The Rolling Stones’ song, “You Can’t Always Get What You Want” features the London Bach Choir and addresses the predominant themes of the 1960s — love, protest, and drugs. There’s some controversy as to whether Mr. Jimmy refers to vagrant Minnesotan Jimmy Hutmaker, who supposedly uttered the famous lyric-to-be during a chance 1964 encounter with Jagger at Bacon’s Drugstore, or Jimmy Miller, a record producer who also played drums on this track instead of Charlie Watts.
“You Can’t Always Get What You Want” is also a suitable theme for the main problem that dominates every aspect of independent contractor misclassification. The problems is that the laws are binary. A worker is either an employee who receives all of the protections of employment laws, or an independent contractor, who receives none. The exceptions creating a middle ground have been sparse.
But if you try sometimes.
California voters tried and succeeded in creating a middle ground in 2022, when they passed Prop 22. Prop 22 guarantees independent contractor status for rideshare and delivery drivers if a series of conditions are met, and then the app companies are required to provide a range of protections for drivers, including minimum rates of pay, a health insurance stipend, accident insurance, sexual harassment prevention, safety training, and rest requirements.
Prop 22 was and is a model for the middle ground that has been missing.
But Prop 22 has also been under attack. In a case called Castellenos, the SIEU and other worker advocates have argued that Prop 22 violates the California constitution and had to be invalidated. Without Prop 22, rideshare and delivery drivers could be subjected to California’s ABC Test for determining drivers’ status.
As you may have read, a California Court of Appeals ruled earlier this month that Prop 22 did not violate the California Constitution and could take effect, except for one small part of the law governing future amendments. The dispute will likely be heard by the California Supreme Court, so the fight isn’t over.
The point I want to make, though, is that Prop 22 carves out a middle ground that should be a model for other states to follow. It guarantees workers certain protections while allowing them to operate their own businesses as independent contractors.
The unions and worker advocates calling for the protection of worker rights routinely ignore the surveys showing that a vast majority of drivers prefer independent contractor status. Much of the noise on this issue is coming from a vocal minority.
The Prop 22 model is a middle ground that provides workers with protections they otherwise lack, while allowing workers to retain their preferred independent contractor status and flexibility.
We’ll continue to watch whether the California Supreme Court decides to hear this dispute but, either way, Prop 22 should be held up as a model for other states to follow, carving out a middle ground that balances the concerns of all sides. Worker status does not have to be binary. Binary laws that mandate employee or independent contractor status, with no middle ground, do not reflect the realities of the modern gig economy.
It’s time for reform.
You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.
The Rolling Stones’ song, “You Can’t Always Get What You Want” features the London Bach Choir and addresses the predominant themes of the 1960s — love, protest, and drugs. There’s some controversy as to whether Mr. Jimmy refers to vagrant Minnesotan Jimmy Hutmaker, who supposedly uttered the famous lyric-to-be during a chance 1964 encounter with Jagger at Bacon’s Drugstore, or Jimmy Miller, a record producer who also played drums on this track instead of Charlie Watts.
“You Can’t Always Get What You Want” is also a suitable theme for the main problem that dominates every aspect of independent contractor misclassification. The problems is that the laws are binary. A worker is either an employee who receives all of the protections of employment laws, or an independent contractor, who receives none. The exceptions creating a middle ground have been sparse.
But if you try sometimes.
California voters tried and succeeded in creating a middle ground in 2022, when they passed Prop 22. Prop 22 guarantees independent contractor status for rideshare and delivery drivers if a series of conditions are met, and then the app companies are required to provide a range of protections for drivers, including minimum rates of pay, a health insurance stipend, accident insurance, sexual harassment prevention, safety training, and rest requirements.
Prop 22 was and is a model for the middle ground that has been missing.
But Prop 22 has also been under attack. In a case called Castellenos, the SIEU and other worker advocates have argued that Prop 22 violates the California constitution and had to be invalidated. Without Prop 22, rideshare and delivery drivers could be subjected to California’s ABC Test for determining drivers’ status.
As you may have read, a California Court of Appeals ruled earlier this month that Prop 22 did not violate the California Constitution and could take effect, except for one small part of the law governing future amendments. The dispute will likely be heard by the California Supreme Court, so the fight isn’t over.
The point I want to make, though, is that Prop 22 carves out a middle ground that should be a model for other states to follow. It guarantees workers certain protections while allowing them to operate their own businesses as independent contractors.
The unions and worker advocates calling for the protection of worker rights routinely ignore the surveys showing that a vast majority of drivers prefer independent contractor status. Much of the noise on this issue is coming from a vocal minority.
The Prop 22 model is a middle ground that provides workers with protections they otherwise lack, while allowing workers to retain their preferred independent contractor status and flexibility.
We’ll continue to watch whether the California Supreme Court decides to hear this dispute but, either way, Prop 22 should be held up as a model for other states to follow, carving out a middle ground that balances the concerns of all sides. Worker status does not have to be binary. Binary laws that mandate employee or independent contractor status, with no middle ground, do not reflect the realities of the modern gig economy.
It’s time for reform.
You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.
What Companies Using Temps In New Jersey Need to Know
According to the National Constitution Center, there were 14 original copies of the Bill of Rights, with one sent to each of the 13 states and another kept by the federal government. The Center also reports, however, that four of the states — Georgia, Maryland, New York, and Pennsylvania — lost their copies. North Carolina’s was stolen by a Union soldier during the Civil War but recovered in 2002 through an FBI sting. (“Hey buddy, I’m lookin’ to buy a Bill of Rights. Ya know anyone?”)
New Jersey kept its copy, but also just added some new stuff. Sort of.
This month, New Jersey passed the Temporary Workers Bill of Rights. It’s less sweeping than the original 1791 Bill of Rights, but it co-opts the important sounding name to get everyone’s attention and to show constituents that the lawmakers are doing really important things that warrant re-election, financial support, the undying love of chatbots, etc.
The Temporary Workers’ Bill of Rights imposes new burdens on staffing agencies and the companies using temp workers. This post will focus on the obligations imposed by the companies using the temp workers.
Does the Bill apply to your industry?
The Bill applies to temp workers assigned by a temp staffing firm to work in any of the following industries, using Bureau of Labor Statistics (BLS) designations:
33-90000 Other Protective Service Workers
35-0000 Food Preparation and Serving Related Occupations
37-0000 Building and Grounds Cleaning and Maintenance Occupations
39-0000 Personal Care and Service Occupations
47-2060 Construction Laborers
47-30000 Helpers, Construction Trades
49-0000 Installation, Maintenance, and Repair Occupations
51-0000 Production Occupations
53-0000 Transportation and Material Moving Occupations
If you’re not in one of these industries, stop reading and get on with your day.
What obligations does the Bill impose on the users of temp labor?
1. Equal Pay. This sounds fair but may be problematic in practice. Temp workers must be paid “not less than the average rate of pay and average cost of benefits, or the cash equivalent thereof” of the user’s similarly situated employees.
I see two immediate problems here.
First, one of the benefits of using a staffing agency is the ability to pay the temps less until they prove themselves and earn an offer of direct hire. No longer. Now you’ll have to pay the same amount as you pay your regular workers, plus the markup.
Second, how is the staffing agency going to know the wages paid to your similarly situated regular workers and the value of the benefits package you provide them? Presumably you’ll have to tell the staffing agency.
But the staffing agency is not your confidant or fiduciary. It has multiple clients, probably including your competitors. Do you really want the staffing agency to know what your cost of insurance is, or what you pay your regular workers, or the full suite of benefits you offer? The staffing agency will have to adjust what it charges you — and your competitors — based on what each of its clients pay their similarly situated worker. That sounds like a pretty useful set of data for anyone wanting to know what competitors are doing.
You can (and should) designate this information as confidential when disclosing it to a staffing agency, and you should make sure your staffing agency agreement includes an obligation to protect confidential information. But is the information really that safe from prying eyes? If a competitor or temp worker is involved in litigation, couldn’t this information be subject to subpoena? Once you reveal this information, you lose a good bit of control over it.
2. Freedom to direct hire. Under the new law, temp workers must be free to accept offers of direct hire. Staffing agencies cannot restrict the workers’ ability to accept offers of direct hire. The agency can impose a “placement fee” on its client (you), but the amount is limited by statute.
The amount of the placement fee cannot exceed “the equivalent of the total daily commission rate the temporary help service firm would have received over a 60-day period, reduced by the equivalent of the daily commission rate the temporary help service firm would have received for each day the temporary laborer has performed work for the temporary help service firm in the preceding 12 months.”
For purposes of contracting, any provisions prohibiting direct hire for limited periods of time need to be removed. Instead, staffing contracts (in NJ, for these job classifications) should permit direct hire but may charge a permitted placement fee.
3. Reimbursement of tax obligations. The user of services is required to reimburse the temp agency for wages and “related payroll taxes.” Presumably this is already basked into the markup, but now it’s required.
4. Joint and several liability. The law imposes joint liability for any violations of the equal pay or direct hire provisions. Consider what that means for equal pay. You might have to disclose to the temp agency what you pay your similarly situated employees, but you don’t control the temp agency’s payroll practices. If they mess up and pay the temp worker less than the law requires, the law says you’ll be jointly liable.
Who said anything about fair?
Be sure your staffing agency agreement includes robust indemnity provisions. The agreement should also create a contractual obligation for the temp agency to pay workers all amounts they are due under the law so that, if the agency fails to do so, you can point to a breach of contract when seeking indemnity. Indemnity claims based purely on the law could be subject to challenge since the law also says there is joint liability.
Conclusions
This Temporary Workers’ Bill of Rights applies only to certain industries in New Jersey but, for users of temps in these industries, the law creates important new obligations.
For violations, the law allows for a private right of action and carries a six-year statute of limitations.
If you use temp labor in New Jersey in one of the covered industries, be sure you understand the new requirements. This would be a good time to go back and revisit your staffing agency agreements. They may need some tidying up.
Also consider requiring temp workers to sign individual arbitration agreements as a condition of being placed at your worksite. This strategy can help insulate you from a class action filed against both the temp agency and your company. Class actions against both entities are a particular concern, given the joint liability section of the new law.
An author of romance novels died in 2020, committing suicide after online bullying. Or so it seemed. But a few days ago, Susan Meachen posted on Facebook to say she was back. Not in a risen-from-the-grave sort of way. She says she faked her own death and is very much alive. The story has been covered by CNN and BBC, and I don’t know whether anyone has yet figured out whether Meachen died or someone is now posting under her name.
One thing that seems more clearly dead, though, is the legal principle of agency deference in Ohio. This important decision arose out of a contractor dispute.
In a 7-0 decision, the Ohio Supreme Court ruled that under Ohio law, the judiciary is never [italics in original] required to defer to an administrative agency’s interpretation of the law, even if the statute is ambiguous. Only the judiciary has the authority to interpret the law for purposes of a judicial proceeding.
The Court held that an agency’s interpretation of the law is merely one view that a court may consider. The Court also stressed that an agency’s interpretation of common words is entirely irrelevant since courts are well equipped to interpret common words. Deference to an agency’s interpretation will depend on how persuasive a court finds the agency’s interpretation to be. A court might be more likely to defer if there is an ambiguity over a technical matter over which the agency has expertise, but even then, deference is never required.
The judicial branch is never required to defer to an agency’s interpretation of the law. As we explain, an agency interpretation is simply one consideration a court may sometimes take into account in rendering the court’s own independent judgment as to what the law is.
First, it is never mandatory for a court to defer to the judgment of an administrative agency. Under our system of separation of powers, it is not appropriate for a court to turn over its interpretative authority to an administrative agency..
Now assume that a court does find ambiguity and determines to consider an administrative interpretation along with other tools of interpretation. The weight, if any, the court assigns to the administrative interpretation should depend on the persuasive power of the agency’s interpretation and not on the mere fact that it is being offered by an administrative agency. A court may find agency input informative; or the court may find the agency position unconvincing. What a court may not do is outsource the interpretive project to a coordinate branch of government.
The case arose when an engineering firm applied for an engineering license in Ohio. Seems uneventful, except the firm listed an independent contractor as its full-time manager. Ohio law requires a firm to identify a responsible full-time manager to receive a license. The Ohio Board of Registration for Professional Engineers and Surveyors denied the license on the grounds that a full-time manager could not be an independent contractor. The Board said that a manager had to be a W2 employee.
But the statute requires only that there be a full-time manager. It doesn’t say who can be a manager. The Board determined that an independent contractor could not be a “full-time manager” because independent contractors (if properly classified) are not controlled by their client. In other words, how could the firm be managed by someone it cannot control?
That’s a great question from a practical standpoint. If the contractor is properly classified, it might be a terrible idea to designate an independent contractor as your firm’s full-time manager. But that doesn’t mean it’s prohibited by the licensing statute.
The Ohio Supreme Court explained that the statute requires the Board (“shall”) to grant a license when a firm identifies a full-time manager and meets the other criteria. The Court ruled that the Board, as an administrative agency, has no right to impose additional requirements that are not in the statute, such as that the full-time manager cannot be an independent contractor.
The Court used this dispute to lay down a marker on an important issue of law — When must a court defer to an agency’s interpretation of the law? In Ohio, the answer is never.
This issue comes up often at the federal level too, and you’ll hear a lot more about this issue following the recent announcement by the Federal Trade Commission (FTC) that it plans to pass a regulation making non-compete agreements illegal. The FTC probably does not have the legal authority to do that. A law to prohibit non-competes would almost definitely have to come from the legislature, not an executive agency. If the FTC goes through with its plan, the issue is likely to end up in front of a federal court, which is likely to rule that the FTC does not have this authority. The US Supreme Court’s conservative majority has sent signals that it will be less inclined to defer to agencies than in the past, and it would not be surprising to see the US Supreme Court issue a ruling at some point that looks a lot like this Ohio decision.
The bottom line here is that the era of agencies making new law through regulation may be coming to an end. Agencies can interpret ambiguities in statutes, and they can provide more detail about legal requirements when authorized to do so. But they cannot impose new requirements when not specifically authorized to do so. The path taken by the Ohio Supreme Court may be a sign of similar things to come at the federal level.
In terms of typical independent contractor issues, this post is a bit off topic. But the issue is an important one, and it arose out of a contractor dispute, so I just decided to just go for it and write this post, whether it’s what you were expecting or not.
Kind of like Susan Meachen did recently when she posted on Facebook. Or didn’t post. We still don’t really know.
A chess-playing robot took enforcement a bit too seriously at a recent tournament in Moscow. Facing a 9-year old human opponent, the robot grabbed and broke the boy’s index finger when the boy reached toward the board when it was the robot’s turn to move. When you’re a robot, rules are rules.
The robot had been in use for 15 years (and the boy had been in use only 9). Neither robot nor boy had any known history of delinquency, but this sounds like a textbook case of bullying. And there’s video!
In an unrelated matter, New York Governor Kathy Hochul was not going to be bullied by the state legislature into signing a recently passed bill that would have imposed new requirements on the use of individual independent contractors.
Hochul vetoed the proposed Freelance Isn’t Free Act on the grounds that it imposed inappropriate burdens on the NY State Department of Labor. In her veto statement, she wrote that the state DOL “could not implement the legislation effectively” because it required the DOL to oversee private contracts between businesses and non-employees. That’s well outside the DOL’s mission of enforcing labor protections for employees.
The law would have required written contracts with individual freelancers, with various types of mandatory disclosures in each contract.
The proposed law was a statewide version of New York City’s Freelance Isn’t Free Act, which NYC enacted in 2016. A summary of the NYC law is here. In 2017, the NYC Department of Consumer Affairs published an additional set of rules implementing the act and adding new restrictions that were not in the original law.
Because the 2022 legislative session has ended, the NY state assembly cannot override her veto, but the bill could be reintroduced in 2023.
If the assembly wants to try again, it might try another version that does not involve the DOL, since this is not a misclassification bill and is not a matter between employers and employees. For the bill to be effective, it would need a suitable yet aggressive enforcer of the new rules.
I know of a chess-playing robot in Moscow that might be available.
If you google “what to watch for 2023,” you’ll mostly get tips on soon-to-be-released movies and streaming video shows. You’ll get grammatically impossible generic hype like “movies we can’t wait to see” (except the whole point is that you have to wait to see them) and you’ll get grammatically impossible niche hype like “The most anticipated Korean dramas and movies we can’t wait to watch in 2023.”
We won’t peddle hype in this post, and you’ll literally have to wait for all of the things addressed below. But here are five important developments to watch for in 2023.
1. The test for Independent Contractor vs. Employee is likely to change, at least under the Fair Labor Standards Act (FLSA). The Department of Labor proposed a new multi-factor test, and the period for public comment ended December 13. The DOL is likely to roll out a new test in 2023. It will replace the current core factors test described here.
2. The test for Joint Employment is likely to change, at least under the National Labor Relations Act (NLRA). In September, the NLRB proposed a new test for determining when joint employment exists under the NLRA. You can read more here. The public comment period has closed, and we can expect a new test sometime in 2023.
3. The NLRB is likely to rule that independent contractor misclassification, by itself, is an unfair labor practice. The NLRB General Counsel has expressed an intent to reverse the Velox Express decision from 2019, in which the Board ruled that misclassification was not an automatic ULP. More information is here. Now that the Board majority has switched from Republican to Democrat, expect a decision in 2023 that creates an automatic ULP when there’s a finding of worker misclassification.
4. Expect state legislatures to keep changing the tests for Independent Contractor vs. Employee. Some states will try to make it harder to maintain independent contractor status by passing ABC Tests, in either a standard or strict version. A few conservative states may go the other way and adopt the latest version of the Uniform Worker Classification Act proposed by ALEC. The law would create a safe harbor for independent contractor classification if certain requirements are followed, including having a written contract. Versions of this law have been passed in West Virginia and Louisiana. You can read more here. Expect Oklahoma to be next.
5. Expect significant rulings on California independent contractor law. Several important cases are pending. These include Olson v. State of California, which challenges the constitutionality of AB 5. Oral argument was held in the Ninth Circuit in July 2022. In another case, the California Court of Appeal is considering the legality of Prop 22, the successful ballot measure that helped to protect independent contractor status for rideshare and delivery drivers using app services. Oral argument in that case, Castellanos v. State of California, was held in December 2022.
The law regarding contingent workforce is constantly changing, and 2023 looks to be another year of significant transformation. As always, it will be a good idea to watch these new developments carefully, as they will likely have a significant impact on companies using independent contractors and other contingent workforce arrangements.
According to this article in USA Today, state and local legislatures pass all kinds of strange laws. In Tennessee, you can’t hold office if you’ve been in a duel. In North Carolina, you can’t hold a meeting if you are dressed in costume. In Louisiana, it’s illegal to wrestle a bear.
Other times, legislatures pass laws that make sense, but they do it in a way that’s sloppy or lazy. A recent amendment passed by the D.C. Council falls into this second category.
Like many state and local anti-discrimination laws, the D.C. Human Rights Act prohibits discrimination and harassment in the workplace. An amendment to the Act, effective 10/1/2022, expanded the law’s protections to most independent contractors. Seems reasonable, right?
But the way the law extends these protections is lazy drafting, and the lazy drafting creates problems for those of us who are careful about preserving the distinctions between employees and independent contractors.
The amendment expands the Act’s coverage by changing the definition of “employee.” Under the amended text, the term “employee” now also includes individuals “working or seeking work as an independent contractor,” as well as unpaid interns. The amendment then excludes some independent contractors from coverage, explaining that an independent contractor for purposes of the Act “does not mean a service vendor who provides a discrete service to an individual customer.”
There are two problems here. First, starting at the end, what does the exception really mean? I presume the exception exists to carve out rideshare and delivery services, but if that’s what they meant, they should have said that. It’s unclear. Maybe some guidance will be issued later.
But the larger problem is the second one, and that’s what I want to focus on here. Instead of amending the law so that it applies to “employees and covered independent contractors,” the law lazily changes the definition of “employee” to say that “the term ‘employee’ includes … an individual working or seeking work as an ‘independent contractor.’”
But the word employee (as everyone commonly understands it) doesn’t include individuals working or seeking work as independent contractors. That’s the whole point of differentiating them by calling them independent contractors.
Let’s try an analogy. If you wanted to expand coverage for a law that applies to police officers so that the same protections applied to fire fighters, you wouldn’t redefine the term “police officers” to “include” fire fighters. You’d say the law applies to police officers and fire fighters.
The same principle applies in every day life. If you went to the ice cream store and ordered vanilla soft serve, you’d be unhappy if the clerk handed you a vanilla-chocolate twist. You’d complain, but the clerk would point you to the sign on the wall that says “We define vanilla to include chocolate.” That’s dumb and would never happen. I think. But I would check twice before ordering soft serve at the D.C. Council cafeteria.
Preserving independent contractor status is already complicated, with so many different state and local tests for determining who is an employee and who is a contractor. We don’t need lazy amendments that define the term “employee” in a way that just includes “independent contractors.” It makes everything more confusing for everyone, especially when it remains important to differentiate between contractors and employees in every other context.
We don’t even need to look beyond D.C. to see how the D.C. Council has messed this up. Let’s compare the amended Human Rights Act to other D.C. laws.
The D.C. unemployment compensation law uses a common law test to determine whether someone is an employee or an independent contractor. So does D.C. wage and hour law. The D.C. workers comp law uses a different “relative nature of work test,” but that’s a balancing test too. The point is, under these other D.C. laws, the term “employee” definitely does not include independent contractors, and there’s a way of differentiating which is which.
It’s laudable that the D.C. Council wants to extend anti-discrimination protections to independent contractors. Some state laws do that too. (Federal anti-discrimination laws do not.) But don’t lazily do it by calling independent contractors “employees.” Because they’re not.
At least in D.C. it’s still legal to wrestle a bear.
The Fremont Troll, photo by Sue (CC BY 2.0) modified
Back in the 1990s, Seattle was known for Nirvana and Pearl Jam, Ken Griffey Jr., Microsoft, Frasier (which I could never get into), the emergence of Amazon, and a lot fewer homeless people. The fewer homeless people may have been in part to the Fremont Troll, an 18-foot sculpture erected in 1990 under the Aurora Bridge, where it holds a crushed VW Beetle and would be scary as hell to sleep next to.
The troll’s still there, but Griffey and Frasier are gone and we all know what happened to Nirvana.
Having left the 90s behind, Seattle in 2022 apparently wants to be known instead as a city where it is pretty burdensome to retain independent contractors.
The Seattle City Council passed a law that requires immediate action from all companies that have solo independent contractors working in the city. The Independent Contractor Protections Ordinance, codified at SMC 14.34, took effect Sept. 1.
The rest of this article was originally published as a BakerHostetler Alert, here. Immediate action is needed for companies with solo contractors in Seattle, so read on. All the same helpful info is just below.
The law applies to solo independent contractors who perform any part of their work in Seattle for a commercial hiring entity if the contractor receives or is expected to receive at least $600 in total compensation from the hiring entity during a calendar year. If the hiring party knows or has reason to know that the work is being performed in Seattle, then the law applies, even if the hiring party has no preference as to where the work is performed.
Independent contractors are defined to include individuals and entities consisting of only one person. The law does not apply to workers being treated as employees by a staffing agency or consulting firm.
Commercial hiring entities are defined to include for-profit and nonprofit organizations. Modified rules apply to drivers for transportation network companies, such as ride-share services. There are also exceptions for lawyers and for contractors whose sole relationship to the hiring party is a property rental agreement.
Commercial hiring entities with independent contractors covered under the new law must:
Provide a written precontract disclosure to the contractor that includes at least 12 specified categories of information about the engagement. This disclosure must be in a single document in the contractor’s primary language. A model notice is available.
Provide written updates before making changes to any of the required information.
Provide timely payment consistent with the precontract disclosure terms or a later written contract. If no deadline for payment is specified, then the contractor must be paid no later than 30 days after the work is completed.
Provide an itemized, written payment disclosure accompanying each payment. The disclosure must be in a single document, such as a pay stub or invoice, and it must contain information in at least 12 specified categories.
Provide a written notice of the contractor’s rights under the new law. The notice must be in English and, if applicable, the contractor’s primary language. A model notice is available.
Maintain for three years records that demonstrate compliance with these requirements.
Refrain from retaliating against any contractor who asserts rights protected under the new law. Prohibited retaliation includes threatening to report that the contractor is an illegal immigrant. If any adverse action is taken within 90 days of a contractor’s exercise of rights, the law creates a rebuttable presumption that the action was retaliatory.
The precontract disclosure and disclosure of rights must be provided before work begins or, for contractors already providing services, by Sept. 30, 2022.
Penalties for violating this law may include payment of unpaid compensation, liquidated damages, civil penalties, other penalties payable to an aggrieved contractor, fines and interest. These penalties are in addition to any other relief available under any other law.
BakerHostetler’s Contingent Workforce team continues to monitor state and local developments affecting companies that retain independent contractors. Please reach out to your BakerHostetler contact or any member of the Contingent Workforce team for compliance assistance.
There’s a fight brewing over cockfighting, and it may be headed to the Supreme Court. The dispute is over who can regulate the bloodsport and how. The Commonwealth of Puerto Rico has joined a cadre of cockfighting enthusiasts to ask the Supreme Court to rule that it’s unconstitutional for the federal government to ban the contests.
In 1933, Puerto Rico changed its laws to allow the sport, in which gamecocks are often fitted with spurs and battle until death or dismemberment. The federal government later stepped in to ban the fights. People bet on this stuff, really. On chickens. Wearing spurs.
Closer to home, another fight is brewing, and it’s on a subject familiar to readers of this blog – Prop 22 in California. Passed in late 2020 through a ballot initiative, Prop 22 exempts app-based drivers from the ABC Test and allows them to maintain independent contractor status, so long as the app companies provide certain types of benefits to drivers.
But on Friday, an Alameda County Superior Court judge ruled that Prop 22 is unconstitutional. Wait, what?
Even though Prop 22 passed with 58% support, the SEIU and a vocal group of drivers weren’t too happy and sued. The matter initially went to the California Supreme Court, but the Court dismissed the petition and said it would not hear the case. The SEIU tried again, this time starting in Superior Court, which is where cases are supposed to start. The union found a sympathetic ear in Judge Frank Roesch, who issued this 12-page opinion, which is confusing, hard to follow, and seems to me to be just plain wrong.
What was the basis for the ruling? Two things.
First, Judge Roesch concluded that Prop 22 was unconstitutional because it limits the legislature’s ability to regulate workers’ compensation. Prop 22 defines app-based drivers as contractors, and contractors don’t get workers comp coverage. The law limits the ability of the legislature to undo Prop 22, which was smart since the legislature hated the bill.
The judge found that these limitations made Prop 22 unconstitutional because the California constitution grants the legislature “plenary” power to oversee workers’ compensation. Prop 22 allows the legislature to make limited amendments to Prop 22 but not to undo the whole thing or reclassify the drivers as employees. In making his ruling, the judge essentially concluded that if the legislature couldn’t undo the law, then the law unduly restricted the legislature. But wait! Just a few pages earlier, the judge conceded that “The term ‘legislature’ in [the California constitution] includes the people acting through the initiative power.” Yes, that’s quite the internal contradiction. If the term “legislature” includes initiatives by the people, then initiatives by the people are the equivalent of legislative action. They are acting as the legislature. An appeals court will likely take care of that confusing mess.
Second, the judge concluded that Prop 22 violated the state constitution’s rule that legislation can only be about one subject. Judge Roesch pointed to the part of Prop 22 that gave app-based drivers the right to collectively bargain in a quasi-union environment. He concluded that the bargaining piece of the law is “utterly unrelated” to the law’s purpose. Huh? That utterly makes no sense. The whole point of Prop 22 was to grant app-based drivers various concessions in exchange for clarity on their status as contractors. These concessions include a minimum rate of pay, contributions to healthcare funds, automobile insurance, and the right to collectively bargain in a specified manner. How could the right to collectively bargain be unrelated to these other rights, all of which were part of the quid pro quo in exchange for preserving independent contractor status? The ruling makes no sense, and this too is likely to be cleaned up on appeal.
So what’s the status of Prop 22? Is it dead? Dismembered? The judge may have tied spurs to his feet and kicked the law around a bit, but I am cautiously optimistic that this law will live to see another day.
The case is now headed to the Court of Appeal, and it may end up back with the California Supreme Court.
Meanwhile, for those of you wagering on whether cockfighting will return to legal status, I’d say the odds are against. I don’t think the Supreme Court will take the case and, if it does, I don’t think the Court will say the federal government lacks the power to regulate chicken gladiator shows. I’d put my money on Prop 22 to survive on appeal. I think Judge Roesch’s analysis is incorrect and will be overturned on appeal. But I can’t say I have the same sense of optimism for our cockfighting aficionado friends.
This article in The Fox Magazine lists five things you can buy that are portable, even though you wouldn’t think they could be. The list includes toilets, massage chairs, saunas, neck fans, and bedrooms. The description of a portable bedroom goes like this:
Another brilliant innovation from the country that brought us the toilet in a suitcase, you can now buy a portable bedroom which comes folded up in a series of cabinets that look just like regular closets and dressers. Simply open the cabinet and fold out your bed for a super comfortable night’s sleep.
Um, no thanks.
If this article is revised next year, one surprising addition to the list could be Health Benefits for Massachusetts Independent Contractors. A new bill, inspired by California’s Prop 22, has been introduced in the Massachusetts legislature. To my surprise, the three co-sponsors are Democrats.
The bill, H. 1234, would create a exception to the strict ABC Test in Massachusetts, but only in the rideshare and delivery industries.
If the bill passes, rideshare and delivery platform companies would be required to offer occupational accident insurance and pay into a portable benefit account for drivers.
In exchange for doing so, these companies would gain assurance that drivers on their platforms are independent contractors under Massachusetts state law. The normal ABC Test would not apply. Platform companies would also be required to follow a few other basic guidelines in their interactions with drivers, including that:
Drivers can decide when to work and not work;
Drivers’ access to the platform cannot be terminated for declining a specific rideshare or delivery request;
Drivers can provide services on multiple platforms; and
Drivers can also work in another lawful occupation or business.
The bill is supported by the Massachusetts Coalition for Independent Work (and, of course, by the gig companies), and it is opposed by the Boston Independent Drivers Guild.
If passed, this would mark a significant exception to the strict ABC Test in Massachusetts, which currently presumes all working relationships to be employment, unless:
(A) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
(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.
Unlike California’s AB 5 (later rewritten as AB 2257), the Massachusetts law does not currently have exceptions for certain industries. Rideshare and delivery services would be the first industries carved out of the Massachusetts ABC Test.
The bill is in the early stages of being considered. It has been referred to the Joint Committee on Financial Services for further consideration. We’ll keep an eye on this one. It’s much more intriguing to me than a portable bedroom or sauna.
Who Is My Employee? 