Tag Archives: Independent Contractor Misclassification

06.17.19
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After Robert R Died, the State Agency Kept Sending Him Assessments. Then I Did This…

Graveyard independent contrractor misclassificationThis is a true story — and it was the most fun I ever had as a lawyer.

I was representing the administrator of an estate. The deceased, Robert R, had required round-the-clock care before his demise, and his family retained several home heath care nurses. The family treated them as independent contractors. When one nurse was no longer needed, she filed for unemployment.

The state agency decided she was an employee, not a contractor. The agency sent a bill to the family for not paying into the state unemployment fund. The assessments covered all of Robert R’s nurses, not just the one who filed for unemployment. The agency also assumed that Robert R continued to retain nurses, and it issued new assessments each quarter.

But then Robert R died. At that point, he no longer needed nurses.

That’s where I come in. Shortly after Robert R’s death, I wrote a polite letter to the agency, informing it that Robert R had passed. I attached the death certificate and told the agency there were no more nurses, so please do not send any new assessments.

But the next quarter, the state agency sent a new quarterly assessment.

I sent another letter. I attached a second copy of the death certificate and again informed the agency that Robert R had died and no longer had any nurses, so please stop sending new assessments.

The next quarter, the state agency sent another new quarterly assessment.

Exasperated, I then sent this.

THL letter - why we are not paying these assessments

The agency stopped sending assessments, and I never heard from them again.

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

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06.10.19
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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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06.03.19
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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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05.20.19
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Say It Like You Mean It! NLRB Says Uber Drivers are Independent Contractors

All You can Eat Seats - Independent contractor misclassification

Section 223 looks delicious!

I was in Phoenix last week and saw this sign at a Diamondbacks Game. The seats in Section 223 were probably plastic and hard to chew but otherwise looked pretty tasty. Still, I don’t think I could eat more than a few at a time.

Ok, I know what the sign intended, but my reading is a fair one too. Right? The message wasn’t quite clear.

The NLRB was much more clear in the message it sent last week in an Advice Memorandum from the Office of the General Counsel. The Board opined that UberX and UberBLACK drivers were independent contractors, not employees of the ride-share app.

The opinion letter applies only to federal labor law (the NLRA), not to wage and hour law, employee benefits law, tax law, or the vast potpourri of state laws, but it’s another sign that the current administration is intent on protecting independent contractor relationships — if the relationships are properly structured.

The memo applied the same Right to Control Test for determining Independent Contractor vs. Employee that the Board used in January in its SuperShuttle decision. In SuperShuttle, the Board ruled that a group of airport van drivers were independent contractors, not employees, under the National Labor Relations Act. The ten-factor Right to Control Test used by the Board is explained here.

This NLRB Advice Memorandum arrives less than three weeks after a similar opinion letter from the Department of Labor (DOL). The DOL’s April 29 letter concluded that service providers who use “virtual marketplace” apps to find customers are independent contractors, not employees. While the letter doesn’t identify the app it reviewed, the DOL’s analysis seems to apply to Uber and other ride-share apps and to the service providers (drivers) who use these apps to find customers. The DOL’s letter addressed only the Fair Labor Standards Act (FLSA), which applies a six-factor Economic Realities Test for determining Independent Contractor vs. Employee. Different law, different test. 

Here are four takeaways from the two letters, viewed together:

  1. Different tests apply to different laws, even for similar circumstances. That’s been a consistent theme in this blog, and these two letters — one interpreting the NLRA and the other interpreting the FLSA — reinforce the different approaches. Click here for a chart showing the different tests for Independent Contractor vs. Employee, as of January 2019.
  2. The current administration and its executive agencies are much friendlier toward independent contractor relationships than their Obama-era predecessors. The Obama DOL and NLRB were outright hostile toward independent contractor relationships (see examples here for DOL and here for NLRB), so this is a major change.
  3. These are not court decisions and do not bind the federal courts, even as to NLRA and FLSA cases.
  4. These opinions apply only to the NLRA and the FLSA — two of the many federal laws that apply only to employees, not independent contractors. The opinions do not directly impact federal tax law or employee benefits law, and they do not impact any of the myriad state laws. In other words, the states don’t care.

The area of independent contractor misclassification and the never-ending quest to determine Who Is My Employee? continues to evolve at a pace that should keep readers on the edge of their seats. Just don’t sit too close to the edge, because if you abandon your seat, someone at a D-Backs game might try to eat it.

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

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05.13.19
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Which Claims Are Covered by the Dynamex ABC Test? Here’s a Chart for California. (Time to Give Up on Positive Thinking?)

Chart Dynamex which claims does the ABC Test cover in California

Cook before eating?

A Mongolian couple died from the bubonic plague earlier this month after eating raw marmot meat. An official from the World Health Organization told the BBC that the couple ate the rodent because they believed it would bring them good health. It didn’t.

Positive thinking can be powerful, but not as powerful as bubonic plague.

California businesses that use independent contractors should be similarly cautious about any positive thinking. After a series of court decisions and a new opinion letter from the California Labor Commissioner, use of the Dynamex ABC Test for determining Independent Contractor vs. Employee is expanding.

Which claims now use the Dynamex test for determining Independent Contractor vs. Employee? Here’s the latest list — at least according to the California Labor Commissioner and my reading of recent court decisions:

Dynamex ABC Test applies:

  • Overtime;
  • Minimum wage;
  • Reporting time pay;
  • Record keeping (including itemized pay stub obligations);
  • Business expense reimbursement for cash shortages, breakage, or loss of equipment;
  • Business expense reimbursement for required uniforms, tools, and equipment; and
  • Meal and rest periods.

It depends:

To determine Independent Contractor vs. Employee for these claims, the Labor Commissioner and a California Court of Appeal instruct that the Dynamex ABC Test applies if the claim is focused on enforcing payment of minimum wage, overtime, and other obligations set forth in the Wage Orders. If not, then the ABC Test does not apply.

The general rule, according to the opinion letter, is that the Dynamex ABC Test applies to any claims that seek to enforce obligations described in one of the Industrial Wage Orders. 

The opinion letter does not carry the weight that a court decision does, and it makes some assumptions that the California Supreme Court did not make when it adopted the ABC Test in Dynamex. So there’s always a chance that the California Supreme Court might rule that the scope of the Dynamex test is supposed to be limited to a narrower range of claims. But this is California, so that does not seem likely. In other words, don’t sample that marmot meat.

Dynamex does not apply (we think):

  • Workers’ compensation claims;
  • Unemployment claims;
  • Wrongful termination;
  • Discrimination, harassment, or retaliation;
  • Tax obligations; and
  • Employee benefit obligations.

For these claims, either the S.G. Borello balancing test should apply if the claims are asserted under California law. For tax and employee benefit claims asserted under federal law, the Right to Control Test will apply. Read more here to understand how one California Court of Appeals determined which test applies to which claim. (Including entirely unnecessary references to G-L-O-R-I-A Gloooooria!)

One of the reasons independent contractor misclassification claims can be so challenging to defend is because different tests apply to different claims. This is not just a California problem.

The same problem exists under federal law, with one test applying to federal wage and hour claims (FLSA), another test applying to tax, benefits, and discrimination claims, and a moving target as to which test applies under federal labor law (NLRA).

Here is a similar chart, showing which test applies to which federal law claims.

In California, it’s getting harder and harder to prove independent contractor status, especially for claims applying the Dynamex ABC Test. Many Californians are into zen, meditation, and positive thinking, but the power of positive thinking might not get you too far when it comes to trying to preserve independent contractor status. There are still defenses, and it’s still possible to maintain independent contractor status in California, but it’s not easy.

Fighting misclassification claims in California can sometimes feel like eating raw marmot meat. It might seem like a good idea at first, but then you could end up with bubonic plague.

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

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05.02.19
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Going Mobile? DOL Endorses Independent Contractor Model for Virtual Marketplace Apps

Opinion letter mobile app

Long before mobile apps were a thing, Pete Townsend and The Who were already going mobile. In the 1971 song, Townsend sings about the virtues of life on the open road, living in a mobile home. I’m an air-conditioned gypsy.

In an important opinion letter released this week, the DOL went mobile too, lending support to businesses in the “on-demand” or “sharing” economy. The letter is the first significant ruling that supports independent contractor status for service providers who obtain work through virtual marketplace apps.

A virtual marketplace app is a matchmaking service. It connects consumers who need a service (driving, housekeeping, handyman, anything) with service providers who do the work. Virtual marketplace companies (VMCs) are frequently the target of misclassification claims. In these types of claims, service providers — and the plaintiffs’ lawyers who love them — file lawsuits claiming that the service providers are really employees of the VMC. Frequent targets have been Uber, Lyft, Doordash, and Grubhub.

In Monday’s letter, the DOL opined that service providers are indeed independent contractors of the VMC, not its employees, at least under the facts of this particular case. The letter does not identify the specific VMC at issue, but the facts in the letter are going to be generally applicable to lots of VMCs.

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04.25.19
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Mixed Messages, Misclassification, and My Visit to Ohio E-Check: Just Another Day on My Way to the Office

Independent contractor misclassification e-check mixed messages

Yesterday I was at Ohio E-check. When they use their fancy vehicle emissions testing equipment, they ask you to get out of your car and wait in a small glass-walled waiting area. Inside there are two signs. The first says: “Ohio E-Check. No cell phones!”  The second says: “Ohio E-Check. How are we doing? To comment, use this QR code.”

Regrettably, I complied with the first sign, so I do not have a picture for you of the two signs. (While waiting, I tried like hell to memorize that QR code!)

When waiting for E-Check, mixed messages are funny. When retaining independent contractors, however, mixed messages are no joke. If enough signs suggest that a contractor is really an employee, the risk of a misclassification finding is heightened, and the consequences of misclassification can be severe.

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04.22.19
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“There was boxes back there”: How a flood and a healthy dose of incompetence sank a strip club’s plan to force a dancer into arbitration

Independent contractor

Nope. Not that Godfather.

Forgive me in advance if I sound condescending. And skeptical. And incredulous. But above all, I am amused.

This is the story of a strip club called the Godfather. When one of its dancers, a young lassie named Tassy, tried to sue, alleging that she had been misclassified as an independent contractor, the Godfather asked the court to send her claims to arbitration, as required under the Godfather’s dancer agreement.

But the Godfather had one small problem. It could not produce the agreement because, it claimed, the agreement was washed out in a flood caused by a rusted-out water heater in the back room. As everyone knows, the flood-prone back room with the rusted-out water heater is the best place for storing corporate legal documents. (Note to self: update template document retention guidelines.) Preferably, as the Godfather did, store them in unmarked boxes with no index or system for determining exactly what was in the boxes. But Tassy’s agreement was in there. They’re pretty sure, anyway.

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04.18.19
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Poor Planning Dooms Pet Owner; Good Planning Saves GrubHub’s Arbitration Agreement

35D2D59B-89A6-40D6-8727-7C4C7D87BC9Findependent contractor arbitration agreement GrubHub Wallace

Why did the cassowary cross the road? To get to the other side.

Careful planning and foresight are important. For example, it would have been a good idea for a Gainesville, Florida man to have read up a little more on cassowaries before choosing to own one as a pet. A cassowary is a large flightless bird that grows up to six feet tall and can weigh 130 pounds. It has a four-inch claw on each foot, used to slice open its prey. (Infomercial: It’s both a fork and a knife!) The bird has powerful legs that it can use to kill its prey with a single kick — or chase it down by running at speeds up to 30 mph. Think Big Bird meets Edward Scissorhands meets pissed-off hungry crocodile in a go-cart.

Anyway, some guy in Gainesville bought one as a pet. It promptly killed him. Poor planning. I would have recommended a labradoodle.

A better example of planning ahead is GrubHub and its independent contractor arbitration agreements.

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04.15.19
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The Stones, the Dalai Lama, and Arbitration: How Not to Get What You Need in an Arbitration Agreement

BF593720-B1EE-47D2-93A0-7B0AE09D5C33

Not Mick Jagger

You can’t always get what you want, said a wise English sage in 1969. This advice still holds true. For example, Chinese Foreign Ministry spokesman Lu Kang recently declared that the reincarnation of the Dalai Lama must comply with Chinese law.  Good luck with that.

The enforcement mechanism for Lu’s edict is unclear, but the Chinese Communist Party knows what it wants. (Allow me a brief diversion. My favorite sentence in the cnn.com story: “It isn’t completely clear whether the Dalai Lama will allow himself to be reincarnated after he dies.”  You and me both, brother!)

Another example arose in a recent court case, in which a messenger service required its independent contractor messengers to sign an arbitration agreement. Like spokesman Lu, the messenger service may have demanded a bit too much. A California Court of Appeal declared the arbitration agreement invalid, ruling that it was both procedural and substantively unconscionable.

What makes an arbitration agreement so one-sided that it’s unconscionable?

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