclusion. Applying the FLSA joint employer test, the Court held that the county was a joint employer, even though it did not control payroll.

Seems a little unfair, but that’s how joint employment works.

According to the Ninth Circuit, here’s the joint employer test under the FLSA: To determine whether an entity is a joint employer, the court must consider “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.”

The test derives from a Ninth Circuit case called Bonette. Other circuits use slightly different tests.

Even though the state controls payroll, the Ninth Circuit ruled that the county had enough involvement, based on the four factors, to make it a joint employer. The county therefore would be jointly liable for the shortfall in overtime pay.

The case is a good reminder of the dangers of joint employment. Even if your business has no control over payroll, a joint employer is liable for the failure to pay overtime.

The idea of two different things coming together is also the answer to today’s trivia question from above: What was the #1 song on the Billboard charts in May 1982?

[scroll down for the answer]

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The #1 song in May 1982 was Ebony and Ivory.

Also, random fun facts about Rick Springfield:

  • His real name is Richard Springthorpe.
  • He was born in Guilford, New Sales Wales, Australia.
  • He played Dr. Noah Drake on General Hospital.
  • Before making it big on his own, he played in bands called Wickedy Wak and Zoot.

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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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11.07.22
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Settling Misclassification Lawsuits Is Sometimes the Right Call, But It Might Make You Feel Dirty

Say cheese!

The world’s dirtiest man died last month at the (ripe) age of 94, having reportedly going 60 years without bathing. Covered in soot and living in a cinder-block shack, the Iranian hermit was known for eating roadkill, smoking a pipe filled with animal excrement, and believing that cleanliness would make him ill.

The newest dirtiest man alive may be this guy in India, who as of 2009 hadn’t bathed in a mere 35 years. Instead of water, this man of the people opts for a “fire bath,” in which he lights a bonfire, smokes marijuna and stands on a leg praying to Lord Shiva. The man told a reporter from the Hindustan Times, “Fire bath helps kill all the germs and infections in the body.” Of course it does.

Sometimes when we settle lawsuits, we also feel dirty. Maybe not that dirty, but at least icky. It feels wrong to pay money to a plaintiff when we feel the other party doesn’t deserve it. But settlements are often driven by factors other than the merits of a claim, such as business conditions or considerations other than purely financial.

In independent contractor misclassification cases, a settlement is sometimes the only way to ensure that a lawsuit does not result in forced reclassification of workers. In a settlement, the parties can agree upon terms, including financial payments, without conceding that anyone was misclassified and without requiring a reclassification going forward.

That is what happened in a recent case involving A Place for Rover, which is an app-based gig economy company that connects dog walkers with dog owners.

In May 2021, the app company won summary judgment in a misclassification dispute. The company argued that dog walkers were independent contractors, not employees, even under California law. The company argued that it could satisfy each prong of the ABC Test and that, regardless, it was a referral service under California law, which would exempt it from the ABC Test usually used in California to determine whether a worker is an employee. The company urged the court instead to analyze the classification dispute using the S.G. Borello balancing test, not an ABC Test.

The district court did not reach a conclusion on whether the company was a referral service and instead determined that the ABC Test was satisfied. The court ruled that dog walkers controlled their own work, routes, and prices, making them legitimate independent contractors.

But the plaintiff appealed, and the company may have feared that the Ninth Circuit Court of Appeals would revive the case and send it to trial. Instead of taking a chance on a bad outcome, the company settled.

By settling, the company pays money to avoid the risk of a judgment that the dog walkers were employees, an outcome that would likely render the company’s business model no longer viable. The company’s decision makers probably felt a little dirty, paying any money at all after having won at the district court level. That is not a surprising outcome, even if they felt strongly about their case. Because the stakes are so high in misclassification litigation, that’s often how these cases conclude. Icky but sometimes necessary.

But at least in litigation, afterwards you can take a bath.

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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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07.18.22
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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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07.11.22
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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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01.18.22
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More Than One Iota: Supreme Court Agrees to Decide Scope of Arbitration Law; Outcome Will Affect Independent Contractor Agreements

Last week I read that Sirhan Sirhan had been denied parole again. No surprise there. But what captured my attention was his attorney’s comment that there was not “one iota” of evidence he would be a threat to society if released.

Not even one iota? Why are there never any iotas? And what is the plural of iota anyway? And how do you even respond to that? Well, actually, we had a few iotas. Let me check my notes here. Yes, three iotas.

“Iota” means an infinitesimal amount. Synonyms include bupkus and diddly-squat. But if you search for “iota” online, no one ever has any iotas. The word is always used in the negative.

Well here are a few iotas for you. The Supreme Court has agreed to hear two cases that will affect when arbitration agreements with independent contractors can be enforced. The Supreme Court generally gets involved when there are at least a few iotas of good arguments on both sides.

Both cases address the scope of the Federal Arbitration Act (FAA), which creates a presumption that arbitration agreements should be enforced, but includes a few iotas of carveouts.

In the first case, Viking River Cruises v. Moriana, the Supreme Court will determine whether cases brought under California’s Private Attorneys General Act (PAGA) are subject to arbitration. California courts have said they are not.

In the second case, Southwest Airlines Co. v. Saxon, the Court will address the scope of the Section 1 exemption, which makes the FAA inapplicable to certain types of transportation workers in interstate commerce. The Saxon decision is likely to clear up the mass confusion (and circuit split) over whether last mile delivery drivers and local rideshare fall within the exemption.

In the political arena, arbitration agreements have come under fire, and there is a movement among Democrats to abolish mandatory pre-dispute arbitration agreements. The Supreme Court, on the other hand, appears more likely to enforce the contracts as written, deferring to the contractual intent of the parties and interpreting any exemptions to the FAA narrowly.

There is more than one iota of evidence to support both sides of these disputes. But expect some 6-3s.

If I am pulling out my crystal ball, I expect the Supreme Court will uphold the arbitration agreements, at least in Saxon. Moriana is tougher to predict since PAGA is a state law creation in which the individual bringing the claim acts as a private attorney general, bringing the claim on behalf of the state. On one hand, the state never agreed to arbitrate. But on the other hand, the individual bringing the PAGA claim did agree to arbitrate any disputes, not to bring them in court under the guise of PAGA.

Whenever the Court rules, we’ll see arbitration agreements back in the news. More visibility on this issue will mean louder and more urgent calls from politicians to abolish pre-dispute arbitration agreements.

We can expect many iotas of news on arbitration agreements later in 2022.

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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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11.08.21
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Joint Employment: Sometimes You Can Win, Even in California

Sometimes it seems as if you just can’t win. Take the case of this man in southern Brazil, who late last month was attacked by a group of bees while fishing with two friends. The man successfully escaped the bees by jumping into the lake — only to be eaten alive by piranhas.

Employers in California, you know what I mean, right? It seems like any way you turn, the laws of California will get you.

Well today I write with good news. There is still hope.

In a joint employment case brought under California law, the Ninth Circuit Court of Appeals handed Costco a win, ruling that Costco is not a joint employer of the supplier sales reps who ask you to taste that new brand of salsa, even under the strict rules of California Labor Code section 2810.3.

California has two flavors of joint employment: Spicy and Extra Spicy.

Extra spicy is Labor Code section 2810.3. It makes joint employment automatic when a “labor contractor” supplies workers to provides services within the client’s “usual course of business.” The workers at issue here were paid by a staffing agency and sent to Costco locations to offer samples of suppliers’ products on a consignment basis. The Court of Appeals ruled that was not part of the “usual course” of Costco’s business, so section 2810.3 did not apply.

Regular spicy is the Martinez v. Combs test. It says that an entity is a joint employer under California law if it (1) exercises control over wages, hours, or working conditions, or (2) “suffers or permits” the individual to work, or (3) “engages” the individual, meaning creates a common law employment relationship, not that you should have put a ring on it.

The Court gave Costco a pass here too, ruling that it didn’t do any of these three things either.

This case is a good reminder that it’s still possible for a companies to win joint employment claims in California. The key is to structure those relationships correctly and ensure you have robust contracts with suppliers of labor. For contracting tips, remember the Monster with Three Eyes.

All is not lost, even in California. Turns out that even the guy in Brazil might have had a chance. His two fishing buddies made it out of the lake alive.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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11.01.21
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California Adopts New Exemptions to the ABC Test (and an Odd Way to Seek Comfort in a Storm)

Looking for Florence? Take the stairs on your left. One flight down.

Florence Ford was terrified of storms and, seeing as how she was born in 1861, none of the weather apps on her phone were working yet. Her mother Ellen provided comfort when the rains came. So naturally, when Florence died at age 10, Ellen felt she still needed to comfort her daughter when it rained.

In Natchez, Mississippi, you can visit one of the oddest graves in the world. Ellen fitted her daughter’s coffin with a small window and built stairs down to the casket. When it poured in Natchez, Ellen would head down to the casket and provide much-needed comfort to Florence’s bones.

Ellen couldn’t quite accept the reality of Florence’s death and tried to create an exception. In her version of death, reading or singing to the corpse still brought comfort to her daughter — or maybe just to herself.

A less creepy version of dueling realities continues to play out in California, as the legislature keeps reviving exceptions from the harshness of the ABC Test it adopted in AB 5.

The state continues to make tweaks. Two recent bills (AB 1506 and AB 1561) adopt these changes:

  • Extends the temporary exemption for newspaper publishers and distributors who meet certain criteria;
  • Imposes reporting requirements on publishers and distributors to ensure they are complying with the Borello Test, if they’re exempt from the ABC Test;
  • Extends the manicurists exemption for three more years (Kudos to the manicurists’ lobby! They nailed it!);
  • Extends the construction industry subcontractor exemption for another three years;
  • Amends the data aggregator exemption; and
  • Modifies the insurance exemption.

This grab bag of edits comes soon after the adoption of AB 2257, last fall, which rewrote AB 5 to change the long list of exemptions.

What’s going on here? The problem is that the ABC Test doesn’t make a lot of sense when you try to apply it across all types of working relationships. That’s why California’s ABC Test statute keeps getting a makeover. After the state legislature codified the ABC Test in September 2019 by passing AB 5, the state has adopted dozens and dozens of exceptions, and as you can see here, the list keeps growing.

Here’s what businesses in California need to remember:

  1. The ABC Tests is still the default test for determining whether an independent contractor is misclassified and should really be an employee.
  2. There are loads of exemptions, many of which are difficult to follow and require compliance with a long list of criteria before they will apply. Check the list of exemptions to see if they apply.
  3. If an exemption applies, it does not mean that independent contractor status is proper. It just means you make the independent contractor vs. employee determination using the Borello balancing test instead of the ABC Test.
  4. The rules keep changing.

If this monsoon of details makes you uncomfortable, it should. Fortunately, today you learned one more way that a person can find comfort in a storm. Thank you Ellen of Natchez.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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