DOL Can’t Go For That (No Can Do), Appeals Joint Employment Ruling

Channeling their inner Hall & Oates, the Labor Department appealed a recent ruling by a New York federal judge that tried to invalidate the DOL’s new joint employer test.

What do I mean? I mean the DOL basically said, “I Can’t Go For That (No Can Do).”

Taking a step back — but not all the way to 1981, when the Private Eyes album was released — the DOL enacted a new test for joint employment in March 2020., which you can read about here. But in September 2020, a federal judge in New York claimed the test was invalid. DOL: No can do. The ruling is now on appeal and will be heard by the Second Circuit Court of Appeals. Expect a decision sometime in 2021.

While conducting important background research for this blog post (which consisted entirely of me listening to Apple Music’s Yacht Rock Essentials on my Sunday morning run), it struck me how similar the Hall & Oates lyrics are to Meatloaf’s “I’d Do Anything for Love (But I Won’t Do That).”

Hall & Oates: I’ll do anything that you want me to do, Yeah, I’ll do anything that you want me to (ooh, yeah), but I can’t go for that, nooo (no). No can do.”

Meatloaf: I would do anything for love, but I won’t do that. No I won’t do that.

Am I overthinking this? Are they not that similar? It was cold out. And raining. And there was a steep hill I had to get up. So I was trying to focus on something other than my aging knees. Which were probably thinking no can do.

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

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Whaddaya Call It? DOL Proposes New Independent Contractor Test

Soda or pop? Pill bug or roly poly? What you call things depends on where you live. In 2014, the New York Times published this 25-question dialect quiz that will tell you, with startling accuracy, where you or your parents are from.

The test is fun, and you can see how words and dialects vary from region to region.

But some things should not vary from region to region — federal laws.

The Fair Labor Standards Act (FLSA) has one definition of “employ,” but when it comes to deciding who is an employee and who is an independent contractor, different courts in different states apply different standards.  The DOL is trying to fix that.

Under a proposed new rule, released on September 22, the same test would be used in all parts of the country, regardless of whether you call your lunch sandwich a hoagie, sub, or grinder.

Click here for the rest of the post, originally posted on BakerHostetler’s Employment Law Spotlight blog.

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

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Joint Employment Test Gets Muddied Again: Federal Court Rejects New DOL Test

Muddy Waters is how you want your blues, not how you want your laws.

A federal district judge in New York last week kicked up a lot of mud in an area of the law that had finally seen some clarity – the definition of “joint employment.” Now we’re back in the muck.

Click here to read all about it, and let me know if you; like to subscribe to the BakerHostetler Employment Law Spotlight Blog, where I originally posted this week’s post.

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

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Silver Linings? DOL Looks to Adopt New Independent Contractor Test Before Year End

canoe

The past few months have included many silver linings — more family time, a Lake Michigan vacation, and professional cornhole on TV. I’ve also learned new things — governors have more power than I thought, remote work is more doable than many of us thought, and there’s such a thing as professional cornhole.

Now the Department of Labor wants us to learn something new too — about independent contractor status. (Too many long dashes so far? I’m flagging myself for excessive use.)

Last week the DOL published a notice that it intends to fast-track a new regulation covering the test for independent contractor vs employee under the Fair Labor Standards Act.

What would that test look like? The DOL gave no hints, but here is my educated guess.

The test for independent contractor status under the FLSA is an Economic Realities Test.  That is a court-created test, it’s well-established, and it’s not likely to change. If the DOL did try to change it, I don’t think the courts would follow the new regulation anyway. So the DOL is going to have to work more around the edges.

I expect the regulation to define more precisely the factors to be taken into account under the Economic Realities Test. Right now, different courts use different versions of it. Some uniformity would be helpful.

I also expect some examples to help illustrate how the factors should be applied. Look for sample fact patterns that seem like close calls but perhaps would be deemed supportive of independent contractor status under a new DOL interpretation.

We can expect the DOL will gently place its fingers on the scales, making it a bit easier to maintain independent contractor status under the FLSA. Don’t expect a full rewrite of the test.

The DOL will want to implement the new rule quickly, in case a new administration takes over in January. Look for a proposed regulation shortly, a quick public comment period, and a new regulation on the books late this year.

Hopefully by the time we see a final rule, we can watch real sports on TV and demote cornhole to livestream only. That way both people who care could still watch.

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

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NSFW? Not Quite. But 18 States Say DOL’s New Joint Employment Rule Is Inappropriate.

Zippy Michigan

Zippy sunbathes in the nude.

Some things sound inappropriate, but they’re not. For example, I sometimes post naked pictures on my blog. But only of my dog. She’s immodest and doesn’t seem to mind. (Her fur coat doesn’t count.) So, you see, that’s not inappropriate.

What about the DOL’s new joint employment test, which went into effect in March? Was that inappropriate? Eighteen Democratic state attorneys general seem to think so, and they’ve filed a federal lawsuit to try to undo the rule. For those of you keeping score at home, they claim the new rule violates the Administrative Procedures Act and is not consistent with the Fair Labor Standards Act.

Last week, a federal judge in New York rejected the DOL’s motion to dismiss the lawsuit, meaning the case moves forward. The DOL argued that the states lacked standing to challenge the new rule. Lack of standing means they can’t sue because they’re not harmed by the new rule.

But the judge found that the states “plausibly alleged” that they have standing to sue. He noted that the new rule could reduce the total amount of wages paid to employees in their states, which could lead to a reduction in tax revenues. The loss of tax revenues and the anticipated increased expense in enforcing state wage and hour laws would be enough. The states can proceed.

The ruling does not address whether the lawsuit has any merit, just that it may proceed.

While no one would claim the new rule is NSFW, these states argue that the content of the new rule and the way it was passed was inappropriate. But like the naked photo above, you need to see the full picture before drawing any conclusions about what’s proper and what’s not. 

For now, the DOL’s new rule remains in effect.  That means it’s more difficult to establish joint employment than it was before. It’s also difficult, by the way, to get a dog to wear a hat. But we did it. And Zippy looks ready for college football season. 

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

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When 500 Isn’t Necessarily 500: How to Count Employees Under the Families First Law

As you know by now, the Emergency FMLA and Emergency Paid Sick Leave provisions in the Families First Coronavirus Relief Act apply only to employers with fewer than 500 employees. But lots of questions have arisen about how to count.

For those who need help counting, here’s a helpful resource:

But for those of you counting employees instead of bats, let’s try this instead.

Question #1:  Do temps count? 

Answer:  Are we talking about feelings here? Because if we are, then everyone counts. You’re a winner! And you’re a winner! And you’re a winner!

Ah, but do they count toward the 500-employee threshold under Families First? Well that depends on whether they are joint employees of your business and the staffing firm.

As of last year, the answer for staffing agency temps was most often yes. But in January 2020, the DOL changed the test for how to determine whether someone is a joint employee under the Fair Labor Standards Act (FLSA). While there are different tests for determining joint employment, the one that matters for the Families First law is the FLSA test.

You can read more about the new DOL test here.

Question #2: Do part-timers count?

Answer: Yes. Count all part-time and full-time employees. Part-timers are people too. See, Feelings, Morris Albert (1975). Skip to 0:45 if you want to skip the instrumental intro.

Fun fact: In the late 80s, when you were arguing with your friends over which is the best Duran Duran song (answer: none), French songwriter Loulou Gaste successfully sued Albert for plagiarism, persuading a jury that Albert based the song on Gaste’s 1957 chart-topper “Pour Toi.”

Question #3: Do you aggregate employees across multiple subsidiaries?

Answer: Generally no. The default is that each subsidiary is its own employer. Divisions of a single subsidiary are aggregated.

But there are some situations when subsidiaries are aggregated. A conglomerate consisting of several different subsidiaries can a “single integrated employer,” in which case, you add the numbers together. We determine “single integrated employer” status by looking at four main factors:

  • Common management;
  • Common ownership;
  • Centralized control over labor relations and personnel; and
  • Interrelation of operations.

The more there exists common control, there more likely there is a single employer. There are many subfactors that also go into the analysis, and the most important factor tends to be centralized control over labor relations and personnel.

This is a difficult analysis, and there can be consequences to being a single integrated employer that go beyond Families First. If you think this applies to your company, proceed cautiously and seek legal advice.

Question#4: If I’m stuck home because of coronavirus, where can I find more helpful videos featuring The Count?

Answer: Ummm … this is where I sign off.

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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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How Does the Families First Act Apply to Independent Contractors?

Families First Act Independent Contractors

Hungry for more COVID-19 info? I can help with that, but if your hunger pangs are for something more exotic — say, deep-fried bull testicles — I’m sorry to say you’re out of luck. Deerfield (Mich.) American Legion Post 392 has cancelled its 19th annual Testicle Festival, leaving festival supplier Dennis Gerth with 330 pounds of bull testicles in his freezer. That’s my 2020 submission if anyone is giving out awards for Sentences I Never Thought I’d Write.

Yes, the coronavirus is affecting society in ways we never imagined. Last week, Congress offered some relief to workers affected by the virus. While the new law doesn’t help Gerth or his ball-filled freezer, it does provide paid leave for employees of most small businesses.

But what about independent contractors?

The Families First Coronavirus Relief Act provides up to 12 weeks of partially paid time off for employees unable to work (or telework) for childcare reasons and up to 80 hours of paid sick time to employees unable to work (or telework) for six specified reasons.

Trying to apply the Act raises a lot of questions. Many are addressed here, in a conversational tone that acknowledges this is awfully confusing. But this post will focus on how the Act applies to independent contractors.

Do Independent Contractors Get the Benefits of the Act?

No. The Act provides paid sick leave and expanded Family and Medical Leave Act (FMLA) leave only to employees, and only if their employer has fewer than 500 employees.

How Does the Act Differentiate Between an Employee and an Independent Contractor?

Ah yes, the age old question of Who Is My Employee? The Act uses the definitions of “employee” in the FMLA and the Fair Labor Standards Act (FLSA). The FMLA uses the FLSA definition, so let’s focus on that.

The test for whether an independent contractor is really an employee under the FLSA is determined by using an economic realities test. This is a different test than the ones used for determining whether someone is an employee under tax, unemployment, workers compensation, and many other federal and state laws.

The economic realities test generally looks at these factors:

  1. The extent to which the services rendered are an integral part of the principal’s business.
  2. The permanency of the relationship.
  3. The amount of the alleged contractor’s investment in facilities and equipment.
  4. The nature and degree of control by the principal.
  5. The alleged contractor’s opportunities for profit and loss.
  6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
  7. The degree of independent business organization and operation.

This list is from DOL Fact Sheet #13, but it’s worth noting that different courts define the factors differently. Know your jurisdiction. Another commonly used listing of the factors can be found here.

The more independent the worker is from the business retaining his/her services, the more likely the worker is properly classified as an independent contractor.

How Could this Issue Arise?

With the economy in a cornoravirus-induced tailspin, lots of employees are losing their jobs, and lots of independent contractors are losing their engagements. When the income stream stops flowing, people look for a way to reopen the faucet.

Independent contractors might file unemployment claims. We’ve discuss the dangers of that here. They might also be tempted to file lawsuits claiming they’ve been misclassified. A successful claim could mean they’re entitled not only to the benefits of the Families First Act, but also potentially to unpaid overtime and other benefits that employees can receive.

Times are tough, and livelihoods are at stake. As contractors lose more work, we’re likely to see an increase in independent contractor misclassification claims. And that’s no bull.

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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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What Is Joint Employment? New DOL Rules Take Effect in 60 Days

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This week’s post is Family Feud Style. Name Three Things That Sound Like They Would Be “Joint Employment” But Are Not:

  1. Long-haired, easy-going product tester at the local wacky tobacky dispensary
  2. Note taker at an orthopedist’s office
  3. The guy on radio ads for non-approved supplements claiming to relieve joint pain who says, really really fast, “These statements not approved or validated by the FDA.”

Each of those jobs has something to do with joints, but that’s not what the Department of Labor (DOL) means when it addresses “joint employment.”

Under the Fair Labor Standards Act (FLSA), more than one person can be an employee’s employer, and when there’s joint employment, both employers are fully liable for any minimum wage or overtime owed to the employee. So, when is a person a joint employer?

On Sunday, the DOL issued new rules for determining when someone is a joint employer under the FLSA. The new rules take effect in 60 days. Here’s what you need to know.

Four-Part Balancing Test

When an employee’s work is for the benefit of both the W-2 employer (such as a staffing agency) and another business, the determination of whether the second business is a “joint employer” is made by evaluating whether the second business:

  1. Hires or fires the employee;
  2. Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  3. Determines the employee’s rate and method of payment; and
  4. Maintains the employee’s employment records.

It’s a balancing test, and no single factor is dispositive.

Actual Control Is Required; Reserved Control Is Not Enough

The new regulations focus on actual control, not merely the right to exert control. This is different from the common law test.

Under the new regulations, the potential joint employer must actually exercise control. Merely reserving control can be relevant, but only if the business actually exercises control in at least one of the four ways. Standard contract language reserving a right to act is not sufficient to demonstrate joint employment.

Different Test for Independent Contractor vs. Employee

The test for joint employment will now be different from the test for Independent Contractor vs. Employee. To determine whether someone is an employee or an independent contractor under the FLSA, the key question is whether the worker is economically dependent on the potential employer. But according to the new regulations, once the worker is someone’s employee, economic dependence is not relevant to determining whether there is a second “joint” employer.

Ordinary Sound Business Practices Are Not Evidence of Joint Employment

The regulations also provide assurance to businesses that wish to impose rules to preserve brand standards, ensure compliance with the law, or instill sound business practices. Those types of actions, according to the DOL, are not evidence of joint employment.

For example, the following actions by a potential joint employer do not make a finding of joint employment more likely:

  • Operating as a franchisor or entering into a brand and supply agreement, or using a similar business model;
  • Requiring the primary employer to comply with specific legal obligations or to meet certain standards to protect the health or safety of its employees or the public;
  • Monitoring and enforcing contractual agreements with the primary employer, such as mandating that primary employers comply with their obligations under the FLSA or other similar laws;
  • Instituting sexual harassment policies;
  • Requiring background checks;
  • Requiring primary employers to establish workplace safety practices and protocols or to provide workers training in matters such as health, safety, or legal compliance;
  • Requiring the inclusion of certain standards, policies, or procedures in an employee handbook;
  • Requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation, or the monitoring and enforcement of such requirements, including specifying the size or scope of the work project, requiring the employer to meet quantity and quality standards, and imposing deadlines;  
  • Imposing morality clauses;
  • Requiring the use of standardized products, services, or advertising to maintain brand standards;
  • Providing the employer a sample employee handbook or other forms; 
  • Allowing the employer to operate a business on its premises (including “store within a store” arrangements); 
  • Offering an association health plan or association retirement plan to the primary employer or participating in such a plan with the primary employer; or 
  • Jointly participating in an apprenticeship program with the primary employer.

FLSA Only

The new regulations apply to the FLSA only. Other agencies may impose different standards. The National Labor Relations Board (NLRB) is expected to issue its own regulations shortly to address when there is joint employment under federal labor law; and the Equal Employment Opportunity Agency (EEOC) is expected to consider issuing its own new standards for determining whether joint employment exists under federal anti-discrimination laws.

Standards issued by the NLRB or the EEOC maybe similar or may be materially different.

Reliance On The New Rules Provides a Defense

These new rules will apply to DOL investigations of FLSA compliance matters. It remains to be seen whether the federal courts will apply these rules too, but—importantly, the rules provide for Portal-to-Portal Act reliance.

That means employers are entitled to rely on these regulations as a defense to any joint employment claim. The regulations provide several examples of scenarios in which joint employment does and does not exist. Employers should review those scenarios and model their relationships accordingly.

More Information

Additional resources from the DOL can be found here:

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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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Can Study Time be Considered Employment? Yes, Says a Federal Court

Is study time compensable employmentSam Cooke admittedly didn’t know much about history, didn’t know much about biology, didn’t know much about a science book, and didn’t know much about the French he took.

That’s probably because he didn’t study.

Studying can have its rewards, but can those rewards include being paid to study? Yes, says a federal court in Arizona—at least under one set of facts.

Under the Fair Labor Standards Act (FLSA), time spent working must be compensated. In Julian v. Swift Transportation, the court had to decide whether study time was working time.

As part of the new hire trainee process, potential new drivers for a transportation company were provided a three-day period of orientation, then were sent for six weeks of paid training with a mentor. During the paid training period, the newbies were required to study in preparation for company-specific new driver tests. Some of the study time was spent on the clock during the 8-hour training day, but some of the required study time was performed while off-the-clock in “sleeper berth” time.

The court ruled that, because the company actively stressed the importance of studying, even during sleeper berth time, this time was compensable “employment.” In this case, the study time had to be paid.

This ruling is limited to the facts of this case and certainly does not mean that all study time for new hires is compensable. Sorry, Sam Cooke. But here, where workers were on the road with a mentor for a six-week training program and were expected to study frequently, the study time was determined to be working time.

Now, I don’t claim to be an A student, but I’m trying to be. For maybe by being an A student, baby, I can win your love for me. (And an extra paycheck?)

© 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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