Tag Archives: Independent Contractor

01.20.20
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Voters Would Reject This Flight Option, But They Could Change Independent Contractor Law in California This November

Expensive flight

A few years back, I found myself headed to the Houston airport earlier than expected after a business trip. I decided to check my phone to see whether I could get on an earlier flight back home to Cleveland.

Turns out I could — for $52,270. For coach. There was also a first class seat available. For $69,570.

I declined and decided to wait the three hours for my originally scheduled departure. But for good measure, I took this screenshot because, hey, why not.

Taking the earlier flight would not have been a good use of my money. The real subject of this post is about five app-based companies who are making much better use of their money.

With app-based companies under constant attack through independent contractor misclassification claims, and with California’s new Assembly Bill 5 making it even harder to classify people as independent contractors, the major providers are fighting back.

They’ve pledged $110 million to support a ballot initiative in California that would redraw the lines in the Employee vs. Independent Contractor debate — at least for rideshare and delivery drivers.

Under current federal and state laws, a worker is either an independent contractor or an employee. It’s binary. Employees get lots of protections. Contractors get almost none. There’s no third category that would allow rideshare and delivery drivers to operate independently while receiving a minimum level of legal protection.

This proposed initiative would change that. The law would create new rules for app-based transportation providers and drivers in California.

If the initiative passes, the new ABC Test would not apply to workers in the app-based rideshare and delivery business. Instead, those workers could stay classified as independent contractors, but the app-based companies must ensure that the drivers receive a predetermined level of compensation and benefits, including:

  • Earnings Minimum. The measure would require app-based companies to pay at least 120 percent of the minimum wage for each hour a driver spends driving—but not time spent waiting for requests.
  • Health Insurance Stipend. The measure would require rideshare and delivery companies to provide a health insurance stipend of about $400 per month to drivers who regularly work more than 25 hours per week (not including waiting time). Drivers who average 15 driving hours per week but less than 25 driving hours would receive half as much.
  • Medical Expenses and Disability Insurance. The measure would require that companies buy insurance to cover driver medical expenses and provide disability pay when a driver is injured while driving.
  • Rest Policy. The measure would prohibit drivers from working more than 12 hours in a 24 hour period for a single rideshare or delivery company.
  • Other. The measure would require that rideshare and delivery companies have sexual harassment prevention policies and conduct criminal background checks and safety training for all drivers. It also would prohibit discrimination in hiring and firing.

The measure would also prevent cities and counties from passing further restrictions on driver classification.

The initiative needs 625,000 signatures to appear on the November 2020 ballot in California. I expect they’ll get the signatures, and then the media campaign will kick into high gear. Expect TV and radio ads, billboards, and a heavy social media push to garner support.

If the ballot measure passes, that will have been money well spent — a much wiser use of resources than for some dodo to pay $52,270 to take an earlier flight home from Houston. The proposed law would create a fairer and more predictable set of rules for drivers and companies, and it should substantially reduce the rampant misclassification lawsuits in the rideshare and delivery driver area.

I’ll be watching for similar proposed legislation in other states. And I’ll be watching airfares too, before I switch any future flights.

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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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01.06.20
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Dead or Not Dead? Schreiber Lives On, But California’s New ABC Test Is Temporarily Killed for Owner-Operator Truckers

Prison dead independent contractor ABC TestWhen Benjamin Schreiber was sentenced to life in prison for clubbing a man to death with the wooden handle of a pickaxe, he probably expected to die in prison. But then fate intervened. Or did it?

In 2015, Schreiber fell severely ill in the Iowa State Penitentiary and had to be resuscitated five times. Schreiber then filed for post-conviction relief. He argued that he did, in fact, die in prison. Since he had to be resuscitated, he must have died, which means that he had successfully completed his “life sentence” — just before being resuscitated.

The argument failed. The judge ruled, “Schreiber is either alive, in which case he must remain in prison, or he is dead, in which case this appeal is moot.”

The decision did not say how many points Schreiber was awarded for creativity.

Two time zones west of Iowa, the California Truckers Association had better luck in its effort to kill California’s new ABC Test for independent contractor misclassification, at least as far the law applies to owner-operator truckers.

On December 31, a federal judge issued a preliminary injunction, preventing California from applying the new ABC Test to owner-operator truckers.  That means, for now, the question of whether an owner-operator trucker is an employee or an independent contractor must still be determined under the S.G. Borello balancing test in California, not the strict new ABC Test.

This is just a preliminary injunction, not a final ruling, so it is subject to further review even at the district court level, before the inevitable appeal.

The winning argument (for now) is that the law imposing the new ABC Test, Assembly Bill 5, is preempted by the Federal Aviation Administration Authorization Act (FAAAA).  The FAAAA preempts state law that affects the price, route, or service of any motor carrier with respect to the transportation of property.

The federal circuit courts of appeals are split on whether the FAAAA preempts state independent contractor laws as they relate to owner-operators in the transportation industry.  The 7th and 3rd Circuits have held that there is no preemption.  The 1st Circuit has held that there is preemption.

Ultimately, the question is likely to be settled by the Supreme Court.

For right now, the balancing test has been resuscitated for owner-operator truckers, but only a little bit like Mr. Schreiber’s resuscitation.

Hopefully, the stay will remain in effect until the case makes its way up the appellate ladder. And hopefully, dead is dead when it comes to the ABC Test and owner-operators.

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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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12.16.19
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Octopus vs. Bald Eagle: Postmates to Defend 5,225 Individual Arbitration Claims

Bald eagle octopus postmates

The best laid plans can sometimes take an unexpected turn for the worse. Just ask this octupus.

Earlier this month, off the coast of Vancouver Island, an octopus was settling down for a meal consisting of one whole bald eagle, freshly caught but still alive. A team of nearby salmon fishermen heard the bald eagle’s screams and, having been trained in speaking eagle, immediately recognized the distress call. The salmon fishermen sprang into action. They poked the soft-bodied mollusc with a pole until it released the bird. The eagle survived, and the fishermen got some footage that made it onto CNN’s website.

While I love octopi (delicious when grilled), I like to think that I too would have favored the eagle when interfering with a battle sponsored by mother nature.

The delivery app company Postmates is also dealing with an unexpected turn of events, but this one involves no sea creatures or birds of prey. In defending a claim of independent contractor misclassification brought by thousands of delivery drivers, Postmates prevailed in showing that the drivers were bound by arbitration agreements with class action waivers. If the drivers wanted to proceed, they would have to arbitrate their claims one-by-one, all 5,225 of them.

Guess what happened next.

The plaintiffs’ firm representing the drivers filed 5,225 individual arbitration claims with AAA.

Faced with having to pay $10 million in arbitration filing fees, Postmates has been trying to figure out how that would work. Can AAA even handle 5,225 simultaneous arbitrations? After Postmates missed an initial AAA payment deadline, the plaintiffs’ firm filed a motion to hold Postmates in contempt for not paying the AAA fees.

Postmates is now defending the contempt motion and trying to figure out, logistically, how to proceed.

Arbitration agreements can be helpful to businesses that have lots of independent contractors, mainly because the agreements can include class action waivers. But this dispute shows the potential downside of class action waivers. A sophisticated plaintiffs’ class action firm can file thousands of simultaneous arbitration demands, flooding the system and leaving the company on the hook for millions of dollars in filing fees alone — before even getting to the merits or defense of a claim.

We’ll see how this one plays out. It’s an unexpected turn of events, much like the octopus getting poked by an eagle-defending salmon fisherman at dinner time.

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

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

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12.09.19
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Is Another Strict ABC Test About to Muddy the Independent Contractor Waters?

NJ ABC Test independent contractorAccording to this article about the Garden State, New Jersey is about more than just the Sopranos and Snooki. Here are three fun facts about NJ:

1. Considered the “Diner Capital of the Country,” NJ has an estimated 525 diners. (I’m assuming from context that more than 525 New Jerseyans dine out, that “diners” here means those breakfast-themed restaurants that often look like rail cars, and that Uber Eats isn’t quite yet so dominant that the other 9 million NJ-ers eat at home every night.)

2. The first modern submarine ride was taken in NJ’s Passaic River. (I find this hard to believe but, if true, I’m sure the scenery was lovely.)

3. NJ was home to the first intercollegiate football game, Rutgers vs. Princeton. (The game is still in a scoreless tie.)

Another less fun fact about NJ is that its legislature may be about to adopt one of the strictest tests for independent contractor misclassification in the country. A recently proposed bill would model the state’s test for independent contractor vs. employee on the new California ABC Test.

New Jersey already uses a type of ABC Test for its wage and hour laws, but the bill would make Part B of the test much harder to meet — like California’s new law, Assembly Bill 5.

It’s no lock that the proposed law will pass, but if I am a betting man — and, fun fact, sports wagering is now legal in NJ — I would bet this one will become law sometime in 2020.

Until then, at least we can all enjoy the diner and submarine scene.

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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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11.25.19
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The Biggest Overlooked Risk for Independent Contractor Misclassification Claims Is…

unemployment independent contractor misclassification

Remember the Chicago song called Baby What A Big Surprise? That’s about a good surprise. The girl he longed for was there all along. How sweet.

This post about is about another kind of surprise – one that’s much more bitter.

When trying to avoid independent contractor misclassification claims, we’re often focused on reducing the risks of lawsuits, especially class actions. But there’s another threat that can be much harder to guard against.

So… what is the biggest overlooked risk for independent contractor misclassification claims?

I wrote about it last week, on the BakerHostetler Employment Law Spotlight blog. Still in suspense? You’ll have to click here to find out the answer.

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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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11.11.19
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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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10.28.19
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California’s New Anti-Arbitration Law: A Hotbed of Problems

California continues to be a hotbed of activity, which got me wondering: what is a hotbed? So I looked it up.

Hotbed – noun – hot·bed |  \ ˈhät-ˌbed

/a bed of soil enclosed in glass, heated especially by fermenting manure, and used for forcing or for raising seedlings/

And now you can decide which is more useful- knowing what a hotbed is or keeping up with the latest legislation in California that makes things harder for businesses.

The latest is AB51, which bans mandatory employee arbitration agreements if they are made a condition of employment. Voluntary arbitration agreements are still permitted.

So let’s just include an opt-out provision, right? That way there’s a choice, so it’s not mandatory. That would seem to make sense. Not so fast. The law says that if you include an opt-out provision, it still counts as mandatory. Huh? That’s contrary to the meaning of opt-out.

Opt – verb \ ˈäpt

/to make a choice/

If the option to opt-in is voluntary, then the option to opt-out is voluntary. Grammarians needed in California please.

The law is also probably illegal, except maybe for jobs in the transportation industry. According to the Supreme Court, the Federal Arbitration Act (FAA) prohibits states from enacting laws that treat agreements to arbitrate differently than other agreements. If the parties agree to arbitrate, there’s an enforceable contract, and the states need to get out of the way. That’s a bit of an oversimplification, but not by much. The FAA doesn’t apply to portions of the interstate transportation industry though, so the California law might be enforceable only as to that small segment of jobs. The enforceability of this law will be tested in the courts.

The law also creates a chicken-and-egg problem for independent contractor misclassification disputes. You can still require in an independent contractor agreement that an independent contractor must arbitrate disputes. And in that arbitration agreement, you can grant the arbitrator the authority to rule on any questions about enforceability of the arbitration agreement.

But what if the dispute is over whether the independent contractor is an employee? If the California law stands, then the agreement to arbitrate the dispute is enforceable only if the arbitrator rules that the contractor is properly classified as a contractor, but the agreement to arbitrate is unenforceable if the arbitrator rules that the contractor is misclassified and should really be an employee. But if the arbitrator rules that contractor was really an employee, then under California law the agreement granting the arbitrator the right to make that decision is void. You’d have to decide the ultimate issue — independent contractor s employee — before determining who decides whether the worker is a contractor or an employee.

Is your head spinning? Good. Just in time for Halloween.

Thanks California. You give me lots to write about.

This new law applies to employee arbitration agreements entered into after January 1, 2020– unless it’s not enforceable at all. We’ll see.

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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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09.19.19
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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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09.16.19
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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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09.09.19
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Sperm Oil Legal Alert: Can You Sue under the Tax Code for Independent Contractor Misclassification?

Sue tax code independent contractor misclassification

When laws are well-written, they’re really specific so everybody knows what you can and cannot do. For example, Title 21, Section 173.275(c) makes it a federal crime to use more hydrogenated sperm oil in food than necessary to accomplish the intended lubricating effect of the sperm oil. (Thanks @CrimeADay!)

Some laws, on the other hand, leave room for interpretation. That’s when lawyers can get creative.

A drapery hanger in Maryland filed a lawsuit alleging that he was misclassified as an independent contractor and should have been paid overtime like an employee. He sued under the usual federal and state laws, but he added a bit of creativity.

The Internal Revenue Code includes a section allowing someone to sue if an evildoer “files a fraudulent information return with respect to payments purported to be made to any other person.” That’s 26 USC 7434, for those keeping score at home. And USC refers to the United States Code, not OJ Simpson’s alma mater.

The drapery hanger included this claim in his lawsuit, alleging that the sole proprietorship that allegedly owed him overtime pay also violated this law by filing 1099s instead of W-2s.

Points will be awarded here for creativity, but those points cannot be used in court. Federal courts don’t take points. (This was not addressed in law school.) All points awarded may be applied to future discounts at your local gas station. No purchase necessary. Void where prohibited.

The court said, nice try but no. This section of the Code refers to the filing of fraudulent amounts of pay, not filing the wrong form.

Had the decision gone the other way, a claim under this section of the Code could be tacked onto just about every independent contractor misclassification lawsuit. And we don’t need that hassle. There are already enough laws that cover misclassification. And sperm oil.

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

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