Tag Archives: Tests

11.10.25
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New Test May Sting Companies with Independent Contractors in Minnesota

Me in Minnesota in 2024, after running around a lake with a name I can’t pronounce

Here are a few fun facts about Minnesota:

  • The official state beverage is milk
  • The official state bee is the rusty patched bumblebee
  • The official state muffin is blueberry

Who knew the blueberry muffin lobby held such sway?

A less fun facts about Minnesota is that the state has made it really hard to be an independent contractor in the construction industry.

In 2024, the state legislature amended its independent contractor classification law to impose a 14-part test. In reality, it’s a 27-part test because some of the parts have mandatory subparts.

If you’re trying to engage an independent contractor in the construction industry in Minnesota, be extra careful. Construction includes commercial and residential improvement but excludes most landscaping services.

A collection of trade groups challenged the law, arguing that it was unconstitutionally vague and that its penalties (compensatory damages plus up to $10,000 per violation) were excessive. They sought a preliminary injunction to suspend the law while they could mount a more substantive challenge.

A district court denied the motion, and then last month the Eighth Circuit Court of Appeals affirmed. The new test therefore remains in place. The Eighth Circuit expressed skepticism about each of the trade groups’ arguments and ruled that they were unlikely to succeed on the merits.

This case is a reminder that the independent contractor tests vary widely. There are different tests for different laws in different states and even within different industries.

Companies using independent contractors should check the laws of their state and industry before assuming that their contract will be sufficient to support contractor status.

A miss here could be painful. Like the sting of a rusty patched bumblebee. If that kind even stings. But for today, let’s assume it stings. And stings hard.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.13.25
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DOL Reminds Employers that Joint Employment Comes in Two Flavors – Vertical and Horizontal

Foie gras ice cream anyone?

We all know that ice cream comes in many flavors. But some are particularly unusual. For example, a French company sells ice cream with flavors like foie gras, caviar, mustard, and truffle. Presumably, those come in separate scoops.

A U.S. company sells deviled egg custard with smoked back team ice cream. That’s a firm no for me. A New York gelateria offers wasabi. Again, pass.

Less fun fact: Joint employment also comes in two flavors — vertical and horizontal.

Vertical joint employment is when the employee of one company performs services for the benefit of a second company, like in a staffing agency scenario. That’s probably what you think of when you consider joint employment.

But there’s also horizontal joint employment, and that flavor was the subject of a recent DOL opinion letter (FLSA 2025-05). The letter reminds us that even under the current administration, the concept of joint employment is alive and well.

Horizontal joint employment occurs when an employee works for two separate companies in the same week, but those companies share ownership, management, scheduling responsibility, or other significant areas of coordination.

Under the facts addressed in the opinion letter, a hostess worked at both a restaurant and a members-only club. She worked fewer than 40 hours per week at each, but worked more than 40 hours per week combined.

The restaurant and the club were on the same property, shared a kitchen, shared some managers, coordinated schedules, and were “operationally integrated with each other,” as the DOL put it. The employee also sometimes performed work for the club while clocked in at the restaurant.

While the locations were run by separately incorporated entities and had separate upper management teams, the overlap in operations was enough for the Acting Wage and Hour Administrator to conclude that the employee was jointly employed. That means her hours had to be combined for purposes of determining her eligibility for overtime. If she worked more than 40 hours combined for the two entities, she would be due an overtime premium. The two joint employers would have to determine how to allocate the premiums between them, and if they failed to do so, both would be jointly liable.

This opinion letter is a good reminder not to overlook the potential for horizontal joint employment. It’s a lesser known flavor of joint employment, but just as loaded with cream and sugar.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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09.29.25
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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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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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09.02.25
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Not Buying It? New Jersey DOL Might Back Off From Tougher IC Test

If you’re a frequent online shopper and reading this post from Japan, you’re probably familiar with the online Japanese flea market app Mercari. What I mean is, I never heard of it either.

Mercari, though, made big news last month when it took the controversial step of banning the sale of prenatal photos on its website. Why would anyone buy someone else’s prenatal photo? For scamming purposes, apparently. And that’s what led Mercari to take action.

The practice of “ninshin sagi” (a phrase that autocorrect vehemently tried to reject) means pregnancy fraud. It occurs when a woman tries to blackmail a male partner into paying money for a supposed pregnancy or to get an abortion. Mercari wants no part in the scheme, so if you want to buy photos of someone else’s uterus, you’ll have to look elsewhere.

New Jersey lawmakers are also saying to look elsewhere, but their ire is aimed at the NJ Department of Labor. As we discussed here, the NJ DOL issued a proposed rule that would change the state’s test for determining independent contractor status. The public comment period for the rule has closed, and now the NJ DOL needs to consider each comment and decide what to do.

Several NJ lawmakers, however, are urging the DOL to back off, and the sentiment is bipartisan. The proposed rule, they say, is not consistent with the current state of NJ court decisions or the NJ statute. (I agree!)

There is no timetable for the NJ DOL to issue a final rule. Or the NJ DOL may abandon its effort to adopt the rule. It’s also possible that lawmakers would enact legislation to block the proposed rule.

Companies with independent contractors in NJ should keep an eye on what happens here. The proposed rule would make NJ’s current ABC Test much stricter and harder to meet, thereby making it very difficult to maintain independent contractor status in NJ.

But at least in New Jersey you can still buy online uterus pics.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.18.25
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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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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.21.25
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Just Like the Dress: Why Balancing Tests for Worker Classification Can Be So Unpredictable

Remember the dress that broke the internet?

In 2015, this image was widely circulated on Facebook, with some people seeing the dress as white and gold, others seeing it as blue and black. Whichever camp you are in, you probably cannot understand how anyone could possibly think the dress is the other set of colors.

You can read more here if you want a refresher. But essentially it all comes down to neuroscience and differences in how people perceive color.

The core takeaway, though, was that two people could view the same object and reach opposite conclusions.

And so it goes with independent contractor misclassification disputes. A recent Fourth Circuit decision highlights the problem with the tools we use to assess whether a worker is properly classified. When a balancing test is used, different fact-finders can view the same evidence and reach opposite conclusions. And that’s exactly what happened here.

The case, Chavez-DeRemer vs. Medical Staffing of America d/b/a Steadfast, involved a staffing firm that provided independent contractor nurses to hospitals and medical clinics, as needed. The DOL launched an investigation in 2018, alleging that 1,100 nurses should have been classified by Steadfast as its employees under the Fair Labor Standards Act (FLSA). The DOL filed a lawsuit in federal court in Norfolk. After a bench trial, the judge ruled that under the FLSA’s six-factor Economic Realities Test, the nurses were employees. The judge awarded more than $9 million in damages.

Steadfast appealed. Last week, in a 2-1 decision, the Fourth Circuit affirmed. Two judges agreed with the trial court, finding that the evidence supported employee status under the Economic Realities Test.

The dissenting judge disagreed vehemently. As in, how-can-you-possibly-think-the-dress-is-blue-and-black vehemently. The dissenting judge excoriated the majority for cherry-picking facts and ignoring the realities of the relationship.

All three judges, of course, were evaluating the same facts and the same record. All three judges were applying the same six-factor Economic Realities Test. Yet, they reached very different conclusions.

If this is depressing, it should be. It shows how unpredictable balancing tests can be.

The outcome is an important reminder of how important it is, when building independent contractor relationships, to consider every relevant factor and to nudge as many factors as possible to the independent contractor side of the scale.

There is no way to predict which facts a judge will find most persuasive and no way to predict how a judge will weigh the factors, especially since it is pretty much inevitable that there will be at least some factions on each side of the scale.

I see the dress as white and gold. I can’t understand how anyone would think it’s black and blue. Those people are insane.

Actually they’re not insane. (Well maybe they’re insane.)

In the Medical Staffing case, the dissenting judge couldn’t see how the other two judges could have possibly reached the conclusion that the nurses were misclassified. Businesses using independent contractor models need to be prepared that no matter how supportable they think their classification decision is, a judge or agency might reach the opposite conclusion, even from the same facts.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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06.09.25
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Different Strokes: Be Careful With Choice of Law Clauses in IC Agreements

The phrase “Different strokes for different folks” originated in the 1960s and seems to have been popularized by Muhammad Ali. Describing his knock-out punches against Sonny Liston and Floyd Patterson, he said, “I got different strokes for different folks.”

In 1979, Ali appeared in the sitcom “Diff’rent Strokes,” which was probably named for the Ali quote and which was actually spelled that way and I can’t find anything that explains why. I guess when it comes to punctuation, different strokes for different folks?

Today’s post is a variation on that theme: Different states for different fates.

When drafting independent contractor agreements, choice of law matters. Choose carefully and thoughtfully. And remember three things:

First, state laws differ significantly on several subjects that might be relevant to your IC agreement — for when someone is considered an employee, for when non-competes can be enforced, for when non-solicitation agreements can be enforced, and for other terms that are likely to be in your contractor agreements. Don’t choose the law of a state that is less likely to enforce the clauses you want to include. If you can avoid California law for example, do yourself a favor and avoid California law.

Second, the state you choose needs to have some nexus to the parties or their relationship. Examples of a nexus that can justify use of a state’s law may be that one party is based there, or the work is being performed there, or (maybe) that one party is incorporated there. But there needs to be some connection.

Third, for worker classification disputes, the law of the state where the work is performed might apply anyway, since if a worker works in State A and the laws of State A would consider that person to be an employee, the parties cannot agree to contract out of the law of State A. But don’t concede so easily. Aim to apply the law of a favorable jurisdiction, even if there’s a chance that a court or arbitrator might disregard the choice of law clause in a classification dispute. Besides, there are going to be many other clauses in your agreement for which you’ll want the most favorable state law to apply.

For employment relationships, it is unlawful in some states (and unenforceable in others) to require application of the law of a state where the work is not performed, but it’s much less clear when and whether such laws apply to non-employment relationships.

The bottom line: Be strategic and thoughtful when inserting a choice of law provision in an independent contractor agreement. Depending on what law is applied to a particular issue or contract clause, the result and enforceability of that term may be different. Or diff’rent.

And the wrong choice of law could mean a knock-out punch for a clause you’d like to enforce.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.27.25
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Rubbish? Ninth Circuit Upholds California’s ABC Test, Rejects Constitutional Challenge

(AI image generators are fun!)

In 1959, residents of São Paulo, Brazil, elected Cacareco to city counsel. Cacareco was a five-year and female and lived at the Sao Paulo zoo. She was a big girl, known to eat 70 pounds of vegetables a day. Cacareco was a rhinoceros.

Cacareco, which means “rubbish,” got on the ballot through a student prank. Her success is generally attributed to residents’ frustration with city officials over local conditions, which included unpaved streets and open sewers. Said one local, “Better to elect a rhino than an ass.”

Back in the U.S., businesses in California have been calling the state’s independent contractor test “rubbish” since it went into effect in 2020. A group of truckers, called the Owner-Operator Independent Drivers Association (OOIDA) mounted one of the more persistent challenges to the law, known as AB 5, and that challenge finally resulted in a Ninth Circuit Court of Appeals decision earlier this month.

Unfortunately for the OOIDA and its owner-operator trucker members, the Ninth Circuit upheld the constitutionality of AB5 and rejected the truckers’ challenge to the law.

The truckers had argued that AB 5 violates the dormant Commerce Clause because it imposes a substantial burden on interstate commerce, which outweighs its putative benefits. the truckers also- argued that the law’s business-to-business exception violates the dormant Commerce Clause because it discriminates against interstate commerce and violates the Equal Protection Clause because it treats interstate and intrastate drivers differently. the truckers argued that there is no rational basis to support this alleged disparate treatment.

The Ninth Circuit saw things differently. In an unpublished opinion, the court rejected each argument and upheld the law.

The ABC Test appears here to stay, and the chances of getting it overturned now seem about as likely as electing a rhinoceros to the California State Assembly.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.19.25
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What Animals! New Jersey Proposes to Toughen Independent Contractor Test

In medieval Europe, it was not uncommon to put animals on trial for various crimes. In France, Italy, Switzerland, and elsewhere, courts tried pigs, dogs, rats, grasshoppers, and snails for crimes against people, property, and God. 

Examples include cases brought against vermin who dared to ransack stores of grain and prosecutions for pigs having maimed or killed people.

There’s a whole book about the practice, Chronological List of the Prosecution of Animals from the Ninth to the Twentieth Century, by E.P. Evans. I typed the name of the book in the search bar at Amazon. Apparently it is not available, and the site instead recommended that I purchase a DVD of Ransom, starring Mel Gibson. (?)

No, thank you.

I also say no, thank you to New Jersey Department of Labor and Workforce Development (NJ DLWD), which has proposed new independent contractor classification regulations.

The regulations would re-interpret NJ’s ABC Test in a way that would make it much harder to maintain IC status. The regulations would apply to the NJ Wage Payment Law, the Unemployment Compensation Law, and the Earned Sick Leave Law.

For years New Jersey has used an ABC Test, but with the standard version of part B, unlike California and Massachusetts, which have a strict version of part B.

To satisfy a standard ABC Test, like in NJ, the party engaging the contractor must prove (all three):

  1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
  2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

The regulations would largely re-interpret part B to make it more like the strict version, which can be met only if the work is performed “outside the course of the business for which such service is performed.”

The regulation would essentially eviscerate the second option — that the work is performed outside of all the places of business of the enterprise for which such service is performed — and make it nearly impossible to satisfy this alternative.

For example, under the regulations, the retaining party’s “place of business” could include any place where the work is typically performed, even customer’s homes.

The regulations would also make parts A and C harder to meet. In part A, for example, the regulations would declare that control exerted to make sure a contractor follows the law is relevant control that can convert the worker to an employee. But control exerted to ensure compliance with a law is control imposed by the government, which passed the law, not by the company retaining the contractor. This re-imagining of part A would be inconsistent with a multitude of court decisions that have addressed this issue.

I say no, thank you, because the regulation is not consistent with New Jersey law and is not consistent with how other courts around the country have interpreted the ABC factors. The NJ DLWD is supposed to apply the law, not change it. The NJ DLWD is not a legislative body and is not a court.

Nonetheless, it seems like there’s a good chance this will pass.

A 60-day public comment period began with the publication of the proposed rule on May 5. Companies that will be impacted by the rule should consider submitting comments. Page 1 of the proposed regulations explains how.

Misclassification in New Jersey is serious business. The state has been aggressive about pursuing legal action against companies that systemically misclassify workers as ICs. (But so far, no cases against pigs, dogs, rats, grasshoppers or snails. I think.)

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.06.25
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DOL Softens Its Bite on Independent Contractor Rule

This is Louie. He’s 11 weeks old. He has the teeth of a shark. If you play with him and there’s no toy in his mouth, your arm is the toy. Or your foot. Or sometimes your face. In my house, we all look like we just played with a blender. But he’s awfully cute.

Late last week, the Department of Labor (DOL) made some news that won’t bite companies in the face.

Read more here.

Originally published 5/5/25 as a BakerHostetler alert.