Tag Archives: Independent Contractor vs. Employee

08.30.18
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Beware of Classwide Arbitration: Instacart Case Might Allow It

Instacart arbitration decision allowing class actions

Did that photo make you want to eat a pumpkin right now? (Probably not.)

🍿🍩🍰🍦🍨 Do these emojis make you hungry?

Does this one 🍺 make you wish the workday was over?

Fortunately for those who like instant gratification, driving services like Instacart promise to connect you with contractors who will go grocery shopping for you and will deliver the bounty to your house. This is not an ad for Instacart, though. This is a post about arbitration.

You see, like many other delivery app companies, Instacart’s drivers are independent contractors. Also like many other delivery app companies, Instacart gets sued for independent contractor misclassification. Wisely, Instacart has all contractors sign arbitration agreements.

One of the most significant benefits of arbitration agreements for companies is the opportunity to insert a clause that waives the right to bring any class/collective action claims. All claims must be brought individually — but only if that waiver language is clearly stated in the contract.

Instacart may have had an Oops!

In a pending case alleging independent contractor misclassification, the arbitrator has ruled (preliminarily) that the driver bringing the claim may bring a class/collective action. Instacart said, Whahhh?, and asked a California court to intervene and to rule that the arbitrator was overstepping his authority.

Arbitrators, though, are pretty well insulated from court review. That’s usually a plus, but it can also be a minus. For Instacart, it’s a minus here.

The California court ruled that it has no jurisdiction to intervene. It cannot review that preliminary decision by an arbitrator. Rather, a court can only review an arbitrator’s decision under very limited circumstances, mainly only after there has been an “award.” Instacart appealed but fared no better. The California Court of Appeals agreed.

The Court of Appeals, like the court below, ruled that the arbitrator’s decision to allow class arbitration is not an “award,” and the court cannot intervene. The arbitration must continue under the jurisdiction of the arbitrator. Only when the case is done will the court take a look.

This decision should serve as a reminder of two important points:

  1. In arbitration agreements with independent contractors, it is important to include a carefully drafted clause that waives the right to file or participate in a class or collective action. The clause should also state that the arbitrator has no jurisdiction to consider a class or collective action. These clauses need to be unambiguous.
  2. When parties agree to arbitrate, the arbitrator has a lot of power, and the preliminary rulings of an arbitrator are generally not subject to court review (except in limited circumstances). When you choose arbitration, you’re all in.

The case is in its very early stages, so we’ll see what happens. But there are some early lessons to be learned here. Congratulations. You made it to the end of the post. Now you can go eat.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.30.18
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Lessons from a Reggae Cucumber Song: Draft Benefit Plan Eligibility Language Carefully

ERISA independent contractor misclassification cucumber

Reggae artist Macka B has a song touting the nutritional benefits of the cucumber. The song includes verses like:

Get the cucumber cut it inna slice
Put it inna jug of water overnight
You know what you get for a fraction of the price
Energy drink full of electrolytes

I learned about this song when I asked The Google for songs about benefits. But as much as I like the song (youtube here), this post is about a different kind of benefits.

One of the biggest risks of independent contractor misclassification is having to provide employee benefits to workers you thought were independent contractors. If it turns out those workers were misclassified and are really employees, they may suddenly be eligible for all sorts of employee benefits, including retirement plans like 401(k) match and employee stock ownership. And they’ll be eligible retroactively. This can be expensive. A goof of this type cost one major corporation $97 million back in the late 1990s.

As one recent federal court decision from Georgia reminds us, businesses can avoid this risk with careful drafting in its benefit plan document.

Continue reading →

07.26.18
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Does California’s ABC Test Violate Federal Law? Truckers Sue, Saying It Does

Trucker Dynamex ABC Test California

The 1976 song, Convoy, is about a fictional trucker rebellion, protesting the 55 mph speed limit, tolls, and mandatory log books to ensure that drivers limit their hours. The song is full of trucker slang and includes CB conversations among Rubber Duck, Pig Pen, and Sodbuster. The truckers crash road blocks and flee the police and reinforcements from the Illinois National Guard. Here’s a fun little article about how this truckers’ protest anthem became a hit single.

The truckers are protesting again.

On July 19, the Western States Trucking Association filed a federal lawsuit, alleging that the California Supreme Court’s new ABC Test (set forth in the Dynamex case) for Continue reading →

07.23.18
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Court Expands Use of ABC Test in California, Commits Candy Land Party Foul

Dynamex ABC Test Candy Land

Suppose you are dominating an important game of Candy Land, having picked the orange card first, which gave you the privilege of taking Rainbow Trail across half the board to a distant purple square, leaving your toddler opponent in tears, whining, “No Fair!” Well, your toddler would be wrong since that was perfectly fair and within the rules. But you feel bad for young Timmy and so you allow him to change the rules mid-game so that no one can use Rainbow Trail, forcing you to plod slowly across all the regular squares, bored to tears because this stinking game takes forever.

Sometimes we make exceptions for bratty toddlers, but in real life it’s no fair to change the rules in the middle of the game. You may have built your entire Candy Land strategy around trying to pick the Orange square card first. It’s not fair to block you from Rainbow Trail after the game has started.

The same is true in business. Businesses hire employees or retain independent contractors according to the rules in place when they make those decisions.

An important ruling last week threatens to change the Independent Contractor vs. Employee rules midway through the game — but this is no game.

Continue reading →

07.16.18
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We’re Blogging about Logging! (I know, lame headline, but true)

Logger Ohio workers compensation independent contractor

The lyrics, “Come fly with me, come fly, come fly away” are instantly associated with Frank Sinatra (although, troublingly, the Michael Buble version appeared higher in my google search for a link to the lyrics). It is a little known fact* that the original version of the song was an ode to woodsmen and forestry workers and went something like this: “Come log with me, come log, come log away.”

In the original* lyric, Ol’ Blue Eyes invites a fellow logger to chop wood with him — not for him. That same distinction (with, not for) made all the difference in a recent court decision denying workers compensation benefits to a logger.

Continue reading →

06.28.18
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How Best to Describe the Effect of Dynamex? Led Zeppelin Songs

ADDD3D9A-F4D5-4404-8E69-C3BFE2919D3C

A lot has been written about the Dynamex case, but not enough has been written about it using references to Led Zeppelin songs. I am here to fill the void. Here is a musically-themed update. We’re Going to California. You’re welcome.

Dazed and Confused. Last week, a gaggle of California businesses and trade associations sent a letter to Gov. Brown and the Cal. Legislature, asking for relief from the Dynamex decision and its court-created ABC Test for independent contractor misclassification claims. The letter correctly says, “With one judicial opinion, nearly 30 years of established law has been overturned virtually overnight.”

Communication Breakdown. The letter argues that any change in the standard for determining Who Is My Employee? should be made by the legislature, not the courts. The Industrial Wage Commission, which wrote the wage orders at issue in the Dynamex case, was defunded 15 years ago, before mobile apps existed and before the gig economy took off. So why is a new rule applicable to the new economy coming from a court, instead of the legislature? Continue reading →

06.25.18
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What Do Rabbits, Swedish Massage, and this Misclassification Study Have in Common?

Independent contractor miscalssification study Georgia State UniversityAccording to the DailySignal.com, the National Institute of Health recently spent $387,000 to determine the health effects of Swedish massage on rabbits. I have not read the study, but I independently conclude that the massages were relaxing and helped to decrease some of the daily stresses faced by small burrowing mammals.

And that brings us to a study being conducted at Georgia State University, partially funded by a similarly wasteful $250,000 grant from the Department of Labor. It’s a study on independent contractor misclassification.

The study is examining 12,000 federal court decisions between 2008 and 2015 to try to determine “the ways in which federal district courts draw the line between employee and independent contractors.” Using text mining and big data tools, the study hopes to uncover “the legal tests that courts used [and] the factors that exerted the most influence on judges’ decisions.”

This is dumb.

Continue reading →

06.11.18
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You can’t pay for English whales (the queen owns those), but you should pay summer interns – as employees, not contractors

Whale summer internships paid unpaid employee independent contractorSome things you can’t pay for. All of the whales and sturgeon that live in English waters, for example, belong to the queen. Under an English statute from 1324, “The king shall have wreck of the sea throughout the realm, whales and sturgeons taken in the sea or elsewhere within the realm, except in certain places privileged by the king.”

So if you wanted to buy an English whale this summer, you may be out of luck. U.S. business should be spending their money elsewhere — like on summer interns! Yes, let’s talk about summer interns. Paid or unpaid? Employee or independent contractor? Have I captured your attention? I knew it. Read on.

Paid or unpaid? The rules have been changing to make it easier to have unpaid interns, provided the internships have educational value and are not for the benefit of the business. This post provides some guidelines. The bottom line, though, is that it’s safest to pay your summer interns. Continue reading →

05.29.18
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Exotic Dance Marathon Ends with $4.5 Million Misclassification Award

Dollar independent contractor misclassification millionsThe Penthouse Club of Philadelphia was hit with a $4.5 million jury award for having misclassified its dancers as independent contractors. This case was filed in 2013, and the federal court just recently entered the judgment order.

For those of you seeking business lessons from stripper lawsuits, today is your lucky day!

The dancers had alleged that they were treated as employees but not paid as employees. For example, they alleged that the club required them to work a set number of hours and days each week, required them to comply with physical appearance guidelines, and took deductions from their tips for what we’ll call special kinds of dances.

The Club fought hard for five years but could not overcome the negative facts in the case. Remember, the determination of whether someone is an employee or a true independent contractor is not based on what the parties agree. It’s based on the facts of the relationship.

This was primarily a Fair Labor Standards Act lawsuit, and so the Economic Realities Test is used. Other laws apply a Right to Control Test. Some states use a more difficult ABC Test.

Independent contractor misclassification lawsuits can be a tremendous liability, and businesses using contractors should be proactive and set up the relationship in a way that will withstand a challenge. When a business maintains control over hours, days of work, worker appearance, location of work, and other aspects of how the work is performed, the relationship starts to resemble employment.

In this case, the Club not only is on the hook for $4.5 million. They had to pay their attorneys’ fees, they’ll continue to pay their attorneys’ fees if they appeal, and they had to slog through six years of painful, time-consuming litigation that was undoubtedly a distraction from the business of running whatever type of classy joint they have going there. [Note to wife: I did not do any onsite investigation.]

We’ve seen lots of activity lately in the field of “exotic dancing.” I mean misclassification activity, and lawsuit activity, just to be clear on what I’ve been “seeing.” See other multi-million dollar misclassification awards here and here, all of which are SFW.

Businesses that use independent contractors need to evaluate the facts of the relationship and need to be proactive in setting up the facts to support true independent contractor status. Those who fail may get an extra long high-heeled kick in the rear.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.24.18
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Do ABC Tests Matter if my Business is not in California? (Yes!!!)

ABC Test Califoirnia Dynbamex Massachusetts other states

According to Michael Jackson and his brothers (don’t forget Tito), ABC is easy as 1-2-3, and it’s also easy as do-re-mi. According to Julie Andrews, in Do-Re-Mi, once you know the notes to sing, you can sing most anything. This is not technically true, as once demonstrated by William Hung.

ABC may sound easy, and some people might think they can sing anything.  But actual compliance with ABC Tests is not easy — and yes, every business needs to think about how it would comply with ABC Tests. (For background on What is an ABC Test?, read here and here.)

ABC Tests are not just in California. Massachusetts uses an ABC Test to determine who is an employee under state wage law. New Jersey uses an ABC Test to determine whether someone is an employee or independent contractor for state wage law. Unemployment too.

For unemployment purposes, lots of states use ABC tests to determine whether someone seeking unemployment coverage was your employee or an independent contractor. These states include Connecticut, Delaware, Illinois, Indiana, Massachusetts, Nebraska, Nevada, New Hampshire, New Jersey, Vermont, Washington, and West Virginia. There are more but I started prioritizing my list by number of electoral votes.

Because ABC Tests are stricter than ordinary balancing tests (like Right to Control or Economic Realities tests), your company may be required to make unemployment contributions for individuals who are independent contractors under most laws but are employees under your state’s unemployment compensation law. You could owe back assessments and penalties for failing to pay into the state unemployment insurance fund.

New York, Pennsylvania, and D.C. use ABC Tests for work performed in the construction industry.

Some states use even tougher multi-factor tests to determine whether an individual presumed to be an independent contractor is really an employee. Maine has an ABCDE Test, meaning each of five factors must be met (plus another 3 from a list of 7, creating a veritable menu of family-style Chinese take-out for misclassification). New Hampshire uses an ABCDEFG Test to determine whether someone is an employee subject to its workers compensation and wage and hour laws.

Congressional Democrats, including Bernie Sanders and his hair, have introduced a bill that would use an ABC Test to determine whether someone is an employee under the NLRA. The bill has no chance to become law unless (until?) the Democrats control both houses of Congress and the Presidency, but for now, it’s worth noting that there is a desire among some lawmakers to adopt sweeping changes to the definition of employee.

The point is that ABC tests are prevalent already — and they are expanding. The California decision adopting an ABC Test was issued three years after the New Jersey Supreme Court adopted a similar (but less stringent) ABC Test for its state wage and hour laws.

With more state legislatures and state supreme courts considering changing the tests, we can expect this trend to continue. We can expect more states to adopt ABC Tests, especially in states where the courts (like in California) make up ABC Tests without legislative input. For a legislature to pass an ABC Test, it takes some work, bicameral support, and usually the signature of a governor. For courts to make up new ABC Tests, however, it’s easy as 1-2-3, do-re-mi.

Business should be thinking proactively about whether their contracts, relationships, and public-facing statements (such as in websites) will allow them to support independent contractor status when an ABC Test is used to determine WhoIs My Employee?

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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