Bring Forth the Tiger-Dogs! Here’s a Quick Status Check on the Challenges to California’s New Independent Contractor Law

Tiger independent contractor dynamex california

Not an actual tiger. Or a dog.

When outside forces pose a threat to people’s livelihood, people will go to great lengths to fight back.

For example, when monkeys began ravaging the crops of a farmer in Karnataka, India, the imaginitive farmer painted his dog to look like a tiger, to scare away the pesky invaders. [Photo here.]

Business owners in California are taking more conventional measures to fight back againt the tyranny of Assembly Bill 5, the new California law that seeks to reclassify many of the state’s independent contractors as employee. Here’s a quick summary of the resistance:

  • Owner-operator truckers claim the new California law cannot be applied to them because of a federal law (FAAAA) that prohibits states from enacting their own laws that affect the “price, route, or service of any motor carrier with respect to the transportation of property.” They won a preliminary injunction last month, temporarily preventing the law from applying to them.
  • Freelance writers and photographers are challenging the law too. The law has an exception for freelancers, but the exemption goes away if freelancers submit 35 or more pieces to a single publication. In other words, they’re independent contractors for submissions #1 through #34, but they instantly become employees with submission #35. They argue that the exemption is arbitrary and violates their First Amendment and equal protection Rights.
  • Rideshare and food delivery apps filed their own lawsuit, alleging that the exemptions are arbitrary and violate their equal protection and due process rights.
  • Five gig economy app companies have contributed $110 million to a ballot measure that will be voted upon in the November 2020 election if the measure collects 625,000 signatures. The law would exempt app-based gig economy drivers from the new test if the companies provide workers with specific levels of pay, benefits, and rights, which are defined in the proposal.
  • Republican lawmakers have proposed a constitutional amendment (A.C.A. 19) called the “Right to Earn a Living Act,” which would overturn Assembly Bill 5 and enshrine in California law “the right to pursue a chosen business or profession free from arbitrary or excessive government interference.” The amendment would reinstate California’s S.G. Borello balancing test for determining whether a worker is an independent contractor or an employee.

Meanwhile, the California Supreme Court is considering whether the 2018 Dynamex decision, which first imposed the ABC Test for wage and hour claims, applies retroactively. If it does, then businesses can be liable for failing to comply with a test that did not yet exist. Really.

That’s a lot of action, and we’ll continue to watch for new developments. Meanwhile, California businesses that use independent contractors should tread carefully, follow the status of legal challenges, and paint their dogs to look like tigers — just in case that turns out to be effective.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Here’s me in a radio interview, explaining independent contractor misclassification risks in California

Ok, so that’s a pretty boring headline. I will accept responsibility for that.

Let’s try something different this week. Instead of reading, you can listen.

Here is a radio interview on KFROG radio, which aired in Southern California a few weeks ago. In the interview, I discuss California’s Assembly Bill 5, which will convert many independent contractors to employees under California law. I address unanticipated consequences and issues for businesses to consider as they prepare for this law to go into effect.

It’s just under 20 minutes so you can listen on your commute.  Or, if you live in trafficky California, you can listen to it four times on your commute.

You can click here to listen.

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

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Proposed Law Would Radically Change App Driver Protections and Legal Status; Might Also Stop Zombie Ant Apocalypse (Maybe).

california driver app law ant zombiesYou’re supposed to learn something new every day, right? Here’s something that’s definitely new, unless you are a fungus aficionado — and, lucky reader, because this is a read-only post, you do not have to identify yourself if you are indeed a fungus aficionado, and if you are, TMI, and keep it to yourself.

Anyway, there’s a fungus that attacks certain kinds of ants, takes over their ant-body cells, turns them into zombies, causes them to take a final mad bite into a certain type of leaf, then causes a plant spore to sprout from their heads. Yes, really. It’s right here in this New York Times article, complete with pictures.

The Ophiocordyceps fungus is not a dinosaur, despite its suspiciously dinosaur-sounding name, but it sounds pretty ferocious and looks like it’s threatening to kill off segments of the ant population.

Another thing that is ferocious and threatening to kill something off is California’s recent Assembly Bill 5, which would convert many independent contractors into employees under state labor laws.

The latest attempt to eradicate that ferocious law comes in the form of a ballot initiative being sponsored by some of the large ride hailing and delivery app companies.

The Protect App-Based Drivers and Services Act, if passed, would preserve the independent contractor status of app-based drivers in California if the app companies provide the drivers with a number of financial considerations and benefits, along with allowing the drivers to maintain control over when and where they work. The law imposes substantial driver protections that app companies are currently hesitant to provide, out of fear that providing these benefits and protections might cause the drivers to be deemed employees.

The law would strike a much-need balance that enhances driver rights while creating certainty on drivers’ classification status.

The app companies would have to provide an earnings guarantee of at least 120% of the local minimum wage for time engaged, a 30-cents per mile stipend to cover vehicle expenses, a healthcare subsidy contribution, occupational accident insurance, and liability insurance.

App companies would be prohibited from engaging in discrimination. Companies would also be required to implement a sexual harassment policy, conduct background checks, implement safety training, and implement a zero tolerance policy prohibiting driving while impaired. Rest periods would also be required.

In exchange, the app companies would receive assurance that the drivers are properly classified as independent contractors so long as four conditions are met:

(a) The network company does not unilaterally prescribe specific dates, times of day, or a minimum number of hours during which the app-based driver must be logged into the network company’s online-enabled application or platform.

(b) The network company does not require the app-based driver to accept any specific rideshare service or delivery service request as a condition of maintaining access to the network company’s online-enabled application or platform.

(c) The network company does not restrict the app-based driver from performing rideshare services or delivery services through other network companies except during engaged time.

(d) The network company does not restrict the app-based driver from working in any other lawful occupation or business.

The proposed law is supported by multiple prominent ride share and delivery app companies. Their hope is to gather enough signatures to place the issue on the November 2020 ballot in California.

This is worth watching. You can read more about it here. If passed, this can serve as model legislation to be applied elsewhere around the country.

In the meantime, if you see fungal spores starting to grow out of app drivers’ heads, you’ll know that Assembly Bill 5 got to them first.  We can only hope.

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

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A New Smell: Ninth Circuit Rejects ABC Test for Determining Joint Employment

Joint employment dogsWhere I play tennis, there’s a lake with a beach that is open all summer. Like most places in the Midwest, it closes for the season on Labor Day. The weekend after Labor Day, they open it up for everyone to bring their dogs to run around, jump off the high dive (I wish!), and sniff each other’s butts. Because dogs are not typically allowed at the lake, these dogs are unfamiliar with each other, so there’s even more butt-sniffing than you might normally see at a canine networking event. 

My daughter captured this gem of a photo — a five-dog sniffing train.

An unfamiliar smell wafted our way from the Ninth Circuit Court of Appeals last week too. And this was a more pleasant scent for California businesses than usual.

The case was a joint employment case involving a franchisor. A local franchisee was accused of miscalculating overtime and failing to provide sufficient meal and rest breaks. The plaintiff-employees settled with the franchisee but continued to go after the deeper pockets, the franchisor. They made several arguments.

Two were of the most interest to me.

First, they argued that the Dynamex ABC Test should be used to determine whether the franchisee’s employees were also the franchisor’s employees. The Court rejected this argument, holding that the Dynamex ABC Test applies only to the question of whether someone is an independent contractor or an employee. To determine whether someone is a joint employee, a different test is used.

Second, they argued that under California’s broad definition of employ, the franchisor “permitted” the franchisee’s employees to work and therefore was a joint employer and jointly liable for the franchisee’s mistakes.

The Ninth Circuit rejected that argument too. To determine whether someone is a joint employer under California wage and hour law, the Court said you look at three alternative definitions of employ: control, “suffer or permit to work,” and the common law S.G. Borello balancing test. If any of these three tests is met, there’s joint employment. The “suffer or permit to work” definition is the broadest and is the one that is most likely to tag a company with joint employer status.

The Court determined that even that broadest of definitions could not be met. The franchisor had no control over day-to-day operations, hiring, firing, scheduling, or worker pay.

For California businesses, the key takeaways from this case are (1) that the ABC Test is used only to determine independent contractor misclassification, not to determine joint employment, and (2) that the test for joint employment is relatively easy to meet but it’s not automatic, even for a franchisor.

The Court acknowledged that the nature of a franchisee-franchisor relationship necessarily involves franchisor control over the product, but that does not mean it controls the employees. It is the franchisor’s relationship with the franchisee’s employees that must be looked at to determine whether there is joint employment.

We have seen plenty of decisions from of the federal and state courts in California that have threatened to expand joint employment and threatened the franchise business model. But this decision smells good, even if a bit unexpected — like an unfamiliar but friendly dog at the beach.

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

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Need Direction After California’s New Independent Contractor Law? Download the Playbook!

Siri punked me. Independent contractor misclassification AB 5Sometime I forget where I park, so when I went to the airport recently, I told Siri where I left the car.

Siri then punked me with this. I think it was intentional. Stupid AI.

California businesses may be in need of some direction too. On September 18, Gov. Gavin Newsom signed Assembly Bill 5 into law.  The law redefines the Independent Contractor vs. Employee test in California, applying an ABC Test to a broad range of state laws.

When the law takes effect January 1, 2020, it will instantly turn thousands of independent contractors into employees. Some aspects of the law may even apply retroactively.

What are your options?

I can think of ten. Click here to download The Playbook: Now That California Has Passed AB 5, What Are the Options for Businesses Using Independent Contractors?

 

Page 1 from The-Playbook-California-AB-5_p03

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

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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.

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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.

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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.

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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.

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Fun with Funerals? Cremation Company Settles Misclassification Case for $2.5 Million

Cannon cremation funeral Independent contractor misclassificationEveryone loves a fun funeral story, right? Apparently so. AARP.com posted this article about creative cremations. Available options for ashes include:

  • Being blasted out of a cannon to the tune of “Mr. Tambourine Man,” (Thank you, Hunter S. Thompson);
  • Being placed in an “environmentally safe, ball-shaped concrete memorial reef” and placed in the ocean to create a marine habitat, (giving a new and more literal meaning to “sleeps with the fishes”);
  • Being launched into space for an earth orbit; and
  • My personal favorite – being loaded into a five-foot biodegradable helium balloon and launched over the hills surrounding the deceased owner’s ranch so his buddies could shoot at the balloon until it burst, spreading the ashes over the surrounding foothills (so beautiful it almost makes me want to weep in my moonshine).

A cremation company had a less fun time last month, when a judge approved a $2.5 million settlement for independent contractor misclassification. The settlement included $1.65 million to a class of independent sales representatives and $825,000 in attorneys’ fees to the plaintiffs’ lawyers.

The company’s independent sales representatives had claimed that they were really employees, despite having signed an Independent Contractor Agreement in which they agreed they were contractors.

As we’ve noted many times before, though, it’s the facts of the relationship that matter, not what the parties call themselves. According to the plaintiffs, the cremation company told them when to work and where to work, paid them an hourly non-negotiable rate, required frequent reports, supervised their work, and provided them a handbook instructing them how to conduct themselves and how to perform their work. These are all facts that weigh in favor of employment status.

The sales reps’ lawsuit alleged that, when assessing the facts of the relationship, they were really employees and not independent contractors. They alleged violations of several laws that apply only to employees, including violations of California’s overtime, meal and rest break, waiting time, recordkeeping, and business expense reimbursement laws; and violations of the federal FLSA overtime rules.

The parties settled the dispute, and a federal judge approved the settlement.

There’s nothing suprising here, but the settlement should remind us that:

  • The facts of the relationship are what matter, even if the parties agree to call the workers “independent contractors” and they sign an Independent Contractor Agreement;
  • Different tests apply to different laws; here, there were claims that would have to be evaluated under:
  • Independent contractor misclassification remains a real and potentially costly risk.

The settlement did not say whether any of these sales representatives sold cannon, reef, space, or skeet shooting funerals along with cremation services. But I sure hope they did.

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

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