by Todd Lebowitz

Clearing the Fog? New Joint Employer Test Is Being Considered for Franchisors

I took last week off work to visit Asheville. The first morning, we woke up at 5 am for a sunrise hike at Craggy Pinnacle, along the Blue Ridge Parkway. This was our view at the top.

Fortunately, the fog burned off after an hour or so. We waited and were rewarded with some spectacular views. Our 7-month old puppy Louie was just happy there were other dogs at the top to play with. Here he is, admiring the view.

The lesson, of course, is to be patient and sometime the fog will clear. (Or check the weather report?)

Franchisors are hoping for the same reward, through the proposed American Franchise Act, introduced in the House in September and now before the House Committee on Education and Workforce.

The bill, which has at least some bipartisan support, would change the definition of joint employment under the NLRA and FLSA for franchisee-franchisor relationships.

The bill would establish that a franchisor can be a joint employer only if it exercises “substantial direct and immediate control” over one or more “essential terms and conditions of employment of the employees of the franchisee.”

“Essential terms and conditions of employment” means wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

To be a joint employer, the franchisor would have to control these terms with respect to individual employees. Setting baseline standards and brand guidelines would not create joint employment.

The risk of joint employment liability is an ongoing concern for franchisors. The franchise business model requires a level of control to ensure brand consistency and a uniform customer experience across locations. The American Franchise Act, if passed, would help to protect the franchise model and establish clear guidelines for what level of control is needed to create a joint employment relationship.

We’ll see if Congress decides to lift the fog.

Here’s a better view from the hike:

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08.18.25

by Todd Lebowitz

Phantom or Real? Federal Bill Would Create New Joint Employment Test

For three hours each night, a policeman appears out of thin air in a busy park in Seoul, South Korea. His presence has, according to police data, reduced crime in the park by 22%. The policeman, however, has never arrested anyone, and he doesn’t even move around the park.

That’s because he’s a hologram.

The police chief attributes the program’s success to “citizens’ perceived safety,” although I’m not sure why anyone would perceive themselves safer in the presence of a hologram. Maybe I should not be so cynical. If it works, it works.

A new federal bill seeks to increase employers’ perceived safety, but without holograms.

The Save Local Business Act, H.R. 4366, would amend the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) to create a uniform test for joint employer status. By adding a new joint employer test to the statutes, Congress would prevent the NLRB and DOL from trying to change the test every time there’s a new party in the White House.

The Act is a pro-business bill. If it passes, joint employer status would be much harder to establish.

Under the proposed text, joint employer status could exist “only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer.”

“Essential terms and conditions” would mean, for example, “hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.”

The bill is sponsored by James Comer (R-Ky.). It was introduced July 14, 2025. Previous versions of the bill were introduced in 2021 and 2023. Obviously, they failed.

With Republicans controlling the House, passage in the House seems possible, but the likelihood of getting 60 votes in the Senate is pretty remote.

So the bill, while it seems good for businesses, is probably the legislative equivalent of a Korean holographic police officer. It looks nice but exerts no real authority.

You can track the status of the bill here.

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07.07.25

by Todd Lebowitz

Bee Aware: New Law Increases Fines for Worker Misclassification in Colorado

When police in Spain pulled over a 70-year-old van driver for not wearing a seatbelt and driving erratically, they thought it would be a routine stop. The man had other ideas. After being asked to take and retake a breathalyzer test, the man threatened to kill the police officers, which is generally a thing you should not do when pulled over.

The man, who I should now mention was a beekeeper, went to the back of the van and released swarms of bees, which proceeded to attack the policemen, stinging them several times. The policemen fled to a nearby restaurant, and the beekeeper casually drove away. He was later arrested, bee that as it may.

The policemen that day didn’t know what they were getting into when they pulled over the van driver. But businesses in Colorado who misclassify workers as independent contractors should now bee on notice that they may get stung — financially — for their misdeeds.

Colorado has amended its wage and hour laws to add a mandatory fine for willful or repeated misclassification of employees as non-employees. Under the new law, an employer found to have misclassified an employee as a nonemployee must pay a fine in the following amounts, in addition to any other relief that may be awarded:

For a willful violation, $5,000;
For a violation not remedied within 60 days after the division’s finding, $10,000;
For a second or subsequent willful violation within 5 years, $25,000; or
For a second or subsequent willful violation not remedied within 60 days after the division’s finding, $50,000.

Colo. Rev. Stat. 8-4-113(1)(a)(I.5).

Misclassifying workers as independent contractors has always carried the risk that you’re not complying with employment laws. As states continue to crack down on the misclassification, we can expect to see more laws with mandatory fines, on top of the usual risk of backpay awards.

Businesses using independent contractors in Colorado and other states with fines should pay extra attention. The fines do not vary by size of the engagement, and they are per-violation fines.

Bee careful out there.

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06.30.25

by Todd Lebowitz

Have a Seat: Alabama Passes Portable Benefit Bill for Contractors

I started to look up fun facts about Alabama and learned that the world’s largest office chair is in Anniston, Alabama. I was content with that find, but then I fell down a rabbit hole when I found this website, which lists other roadside attractions in the category of Oversized Chairs.

There’s a giant ladderback chair in Sebastopol, California. There’s a big chair you can drive under at the Los Angeles Merchandise Mart. Homer, Alaska has a big Adirondack-style chair, in case you’re headed out that way.

Whatever your destination, you may want to sit down and relax. I have some good news for a change.

Alabama passed a new law creating a portable benefit system for independent contractors. Unlike other portable benefit systems, this one allows for 100% tax deductibility for both contractors and the paying party for all contributions to the account.

Under the Portable Benefits Act (SB 86), contractors can create a portable benefit account through a third party. The account can be used to fund health insurance, life insurance, or other benefits. Starting in January 2026, funds contributed by the contractor are excluded from taxable income. Funds contributed by the party that retained the contractor are 100% tax-deductible.

The tax consequences here apply only to Alabama law, not federal tax law; but this is a solid step in the right direction for solo and small business owners.

The push by unions and some deep blue states to reclassify contractors as employees is motivated mainly by the desire to give contractors the same protections and benefits received by employees. If contractors have portable benefit accounts that can be funded tax-free, that certainly helps them and removes some of the incentive to reclassify.

There have been portable benefit bills passed in a few other states, with varying scopes. Utah and Tennessee, for example, have portable benefit programs, but neither offers 100% tax-deductibility.

There have been some efforts at the federal level to pass a nationwide portable benefits bill, but nothing is close to being passed.

In the meantime, this is good news for Alabama contractors and the companies that engage them. Y’all deserve to relax and enjoy a cocktail in an oversized comfortable chair. I’d recommend the big chair in Anniston, Alabama. California and Alaska are a bit too far a drive.

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04.28.25

by Todd Lebowitz

A Parliament of Owls? Senate Committee Seeks Support for Portable Benefits Bill for Contractors

*I found this guy while running in the neighborhood*

When animals flock together, we use strange collective names to describe them. You’ve heard of a flock of seagulls, a pod of whales, and a murder of crows. But did you know the collective nouns for apes, hippos, and wildebeests?

Fortunately, this wildlife writer does. It’s a shrewdness of apes, a bloat of hippopotamuses, and a confusion of wildebeests.

My favorite, though, is a parliament of owls. The phrase was apparently coined by CS Lewis in the 1950s and stuck. Good for the owls! I wish for them to form a strong government and pass wise laws.

When independent contractors flock together, we don’t really have a good word for that. Contractors generally can’t flock together for employee benefit plans since they’re not employees, even though some states have enacted portable benefits laws as models for what may be viable on a national level.

One impediment to companies providing contractors with benefits is that doing so can be evidence of an employment relationship. Companies are perversely incentivized not to help contractors remain self-sufficient because companies don’t want to risk misclassification claims.

That could change with a national portable benefits bill.

There has been interest for a long time among trade associations and small business groups to allow portable healthcare and retirement benefits for independent contractors. A recently released white paper by Sen. Bill Cassidy, Chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, advocates for a national portable benefits bill.

The white paper proposes various options for providing affordable health care options for independent contractors, including association health plans, health reimbursement arrangements, pooled employer plans, and single employee pension IRAs. For these programs to work, Congress would have to ensure that a company’s participation in such plans is not a factor in determining whether the contractor receiving such benefits is misclassified.

The concept of portable benefits for contractors is one that should have bipartisan support. The main obstacle to such a bill is likely the desire by some for contractors to receive all of the benefits of employees, and so this concept (for them) is only half a loaf.

Once upon a time, we used to have a Congress that would consider half a loaf to be better than no loaf at all. My hope is that legislators will find a way to make this concept work.

It would be wise. Something that a parliament of owls could probably get done.

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03.03.25

by Todd Lebowitz

Death Whistle for IC Tests: New Bill Would Create Unified Standard

The Aztec Death Whistle is shaped like a human skull and produces a hideous shrieking sound, as if conjuring up 1000 piercing human screams. These whistles have been discovered in burial site excavations. Scholars believe that they played a role in warfare or burial ceremonies.

Either way, they make a pretty awful sound. Here’s a youtube video demonstration. Enjoy! 😳

Rep. Kevin Kiley (R-CA) hopes that two new bills will sound a death whistle to the confusing morass of independent contractor tests.

The Modern Worker Empowerment Act (MWEA) would codify the test for employee status under the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). The new test would create a two-part test. It would be a blend of the Right to Control Test and the Economic Realities Test.

An individual would be deemed an independent contractor if (1) the hiring party does not exercise significant control over how the work is performed, and (2) the person performing the work has the opportunities and risks inherent to entrepreneurship.

The bill would also prohibit consideration of certain facts, such as any requirement to comply with legal and safety standards.

The Modern Worker Security Act (MWSA) would create a safe harbor so that companies could provide portable benefits to independent contractors.

These laws would apply only to classification under the FLSA and NLRA. The bills do not attempt to modify the IRS’s Right to Control standard or any state law tests.

So are these bills a death whistle for the current IC tests?

Probably not. My Aztec-themed prediction device says the bills are not likely to become law. But I like the thinking. Any increase in clarity for the IC tests would be helpful to the business community.

Meanwhile, if you’d like to learn more about Aztec death whistles, there’s an actual study published in Nature that investigates the “Psychoacoustic and Archeoacoustic nature of ancient Aztec death whistle.” Here’s the link.

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11.25.24

by Todd Lebowitz

A Car Crash? Trump’s Labor Secretary Pick Supports ABC Test for Worker Classification

Sometimes things don’t make sense when you read them. Like this: Here’s an adorable video of a dog getting hit by a car.

You need to dig deeper to make sense of it. If you watch the video, you’ll understand. The sentence is true, and the video is adorable.

Another thing that didn’t make sense to me when I first read it is that Trump’s pick for Secretary of Labor, Lori Chavez-DeRemer, was a co-sponsor of the PRO Act.

I had to dig deeper. Is that really true? It is.

Remember the PRO Act? It’s an acronym for Protecting the Right to Organize. It’s a Democrat-sponsored bill that threatens to blow up the gig economy and convert most independent contractors to employees.

The PRO Act would change the definition of “employee” under the NLRA so that all workers are presumed to be employees, not independent contractors, unless the strictest version of the ABC Test is met. That’s the same test as in California, but without all the exceptions.

In the 2023 version of the PRO Act, a worker is an employee under the NLRA unless (all 3):

(A) the individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact;

(B) the service is performed outside the usual course of the business of the employer; and

(C) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

Yes, that’s the same dreaded Part B that makes California such a difficult place to maintain independent contractor relationships.

The PRO Act would also broaden the definition of joint employment under the NLRA.

Chavez-DeRemer was one of three Republicans to co-sponsor the bill.

The PRO Act will not get the 60 votes needed in the Senate, so it’s not going to pass anytime soon (so long as the filibuster rule remains intact). But this bill is so pro-union that her support should be of concern to any business that engage contractors.

Chavez DeRomer served only one term in Congress, so she did not build an extensive record. But her support of the PRO Act is a part of that limited record.

I expect we’ll learn more about her views during the confirmation process. Her support of the PRO Act is something to keep an eye on. Getting hit with the PRO Act (or some DOL-authorized version of it) would be far worse that the damage done by the car hitting the dog in the video, which you really should watch if you skipped over the link above.

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11.11.24

by Todd Lebowitz

For Upcoming Changes to Independent Contractor Rules, Look to Band Names

The band America (“A Horse with No Name,” “Ventura Highway”) was formed in England. Yes, really. But by three Americans whose fathers were in the U.S. Air Force and stationed overseas.

That got me thinking about other bands with place names. When I was growing up in Miami in the 1980s, if someone mentioned Boston, I thought of just another band out of Boston, on the road to make ends meet. If someone mentioned Kansas, I thought of dust in the wind, even though I never particularly liked that song. Chicago made me think of the Cubs, but only in 1984. Otherwise, does anybody really know what time it is?

Not that I am older and have a life, place names mean something different to me. They now make me think of federal, state, and local laws affecting independent contractor status.

(Ok, I take back the comment about having a life. I realize this is a sad and pathetic way to think of place names.)

After the election, place names are going to take on greater importance as businesses aim to protect their independent contractor relationships. Federal enforcement activity isn’t going away, but I expect to see a growing emphasis on legislation and enforcement at the state and local level.

In the realm of non-employee workers (independent contractors, staffing agency temps), I expect to more state and local legislation in these areas:

1) Freelancer Laws. We now have freelancer laws in CA, NY, IL, Los Angeles, NYC, Minneapolis, Seattle, and Columbus. These laws impose requirements when retaining individuals who are independent contractors. The laws generally require written contracts that contain several mandatory components.

2) Temporary Worker Laws. We have these in NJ and IL. They generally require that staffing agencies pay their workers an equivalent wage rate (and sometimes the value of benefits) being paid to workers they work alongside at the company where they are providing services.

3) Misclassification Laws – the Bad Kind. In states with Democrat trifectas (house, senate, governor), expect new laws that make it harder to be an independent contractor. Expect more ABC Tests, like in CA and MA. Other states have ABC Tests for determining who is an employee under workers’ comp and unemployment law.

4) Misclassification Laws – the Good Kind. In states with Republican trifectas, expect more safe harbor laws. If you satisfy a set of basic requirements in your dealings with a non-employee worker, then the worker is an independent contractor under that state’s laws. Pesky balancing tests (and long-haired freaky people) need not apply. We have these state laws in WV and LA (not L.A.)

We will likely see changes at the federal level too, but these may take years to develop. The federal agency rulemaking process is slow and cumbersome, and agency rules will take on less importance as federal agency power continues to diminish after the Supreme Court’s Loper Bright decision.

I haven’t touched on Europe or Asia, but those are bands for another day and another post. When? At some point, in the heat of the moment, but only time will tell.

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09.23.24

by Todd Lebowitz

Better Than Stealing a Car: Updates to Illinois Temp Worker Law Should Help Businesses Using Temp Labor

A Florida car thief may want to reconsider his career choice.

A Miami Beach man walked back to his Corvette after a Starbucks run, only to find a wannabe thief trapped inside. The thief became trapped inside because the car has electrical locks and no manual door handle. The car requires a key to unlock the doors.

The thief begged the car’s owner for help, but without success. The car’s owner videotaped the ridiculousness and called the police. That’s bad news for the thief.

Business owners in Illinois had much better news recently, when Gov. Pritzker signed amendments to the state’s temporary worker law. The law was last amended in 2023, when it created new burdens for businesses using staffing agency temp labor. (See here and here.)

The main problem business owners had with the 2023 amendment was that staffing agencies were required to pay temps “not less than the rate of pay and equivalent benefits” of comparable employees at the business where they were providing services. The only way staffing agencies could ensure compliance with this requirement was to obtain wage and benefit data from its client. Obviously, businesses did not want to provide that information. (A court decision struck down the “equivalent benefits” requirement.)

Under the 2024 amendment, a staffing agency can now comply with the pay requirements in two ways.

First, it can match the straight-time hourly rate of a comparator employee who works directly for the client, as before.

Second, they can now determine compensation without the need for comparator data from the client business. Under the amendment, the staffing agency can instead comply with the pay requirements by paying its workers based on Bureau of Labor Statistics data.

The pay requirements do not apply until a temp worker has worked 720 hours at the client business within a 12-month period.

The change to the law means that businesses retaining staffing agencies in Illinois will no longer be required to provide wage and benefits information about its comparator employees. The client, not the staffing agency, gets to choose whether to provide the data and, if the client chooses not to provide it (which I expect will most often be the case), the agency must use the BLS formula.

There are other changes to the law too, including amended benefit requirements, notice requirements, and the right of temp workers to decline to cross a picket line.

Staffing work might not pay great, but laws like the Illinois temp worker law seek to ensure a minimum level of pay for temp workers. The Miami Beach car thief may want to look into steady work like that instead, if he ever gets out of the Corvette.

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08.12.24

by Todd Lebowitz

Smashing! House Committee Presses DOL to Reveal Any Changes to Its Independent Contractor Enforcement Strategy

In this video, Muhammad Rashid of Pakistan, crushes 39 cans in 30 seconds. With his head. (I like the little fist pump he gives at the end.)

Why would a person do this? To get attention, I imagine. It caught my attention.

The House Committee of Education and the Workforce may also be trying to solicit a bit of attention, but I do want to know the answers to the Committee’s questions.

On August 8, they sent this letter to Acting Secretary of Labor Julie Su, asking her for information about the DOL’s enforcement activity under its new independent contractor rule. The Committee would like the DOL to answer three questions:

1) Since January 20, 2021, how many instances of misclassification have Wage and Hour Division (WHD) inspectors found? Please provide the total number of instances across each occupation that has been subject to investigation.

2) Please provide the number of misclassification enforcement investigations WHD has initiated for each specific industry sector since January 20, 2021.

3) Has DOL initiated any investigations related to misclassification based on its coordination with the National Labor Relations Board and the Federal Trade Commission? If so, please provide the number of investigations DOL has undertaken, broken down by each specific industry segment.

Committee Chair Virginia Foxx (R-not from Virginia) writes that she asked Su these questions when Su appeared before the Committee on May 1, but Su failed to answer. The letter begins by knocking Su around a bit, alleging that the DOL with its new independent contractor rule is trying to destroy all independent contractor relationships.

Maybe yes, maybe no. I don’t know where this letter falls on the continuum of publicity stunt vs. actual relevance for policy making, but I think these are good questions. It would be hopeful for businesses to know whether the DOL’s enforcement strategy has shifted since enactment of the new rule. And if so, how.

The Committee might get the answers it seeks, or it might just be banging its head against the ~~wall~~ cans. But it never hurts to ask.

What Mr. Rashid was doing, on the other hand, does hurt. Or it should hurt. And if it doesn’t hurt, then maybe that tells us something too. Also, I think Mr. Rashid owes someone the cost of 39 beers.

Who Is My Employee?

Exploring Independent Contractor Misclassification & Joint Employment Issues

Tag Archives: Legislation

Clearing the Fog? New Joint Employer Test Is Being Considered for Franchisors

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Phantom or Real? Federal Bill Would Create New Joint Employment Test

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Bee Aware: New Law Increases Fines for Worker Misclassification in Colorado

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Have a Seat: Alabama Passes Portable Benefit Bill for Contractors

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A Parliament of Owls? Senate Committee Seeks Support for Portable Benefits Bill for Contractors

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Death Whistle for IC Tests: New Bill Would Create Unified Standard

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A Car Crash? Trump’s Labor Secretary Pick Supports ABC Test for Worker Classification

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For Upcoming Changes to Independent Contractor Rules, Look to Band Names

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Better Than Stealing a Car: Updates to Illinois Temp Worker Law Should Help Businesses Using Temp Labor

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Smashing! House Committee Presses DOL to Reveal Any Changes to Its Independent Contractor Enforcement Strategy

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