Why You Should Limit Workplace Rules That Apply to Contractors (Twisted Sister Edition)

There are so many great songs about defying authority. What’s the best? Hard to say. The best video, though – that’s easy. We’re Not Gonna Take It by Twisted Sister. (Watch here, then thank me later. I could watch the first minute a hundred times. Say it with me: “What do you want to do with your life?”)

Rock may about breaking rules, but business is not. With your employees, there are lots of rules you want them to follow, and you probably list them in painful detail in handbooks, posters, flyers, brochures, catalogs, signposts, compendiums, directories, and mandatory worker inner eyelid tattoos.

What about independent contractors, though? To preserve independent contractor status, you already know you want to try to minimize your exercise of control. But some rules are needed, expecially for contractors who work on your site.

Here are some guidelines to consider:

Rules appropriate for employees, but not well-suited for contractors:

  • Employee Handbooks
  • Policy Manuals
  • FMLA Policy
  • Vacation and leave policies

Applying those employee-specific rules to independent contractors would tend to support an argument that contractors are being treated like employees.

Some rules, though, are more appropriate to ask on-site contractors to follow.

Examples of rules that are generally suitable to apply to contractors:

  • Safety rules, especially those related to ensuring safety at the facility (e.g., must wear hard hat, please do not flick matches at that industrial-size fuel tank, keep your fingers clear of the 4000 ton forging press)
  • Emergency evacuation or exit procedures
  • Anti-Discrimination Policy (if drafted broadly, to cover employees, contractors, visitors, interlopers, outerlopers, sidelopers, etc.)

These types of rules can be applied to contractors because they do not tell the contractor how to do the work. Instead, they are designed to ensure a safe and productive space where no one gets hurt.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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

 

Independent Contractor vs. Employee: An Ode to Tom Petty

With an unmistakable voice and powerful lyrics, Tom Petty will long be remembered as a musical giant. As I tuned into the SiriusXM Tom Petty channel on my drive home from work last night, I decided to honor his memory the only way I know how – by linking a bunch of his song titles to completely irrelevant points about independent contractor misclassification.

So, here it is, the subject of Independent Contractor vs. Employee, as told through the song titles of Tom Petty.

You Got Lucky. Businesses sometimes tell me that their independent contractors must not be misclassified because it’s always been done this way. The business has never been audited or sued. Ignorance, however, should never be mistaken for bliss. Just because your classification of workers as contractors has never been challenged does not mean it is correct. To all those businesses who may be misclassifying their independent contractors but have never been challenged, I would say, You Got Lucky.

Don’t Do Me Like That. This song reminds me of the common scenario where an independent contractor has been blissfully working for a business for many years. Everyone is happy with the arrangement – until they are not. The business cuts ties with the independent contractor, then the contractor files a complaint. The agency or judge, evaluating the facts of the relationship, concludes that the contractor was really an employee all along, and the business now owes back assessments or back taxes for several years of misclassification. To every independent contractor who has filed a claim, what the business really wants tell you is, Don’t Do Me Like That.

I Won’t Back Down. When your independent contractor files for unemployment, try not to think of this clam the same way you would think of an unemployment claim filed by an employee. When a former employee files for unemployment, you probably don’t care a whole lot. The consequences to your business are minuscule and, besides, the person lost a job and is seeking a government benefit that is meant for when people lose a job. On the other hand, if your independent contractor files for unemployment, there can be serious consequences if that worker is deemed to have been an employee and therefore eligible for unemployment insurance. The consequences are that your business did not pay into the unemployment system for that worker — and for every other similarly situated independent contractor, for as far back as the statute of limitations extends. The economic consequences can be significant. You probably want to fight that claim. If your contractor files for unemployment, your Tom Petty song ought to be, I Won’t Back Down.

Yer So Bad. The consequences of independent contractor misclassification can be substantial. You know all those employment, tax, and benefit laws that you thought didn’t apply? Well, now they apply. Fines, penalties, back taxes, assessments, and good old fashioned lawsuits await, along with all sorts of fun flavors of damages like back wages (yummy!), punitive damages (scrumptious!), and having to pay the attorneys’ fees of the plaintiff who just sued you (what??? icky!). All of these negative consequences are the courts’ and agencies’ way of saying, Yer So Bad.

Time to Move On. Businesses that use independent contractors should take proactive steps to evaluate those relationships. Sometimes, after an honest assessment, the best strategy is to reclassify those workers as employees. Time to Move On.

Jammin’ Me. This ‘80s beauty featured lines like, “Take back your Iranian torture” and “Quit jammin me.” Those are lines you might want to say to the government agency that conducts a 1099 audit and alleges that you’ve misclassified some contractors. You might want to say it. But you probably shouldn’t. Not professional.

It’ll All Work Out. This is the part of the blog post where you lean back and take a deep breath. In a true independent contractor relationship, you care about the result but do not exert control over how the work is done. The more you control how the work is done, the more likely the contractor is misclassified and is really an employee. The best philosophy with independent contractors is not to micromanage. Chill, man. It’ll All Work Out.  (Or, if we were doing a Breaking Bad post, “Saul Good, Man”)

It’s Good to Be King. This is the feeling you should have if you’ve been proactive, evaluated your 1099 contractor relationships, made sure the facts support independent contractor status under all of the various Right to Control Tests, Economic Realities Tests, ABC Tests, and whatever other tests any state or local government throws at you. When it’s all said and done and you can say with confidence that your contractors are properly classified, you’ll know It’s Good to Be King.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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

 

Can Independent Contractor Misclassification Automatically Violate Federal Labor Law? (Hint: Yes)

The past two weekends, we have seen NFL players link arms in solidarity. They protest mistreatment and injustice in society, not mistreatment and injustice by their employers. In fact, there have been several instances where owners and coaches have joined in.

Had the players been protesting actions by their employers — their teams — their actions likely would be considered “protected concerted activity” under the National Labor Relations Act (NLRA). The NLRA grants employees the right to act collectively to protest terms or conditions of their employment. Employees have these rights even if there is no union.

NLRA rights apply only to employees, not to independent contractors. Independent contractors have no right under the NLRA to engage in collective behavior. In fact, antitrust laws can sometimes prohibit independent contractors from acting collectively — such as in price fixing.

So let’s get to the issue that is the focus of this blog — the issue of Independent Contractor vs. Employee.

Here’s the question of the day:

If independent contractors have no rights under the NLRA but employees do, can the mere act of misclassifying independent contractors be considered a denial of NLRA rights? 

Yes, said an Administrative Law Judge in a recent case involving couriers.

Here’s the judge’s reasoning: Employees have NLRA rights, allowing them to act collectively. An employer violates the NLRA by denying an employee the right to act collectively. Protected concerted activity can include discussing wages with co-workers, discussing discipline, speaking out against a supervisor, criticizing work conditions, and a broad range of other activities (many of which you probably never thought were protected).

Independent contractors do not have these rights because the NLRA applies only to employees. By misclassifying a worker as a contractor, the judge ruled, a business is essentially telling the worker — who is actually an employee — that he has none of these rights.

Telling an employee that he has no right to engage in protected concerted activity is pretty clearly a violation of the NLRA.

And there you go.

So what does that mean for businesses that use independent contractors? In other posts, we have discussed many of the negative consequences of independent contractor misclassification. A business that has misclassified workers as independent contractors (when they should really be deemed employees) can be liable for failure to pay employment taxes, failure to provide workers’ compensation and unemployment coverage, failure to follow hiring and paycheck laws, failure to provide employee benefits, and more.

Now add to that list a possible automatic violation of the National Labor Relations Act — at least according to this judge.

You can’t see me, but I am kneeling in protest.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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

 

Update: Uber’s Misclassification Cases, Arbitration, and the Supreme Court

Independent contractor vs employee Uber misclassification lawsuit arbitration agreements IMG_1111Remember the children’s game called Red Light, Green Light? One ambitious youngster is selected as the traffic cop, who randomly shouts “red light” or “green light,” requiring all the children to run and stop and start in short bursts that would cause an adult human to tear an ACL.

That’s essentially what’s happening in the big Uber misclassification case that has been pending in California since 2014. The case is called O’Connor v. Uber Technologies and is being overseen by traffic cop / federal judge Edward Chen in San Francisco. If anyone ever gets to the finish line, it will eventually be determined whether Uber drivers are properly classified as independent contractors, rather than employees.

There are lots of Uber cases, but this one is the biggie for now, with potentially a billion dollars at issue. For those keeping score at home, that’s 1,000 times more than Dr. Evil demanded for the return of the Kreplachistan warhead.

In December 2015, the judge approved a class of 240,000 drivers, and allowed the case to proceed toward a trial. Green light! Notably, many of the drivers in the class had signed arbitration agreements preventing them from participating in a class action. The judge, however, ruled that the arbitration agreements were unenforceable. He said that the agreement prevented the drivers from engaging in “protected concerted activity” (participating in a class action lawsuit), a right protected under the National Labor Relations Act (NLRA).

Now wait a minute. We have a chicken and egg problem here. The NLRA only applies to employees. If the drivers are truly independent contractors, the NLRA does not apply, and the validity of the arbitration agreements should not be an issue. Uber filed an immediate appeal, claiming that the agreements are valid and that judge should not have allowed the case to proceed as a class action. (Red light?)

In April 2016, the Ninth Circuit Court of Appeals agreed to hear Uber’s appeal.

Meanwhile, Judge Chen allowed the case to proceed toward trial, despite the appeal. Green light! But both sides flinched (Red light!), and the case settled for $100 million.

But wait. A judge must approve a class settlement. This judge ruled the settlement was unfair to drivers since the actual recovery in trial could be much greater. (Hey, isn’t that the point of a settlement? The drivers also might have taken home nothing!) Anyway, Green light!

Meanwhile, back at the Ninth Circuit, the appeals court issued an order last week that said, “Hey, everybody wait.” Red light!

The Court of Appeals noted that the U.S. Supreme Court is about to decide whether employee arbitration agreements that waive the right to participate in a class action are permissible, or whether they violate the NLRA. That’s the same issue that led Judge Chen to call “Green light!” in 2015 and certify the class of Uber drivers. The Supreme Court’s decision will likely govern whether the Uber drivers’ arbitration agreements are valid.

On October 2, the Supreme Court will hear oral arguments on this issue, and a decision is expected in the first half of 2018. The Supreme Court’s decision will have far reaching consequences for all businesses who ask their workers to sign arbitration agreements waiving the right to trial and waiving the right to participate in a class action.  So far, courts around the country have split on this important issue, reaching different conclusions about whether these agreements are allowed. The Supreme Court decision will settle this issue for everybody.

The Supreme Court case, called NLRB v. Murphy Oil USA, will be one of the more significant employment law decisions from the Supreme Court in a long time. You can read more here from SCOTUSblog or here from Baker Hostetler blogs.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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

Drivers Rack Up Misclassification Settlements, While GrubHub Fights Back

In 1984, the Cars released a sad-sounding song called Drive. I assume it was about a guy longing for a girl, but it’s too depressing to listen to the whole thing. Throughout the song, Ric Ocasek asks “Who’s gonna drive you home tonight?” (Why the long face, Ric? Kidding.)

If you use a ride hailing service, chances are it’s an independent contractor driver who’s gonna drive you home. But in several high profile lawsuits, drivers have challenged their independent contractor status. While these suits have been in the news for years, there have been a recent flurry of high dollar settlements. Earlier this year, Lyft agreed to pay $27 million to a class of 95,000 drivers in California and Door Dash agreed to pay $5 million. Just last week, Postmates agreed to pay $8.75 million.

Notably, none of these settlements resolved the issue of whether drivers for these companies are employees or independent contractors. The settlements involved payouts and agreed-upon changes in company policies, but none of the drivers were reclassified as employees.

GrubHub, on the other hand, has taken a misclassification case to trial. The case being tried is not a class action, and only about $600 is at issue. But the case may have significant ramifications for the status of independent contractor driviers, both at GrubHub and potentially elsewhere, and the case is being watched closely. (You can read more here and here.) As of this morning (9/18/17), the case is still in trial and there has been no verdict.

The point to remember is that companies who use an independent contractor model face a substantial risk of being sued. Plaintiffs’ lawyers are aggressive in recruiting contractors to file lawsuits that challenge their status as independent contractors, arguing that they should be paid as employees instead.

Companies using a contractor model should be proactive. Take steps to evaluate these relationships now. Adjust the facts and contract language to best position your business to defend against a misclassification challenge.

Independent contractor misclassification litigation is active and should be watched closely — unlike the Cars, who broke up in 1988 (for the most part, anyway; you can read more here in the unlikely event you care about the current status of the Cars).

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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

 

Who is the Next “Miss Classified”? Here’s How I Would Award the Prize.

IMG_1107I received an email this week from a worker claiming he was “Miss Classified.” I did not know there was a pageant for that, but I suppose congratulations were probably due. I politely responded that I only represent companies, not individuals, in disputes relating to independent contractor misclassification, and I wished him luck.

But then I started thinking, What if there was a pageant? What would it take to be crowned Miss Classified?

I came up with a few criteria.

To be named Miss Classified, a contestant would probably have a job that requires her to work a set daily schedule, with little flexibility. She’d have to ask a supervisor for time off (including to enter this pageant).

A fixed schedule suggests employment when assessing Independent Contractor vs. Employee, so I’d award that contestant a point toward becoming Miss Classified. If the supervisor denies the request for time off, I’d award an extra point toward Miss Classified status — but sadly, if denied the day off, this worthy contestant might not show up for the pageant. [🤔]

I’d award another point toward being named Miss Classified if she uses company tools and equipment. If she does office work, she’d get points if she uses someone else’s desk and computer, performs her work at the company’s primary place of business, and has a company badge. I’d award bonus points if she has a company email address.

Instead of a swimsuit competition, I’d have contestants reveal what they wear to work. Anyone wearing a swimsuit is at the wrong pageant and would be asked to leave. But anyone wearing company uniform or logo would get a point. I’d have an exception, though. If the company shirt says “Company – Authorized Contractor,” no points.

For the talent portion of the Miss Classified pageant, I’d ask candidates how they learned their special skill. I’d award no points to anyone who became licensed and trained on their own time and on their own dime. But if they learned their craft from the company they are working for, I’d award a point toward being named Miss Classified. If the company paid for the license or training, I’d award another point.

My pageant would have a monetary award for the winner (let’s just call it damages), but before awarding any economic prizes, I’d ask the contestants about their current financial situation. Are you economically reliant on one company for all your compensation? If yes, two points. That’s a candidate who might be worthy of the title Miss Classified.

On the other hand, a candidate gets no points if she performs work for several companies and advertises her services in the marketplace. Anyone using a personal business card and website to advertise her services to the public gets no points. Anyone who is simultaneously working for one company and that company’s direct competitors will be disqualified from the competition. That person is probably not Miss Classified.

I’d hold my competition in California. That would be the most likely place for someone to be named Miss Classified. California has all sorts of state laws that would influence the outcome of my competition.

I’d have Simon Cowell judge. Not for any good reason though. I just think that would be good for ratings.

And the winner is … hopefully not anyone performing services for your company!

(In case you were wondering, this would NOT be the among the world’s strangest pageants. But these are.)

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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

 

Court Serves Up Reminder that Contractors Can Be Properly Classified and Misclassified – At The Same Time.

elephant-reminder pennsylvania court joint employment joint empoyer construction workplace misclassification act

A recurring theme in this blog has been that when trying to determine Who Is My Employee?, there are different tests under different laws. Different tests can yield different results.

A recent court decision from Pennsylvania emphasizes this point. In the Keystone State (proud home of Dunder Mifflin and Hershey Park), contruction workers are considered employees for workers compensation purposes unless they (i) have a written contract, (ii) have a place of business separate from their general contractor’s site, and (iii) have liability insurance of at least $50,000. This strict test is courtesy of the Construction Workplace Misclassification Act (CWMA), an Act whose name shows a disappointing lack of creativity.

I might have gone with “Construction Occupation Workers’ Act Regarding Designations In Classifying Employees” (COWARDICE) or “Law About Misclassifying Employees” (LAME) or, if I was hungry for shellfish, then maybe “Construction Law About Misclassification for Builders And Keeping Employees Safe” (CLAMBAKES).

Anyway, what were we talking about? Oh yeah, that whack-a-doodle misclassification test for construction workers. As my loyal readers know, that’s not even close to the tests used for determining Employee vs. Independent Contractor under most other laws. Other more common tests, like Right to Control Tests or Economic Realities Tests, rely on entirely different factors and weigh them, rather than requiring three specific factors to be met.

The court noted that the CWMA test was very different from the common law test and that the result under one test was not necessarily going to lead to the same result under the other test.

So remember, the task of deciding whether a worker is misclassified is hard and no fun. The task of writing names for laws, however, should be embraced with joy and creativity.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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