Island Politics: Which States Are Considering New ABC Tests?

On Victoria Island in Northern Canada there is a series of long finger lakes. In one of the lakes there’s an island. Inside that smaller island, there’s a smaller lake, which contains a still smaller island about a fifth of a mile long. It is the largest known island in a lake on an island in a lake on an island. You can see it here.

I like maps and islands. I like exclaves and enclaves and have lots of questions about islands.

One of my questions is why Rhode Island came to be called that, since it’s not an island. This was particularly confusing to me in elementary school but I have come to terms with it and no longer lose sleep over this.

But now Rhode Island is causing me to lose sleep again.

Why? ABC Tests.

There are bills pending in both Rhode Island and New York that, if passed, would adopt strict ABC Tests for determining who is an employee and who is an independent contractor. The tests would follow the California AB 5/Dynamex model and the Massachusetts model, meaning that a worker providing services would automatically be classified as an employee unless (all 3):

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

(B) the individual performs work that is outside the usual course of the hiring entity’s business; and

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

As discussed here, Part B is the killer B, the destroyer of most independent contractor relationships.

The bills have not yet passed either house, but both have popular support among legislatures that are heavily Democratic. Both bills seem to have a good chance at passing in 2021.

Keep an eye on these bills.

Meanwhile, Victoria Island is the eighth largest island in the world but has only about 2,100 people. I am not aware of any push among the mostly-Inuit inhabitants to reclassify independent contractors anywhere in Nunavut, but I also don’t feel like I have my finger on the pulse of Nunavut politics. It’s harder to track legislation there.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Use a Sea Slug’s Secret Superpower When Drafting IC Arbitration Clauses

Witness: The severed head of a sea slug. Image by Sakaya Mitoh, who performed this awesome experiment.

Did you know that sea slugs have superpowers?

According to researchers at the Nara Women’s University in Japan, if you sever the head of a certain type of slug, the slug can grow a new body, organs and all. I like that as the basis for a new Marvel character. Or maybe the slug is a distant cousin to Roland the Headless Thompson Gunner.

The moral of the story is that when a slug loses its head, all is not lost. (This is how sea slugs survived the French revolution.) The same may be true in the context of arbitration agreements for independent contractors. (Come on, that’s a really good segue, isn’t it?)

For independent contractors in the transportation industry, arbitration agreements may be unenforceable under federal law. But all is not lost. In some states, state arbitration law can save the day. That means it’s important to know your state laws and to draft choice of law clauses carefully.

Here’s what I mean:

For companies that work extensively with independent contractors, there are lots of good reasons to require that disputes are resolved in arbitration, not in court. One of the biggest advantages of arbitration is the ability to include a class action waiver, requiring any claimant to bring a case on an individual basis only. No class actions. Class claims are the sexiest of all claims to plaintiff’s lawyers. Individual claims are not nearly as lucrative. Or sexy.

The Federal Arbitration Act (FAA) embraces arbitration as an enforceable way to resolve disputes. But there’s a big exception to the FAA. It doesn’t apply to transportation workers “engaged in … interstate commerce.” The meaning of that phrase is unclear, and there are lots of lawyers fighting about its scope. Different courts have come to different conclusions, especially regarding last mile delivery drivers and rideshare. Eventually, the Supreme Court is likely to rule on exactly what this phrase means.

But in the meantime, what if your contractors are arguably “engaged in … interstate commerce”? Are you stuck with a lengthy legal battle over whether your arbitration agreement is enforceable under the FAA?

Not necessarily. Don’t forget about state law. Several states have their own laws embracing arbitration as an enforceable way to resolve disputes, and these state laws generally do not have exceptions for transportation workers.

New York is a good example. Courts in New York have upheld arbitration agreements, even when the workers were arguably transportation workers not covered by the FAA.

Choose your state law carefully, especially if your arbitration agreement might be subject to the FAA’s exception for transportation workers. It’s common to include a “choice of law” clause in contracts, but those clauses are often dropped into contracts without anyone thinking about why a certain state’s law should apply. Those clauses really do matter, and the choice of law section should be carefully considered.

When it comes to arbitration agreements, the choice of law clauses should not be viewed as a boilerplate clause to toss in without careful thought.

The ability to choose a particular state’s law is a real superpower. Use it like a sea slug!

© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Sign up now for the BakerHostetler 2021 Master Class on The State of Labor Relations and Employment Law. Twelve sessions, one hour every Tuesday, 2 pm ET, all virtual, no cost. Click here for more information. List me as your BakerHostetler contact so I know you’ve registered. 

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DOL Can’t Go For That (No Can Do), Appeals Joint Employment Ruling

Channeling their inner Hall & Oates, the Labor Department appealed a recent ruling by a New York federal judge that tried to invalidate the DOL’s new joint employer test.

What do I mean? I mean the DOL basically said, “I Can’t Go For That (No Can Do).”

Taking a step back — but not all the way to 1981, when the Private Eyes album was released — the DOL enacted a new test for joint employment in March 2020., which you can read about here. But in September 2020, a federal judge in New York claimed the test was invalid. DOL: No can do. The ruling is now on appeal and will be heard by the Second Circuit Court of Appeals. Expect a decision sometime in 2021.

While conducting important background research for this blog post (which consisted entirely of me listening to Apple Music’s Yacht Rock Essentials on my Sunday morning run), it struck me how similar the Hall & Oates lyrics are to Meatloaf’s “I’d Do Anything for Love (But I Won’t Do That).”

Hall & Oates: I’ll do anything that you want me to do, Yeah, I’ll do anything that you want me to (ooh, yeah), but I can’t go for that, nooo (no). No can do.”

Meatloaf: I would do anything for love, but I won’t do that. No I won’t do that.

Am I overthinking this? Are they not that similar? It was cold out. And raining. And there was a steep hill I had to get up. So I was trying to focus on something other than my aging knees. Which were probably thinking no can do.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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If I Told You Once, I Told You 55,000 Times! These NYC Employment Laws Now Apply to Contractors

NYCHRL independent contractors 8-107(23)A Twinsburg, Ohio man received a statement in the mail for his daughter’s student loan. And then another. And another. And another. The lender sent him 55,000 identical letters filling 79 bins at the post office.

Even better, all of the statements were wrong. They provided an incorrect payment amount.

A recent change to New York City’s Human Rights Law (NYCHRL) doesn’t need to be explained 55,000 times. But it does need to be explained once. Correctly.

Effective January 11, 2020, the protections under the NYCHRL now apply to independent contractors, including freelancers. That means, under NYC law:

  • It is now unlawful to discriminate, harass, or retaliate against an independent contractor, based on any protected class;
  • Businesses must provide reasonable accommodations, including for needs related to pregnancy, lactation, religious observances, sexual offenses, or stalking;
  • Businesses must engage in a “cooperative dialogue” with any contractor seeking an accommodation and must provide a written determination of any accommodation that was granted or denied;
  • Businesses must follow the Fair Chance Act requirements before taking any adverse action based on the results of a criminal background check, including providing a written Artcile 23-A analysis;
  • Businesses cannot inquire about salary history;
  • Businesses cannot perform a credit check (maybe; this is unclear); and
  • Businesses may need to provide sexual harassment training to contractors, depending on the number of hours worked.

For those keeping score at home, the change is to Section 8-107(23) of the NYCHRL. This one little sentence does all the work: “The protections of this chapter relating to employees apply to interns, freelancers and independent contractors.” Boom!

The law applies to businesses in New York City that had four or more workers, including independent contractors, at any time in the previous 12 months.

The law does not apply to wage and hour issues like minimum wage and overtime payments, and the law does not change the test for determining whether someone is an independent contractor or an employee.

The Commission has published some additional guidance on how this will work, especially the sexual harassment training part. You can read it online. Thankfully, the Commission didn’t send it 55,000 times to every business in the mail.

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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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Will NY Lawmakers Create a New Class of “Dependent Contractors”? If So, It Could Be a Work of Art.

Horse no shadow - independent contractor misclassification - dependent contractor - Todd Lebowitz

This piece of art hung in the bedroom at the apartment I rented on my recent vacation in Paris. See the shadow of the dog? Yep. See the shadow of the horse? Yep. See the shadow of the rider?

Oops. I expected it to be there. Chalk up another win for bad art.

Art requires creativity and, sometimes, a different perspective. Things are not always the way we expect them to be. That can be due to oversight (such as with bad art) or due to creativity. New York lawmakers are looking at new ways to approach the Independent Contractor vs. Employee question, and under one recent proposal, lawmakers could get creative.

A proposed bill would create the status of dependent worker, allowing gig workers to form quasi-unions to negotiate fees and directing the state to hold public hearings exploring ways to provide other rights to gig workers, such as minimum wage and anti-discrimination protections.

The bill was withdrawn just before summer recess, but the question will be revisited in the next legislative session. 

Some worker groups say the bill does not go far enough. Many worker advocates would like to see a new law that presumes all gig workers to be employees, unless the hiring party can prove an exception. ABC Tests are one example of that type of law. Business groups seem more open to the proposal, recognizing that labor laws probably need to start recognizing a middle ground between employees and independent contractors. (You can read more about that movement here, in last week’s post.)

We’ll have to wait until the fall, when New York lawmakers return to Albany, to see how this plays out in New York. In the meantime, if anyone is looking for something fun to do during summer break, I know of at least one amateur French painter who could use some tutoring.

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

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Are Independent Contractor Drivers Entitled to a Minimum Wage? NYC Changes the Rules.

New york city rise share drivers minimum wage

Normally, independent contractors are not subject to minimum wage requirements, since those laws (such as the Fair Labor Standards Act) apply only to employees. Lots of litigation focuses on whether contractor drivers should, in fact, be classified as employees and therefore subject to minimum wage and overtime rules, but if the drivers are properly classified as independent contractors, minimum wage requirements typically do not apply.

But under a new rule in New York City, ride share drivers are now entitled to a minimum wage in excess of $15 per hour, despite being independent contractors.

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NYC May Expand Anti-Discrimination Law to Cover Contractors, Interns

NYC anti discrimination gapI will admit, without shame, that in the 1980s, I loved the Gap Band. Songs like “You Dropped a Bomb on Me” and “Burn Rubber on Me” were just plain fun to listen to. Tip: Try it!

The band’s name didn’t refer to any actual gap — the name comes from the first letters of streets in Tulsa, Oklahoma — but I do know there are many gaps in anti-discrimination law, leaving some types of workers without adequate protection.  

The federal laws that prohibit discrimination in employment, like many (but not all) state laws, protect only employees. That leaves a gap. Independent contractors and interns who have been discriminated against may have no recourse.

The New York City Council is trying to close that gap.

In the same bill we excoriated on Monday for unfairly attacking the franchise model, the New York City Council also proposes to expand the protections of the City’s anti-discrimination law (section 8-107 of the Administrative Code) to protect independent contractors and interns, not just employees. 

Closing that gap makes sense. Hopefully this bill will be amended to keep the parts that expand anti-discrimination protection to non-employee workers (a good idea), while removing the parts that would expand liability to companies not responsible for the discrimination (a bad one).

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

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NYC to Franchisors: We’re Going “Crazy on You”!

Barracuda NYCIn 1976, the band Heart released the album Dreamboat Annie. Soon after its release, the label (Mushroom Records) released a suggestive National Enquirer-style ad suggesting that sister Ann and Nancy Wilson might also be lesbian lovers. Ann’s outrage led her to write the song “Barracuda,” about ambush and false accusations.

A different Heart song title came to mind as I read the latest attempt by the New York City Council to hold franchisors responsible for acts they did not commit. 

A bill co-sponsored by 19 council members would amend the City’s anti-discrimination law to hold franchisors strictly liable for discriminatory acts by their franchisee. We have seen many attempts to expand the definition of “joint employer” to include franchisors, but this proposal goes beyond anything we’ve seen. This bill doesn’t even deal with the concept of “joint employment.” It just says that franchisors are liable for discriminatory acts of their franchisees, without any analysis of their involvement in the discriminatory acts or their level of control over the franchisee. It’s automatic.

That’s crazy. Holding one company strictly liable for the wrongful acts of another raises all sorts of legal concerns and, if passed, the bill will certainly be challenged in court.

Franchisors, the Council wants to go “Crazy on You.”

Now, truth be told, in the Heart song, going “Crazy on You” has a very different meaning than I intend it here. Ann Wilson and Roger Fisher (her bandmate, co-writer, and lover) meant it in an amorous way, but there is certainly no love between NYC and franchisors. The attacks by NYC on the franchisor-franchisee relationship are more like those of the sharp-toothed predator of the sea, the Barracuda.

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

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Extra Pepperoni! Domino’s Fends Off Joint Employment Claims

Pizza Food Slice Cheese Mushroom Veggies V

Domino’s Pizza in Russia recently had to cancel a promotion offering free pizza for life to anyone who got a tattoo of the Domino’s logo after too many people tatted up. The Russian franchisee that offered the promotion was overwhelmed by the response. It canceled the scheduled two-month promotion after just four days.

Franchise owners have to adhere to brand standards, but they have flexibility on other things, such as how vigorously to encourage their customers to ink. It can be confusing to the public, however, which decisions are made by franchisors and which decisions are made by franchisees. Not surprisingly, this confusion extends to employment situations, where claims of joint employment are frequently asserted against franchisors, even though individual employment decisions are made by franchisees.

In a delicious decision for franchisors, a New York federal court has ruled that Domino’s Pizza’s corporate entities are not joint employers of the employees who work at individually owned Domino’s franchises – at least under federal and New York State wage and hour law. (Click here for Five Things You Should Know About Joint Employment.)

Joint employment claims are a constant threat in the franchise space. Major restaurant and fast food franchisors are frequently alleged to be joint employers when plaintiffs bring employment lawsuits against individual franchisees. The franchisors (like Domino’s) are viewed as the deep pockets and, by targeting the franchisor’s corporate office, plaintiffs can try to build class actions that include groups of employees across multiple franchises. Or, by tagging a franchisee as a joint employer, plaintiffs can feel more confident that enough dollars will be available to pay any judgment.

The court’s ruling, which granted summary judgment to Domino’s corporate entities, evaluated the plaintiffs’ joint employment claims under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) using a two-part Economic Realities Test.

Following guidance from the Second Circuit Court of Appeals, the court looked at two sets of factors: one set to assess formal control exercised by the franchisor, and the second set to assess functional control by the franchisor. (That’s not the test used everywhere.)

As is typical in franchisor-franchisee relationships, the franchisee (store owner) signed a franchise agreement, agreeing that it – not the franchisor – “shall be solely responsible for recruiting, hiring, training, scheduling for work, supervising and paying the persons who work in the Store and those persons shall be [franchisee’s] employees, and not [franchisor’s] agents or employees.”  The agreement required the franchisee to adhere to brand standards to ensure consistency in product, but individual employment decisions were to be made at the store level, not by the franchisor.

Based on this framework, the court analyzed the facts using the formal control factors and the functional control factors.

The formal control factors included whether the franchisor:

  1. had the power to hire and fire the employees,
  2. supervised and controlled employee work schedules or conditions of employment,
  3. determined the rate and method of payment, and
  4. maintained employment records.

The functional control factors for determining joint employment, some of which do not even make sense in the context of a franchise relationship, are:

  1. whether the alleged employers’ premises and equipment were used for the plaintiffs’ work;
  2. whether the subcontractors had a business that could or did shift as a unit from one putative joint employer to another;
  3. the extent to which [the] plaintiffs performed a discrete line job that was integral to the alleged employers’ process of production;
  4. whether responsibility under the contracts could pass from one subcontractor to another without material changes;
  5. the degree to which the alleged employers or their agents supervised [the] plaintiffs’ work; and
  6. whether [the] plaintiffs worked exclusively or predominantly for the alleged employers.

After evaluating the facts using these factors, the court ruled that the Domino’s corporate franchisor entities were not joint employers. The franchisor entities were therefore dismissed from the lawsuit, but the court allowed the case to continue against the individual franchise owners.

The decision is refreshing for franchisors, but not too refreshing.  As noted here, other Courts of Appeal – mainly the Fourth Circuit – apply different tests for determining whether a company is a joint employer under the FLSA, even though the FLSA is a federal law that you would think would be interpreted the same way all across the country.

The test for joint employment under the National Labor Relations Act is different too – and is likely to change again.  It is possible for a company to be a joint employer under one law or test but not under other laws or tests. There is no uniformity or consistency.

For now, franchisors should rejoice in this small victory, but the fight to protect franchisors against joint employment claims is far from over — unlike the Russian tattoo promotion, which is entirely kaput.

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

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