Proposed Law Would Radically Change App Driver Protections and Legal Status; Might Also Stop Zombie Ant Apocalypse (Maybe).

california driver app law ant zombiesYou’re supposed to learn something new every day, right? Here’s something that’s definitely new, unless you are a fungus aficionado — and, lucky reader, because this is a read-only post, you do not have to identify yourself if you are indeed a fungus aficionado, and if you are, TMI, and keep it to yourself.

Anyway, there’s a fungus that attacks certain kinds of ants, takes over their ant-body cells, turns them into zombies, causes them to take a final mad bite into a certain type of leaf, then causes a plant spore to sprout from their heads. Yes, really. It’s right here in this New York Times article, complete with pictures.

The Ophiocordyceps fungus is not a dinosaur, despite its suspiciously dinosaur-sounding name, but it sounds pretty ferocious and looks like it’s threatening to kill off segments of the ant population.

Another thing that is ferocious and threatening to kill something off is California’s recent Assembly Bill 5, which would convert many independent contractors into employees under state labor laws.

The latest attempt to eradicate that ferocious law comes in the form of a ballot initiative being sponsored by some of the large ride hailing and delivery app companies.

The Protect App-Based Drivers and Services Act, if passed, would preserve the independent contractor status of app-based drivers in California if the app companies provide the drivers with a number of financial considerations and benefits, along with allowing the drivers to maintain control over when and where they work. The law imposes substantial driver protections that app companies are currently hesitant to provide, out of fear that providing these benefits and protections might cause the drivers to be deemed employees.

The law would strike a much-need balance that enhances driver rights while creating certainty on drivers’ classification status.

The app companies would have to provide an earnings guarantee of at least 120% of the local minimum wage for time engaged, a 30-cents per mile stipend to cover vehicle expenses, a healthcare subsidy contribution, occupational accident insurance, and liability insurance.

App companies would be prohibited from engaging in discrimination. Companies would also be required to implement a sexual harassment policy, conduct background checks, implement safety training, and implement a zero tolerance policy prohibiting driving while impaired. Rest periods would also be required.

In exchange, the app companies would receive assurance that the drivers are properly classified as independent contractors so long as four conditions are met:

(a) The network company does not unilaterally prescribe specific dates, times of day, or a minimum number of hours during which the app-based driver must be logged into the network company’s online-enabled application or platform.

(b) The network company does not require the app-based driver to accept any specific rideshare service or delivery service request as a condition of maintaining access to the network company’s online-enabled application or platform.

(c) The network company does not restrict the app-based driver from performing rideshare services or delivery services through other network companies except during engaged time.

(d) The network company does not restrict the app-based driver from working in any other lawful occupation or business.

The proposed law is supported by multiple prominent ride share and delivery app companies. Their hope is to gather enough signatures to place the issue on the November 2020 ballot in California.

This is worth watching. You can read more about it here. If passed, this can serve as model legislation to be applied elsewhere around the country.

In the meantime, if you see fungal spores starting to grow out of app drivers’ heads, you’ll know that Assembly Bill 5 got to them first.  We can only hope.

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

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Don’t be a goat: Know the joint employment law before going to trial

Joint employment goatI took a picture of this goat right before it tried to eat a small paper cup. The paper cup had food in it, but the paper cup was not the food. This confusion is understandable because, well, it’s a goat. The bar is set low for a goat.

The bar needs to be set higher when retaining counsel to defend against claims of joint employment. A recent California case shows what happens when your lawyer doesn’t understand the proper test for joint employment.

In the lawsuit, a staffing agency employee had been retained to work in a supervisory role as a line lead in a production department. We’ll call the place where she worked the “contracting company.” The worker was accused of bullying, then she accused another worker of harassment, and the contracting company terminated its her relationship with her. We don’t know whether the staffing agency terminated her direct employment, but that’s not important for now. The point is that the contracting company terminated its relationship with her.

She then sued the contracting company for having terminated her role there, accusing the contracting company of sexual harassment and retaliation. Because her direct employer was the staffing agency, she would have to prove that the contracting company was her joint employer. That’s because you can only allege employment discrimination claims against an employer. In other words, to bring a claim of employment discrimination against the contracting company, she had to prove that she was an employee of the contracting company.

Under California anti-discrimination law, a right to control test is used to determine whether a business is a joint employer. The test looks at how much control the business had over how the worker did her work. Because she was a line lead and a supervisor for the contracting business, there were plenty of facts that could support a finding of joint employment.

The lawyers for the contracting business either didn’t understand the joint employment test or they knew their goose was cooked, so they tried a different approach. Instead of arguing that the contracting business did not have a right to control her work, they argued that the jury should look at who had more control — the staffing agency or the contracting business. They argued that the staffing agency hired her and paid her, so it must have had more control over the essential terms of her employment. The staffing agency, they argued, was therefore her real (and only) employer.

The jury bought this argument, finding that the contracting company was not a joint employer because it exerted less control than the staffing agency.

But this argument was too clever by half. That’s not the test. So last week, a California Court of Appeals reversed the judgment, sending the case back for a new trial. You’ve got to use the proper test.

The test for joint employment is not about who had the most control. It’s just about who had the right to exert certain types of control. If more than one business exerts the right kinds of control, there can be more than one employer. That’s the whole point of joint employment.

Here’s an analogy that may be useful. Suppose a worker has a manager, who reports to a general manager. Both the direct manager and the general manager have control over the worker, even though the direct manager has more day-to-day and direct control. But they both are managers, and both have the right to control how the worker does the job. It’s not about which of the two managers has more control. They both manage the employee. Jointly.

To effectively defend against claims of joint employment, it’s necessary to understand the legal test for joint employment. Here, the contracting company argued the wrong test and scored a hollow victory at trial. In goat-speak, they overlooked the food and ate the paper cup. Now they’ll have to do it all over again, costing the contracting company a boatload in additional legal expenses for a second trial.

The lesson here is: Know the law, and know the tests. It’s hard to mount a real defense against joint employment if you don’t.

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

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A New Smell: Ninth Circuit Rejects ABC Test for Determining Joint Employment

Joint employment dogsWhere I play tennis, there’s a lake with a beach that is open all summer. Like most places in the Midwest, it closes for the season on Labor Day. The weekend after Labor Day, they open it up for everyone to bring their dogs to run around, jump off the high dive (I wish!), and sniff each other’s butts. Because dogs are not typically allowed at the lake, these dogs are unfamiliar with each other, so there’s even more butt-sniffing than you might normally see at a canine networking event. 

My daughter captured this gem of a photo — a five-dog sniffing train.

An unfamiliar smell wafted our way from the Ninth Circuit Court of Appeals last week too. And this was a more pleasant scent for California businesses than usual.

The case was a joint employment case involving a franchisor. A local franchisee was accused of miscalculating overtime and failing to provide sufficient meal and rest breaks. The plaintiff-employees settled with the franchisee but continued to go after the deeper pockets, the franchisor. They made several arguments.

Two were of the most interest to me.

First, they argued that the Dynamex ABC Test should be used to determine whether the franchisee’s employees were also the franchisor’s employees. The Court rejected this argument, holding that the Dynamex ABC Test applies only to the question of whether someone is an independent contractor or an employee. To determine whether someone is a joint employee, a different test is used.

Second, they argued that under California’s broad definition of employ, the franchisor “permitted” the franchisee’s employees to work and therefore was a joint employer and jointly liable for the franchisee’s mistakes.

The Ninth Circuit rejected that argument too. To determine whether someone is a joint employer under California wage and hour law, the Court said you look at three alternative definitions of employ: control, “suffer or permit to work,” and the common law S.G. Borello balancing test. If any of these three tests is met, there’s joint employment. The “suffer or permit to work” definition is the broadest and is the one that is most likely to tag a company with joint employer status.

The Court determined that even that broadest of definitions could not be met. The franchisor had no control over day-to-day operations, hiring, firing, scheduling, or worker pay.

For California businesses, the key takeaways from this case are (1) that the ABC Test is used only to determine independent contractor misclassification, not to determine joint employment, and (2) that the test for joint employment is relatively easy to meet but it’s not automatic, even for a franchisor.

The Court acknowledged that the nature of a franchisee-franchisor relationship necessarily involves franchisor control over the product, but that does not mean it controls the employees. It is the franchisor’s relationship with the franchisee’s employees that must be looked at to determine whether there is joint employment.

We have seen plenty of decisions from of the federal and state courts in California that have threatened to expand joint employment and threatened the franchise business model. But this decision smells good, even if a bit unexpected — like an unfamiliar but friendly dog at the beach.

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

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Need Direction After California’s New Independent Contractor Law? Download the Playbook!

Siri punked me. Independent contractor misclassification AB 5Sometime I forget where I park, so when I went to the airport recently, I told Siri where I left the car.

Siri then punked me with this. I think it was intentional. Stupid AI.

California businesses may be in need of some direction too. On September 18, Gov. Gavin Newsom signed Assembly Bill 5 into law.  The law redefines the Independent Contractor vs. Employee test in California, applying an ABC Test to a broad range of state laws.

When the law takes effect January 1, 2020, it will instantly turn thousands of independent contractors into employees. Some aspects of the law may even apply retroactively.

What are your options?

I can think of ten. Click here to download The Playbook: Now That California Has Passed AB 5, What Are the Options for Businesses Using Independent Contractors?

 

Page 1 from The-Playbook-California-AB-5_p03

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

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California Businesses May Need Emotional Support Clown When New Independent Contractor Law Takes Effect

Emotional support clown independent contractor misclassification

An Auckland, New Zealand man sensed he was about to fired from his job in the ad industry. His employer scheduled a meeting and said he could bring someone with him for emotional support.

He brought a clown.

As the employer provided the man with his separation papers, the clown made balloon animals — a poodle and a unicorn — to try to lighten the mood. The clown also mimed crying as the employer explained the termination.

Afterward, the man described the performance of his emotional support clown as “overall supportive” but “sort of noisy.”

California businesses may want to hire their own emotional support clowns as they try to decide how to respond to Assembly Bill 5 (AB 5), which has passed both houses and now awaits Governor Newsom’s signature to become law.

AB 5 makes it harder to classify workers in California as independent contractors.  Once it takes effect, it will instantly convert many thousands of independent contractors into employees.

Here’s how. AB 5 codifies the ABC Test invented by the California Supreme Court in the Dynamex case and then extends it.  In April 2018, the California Supreme Court ruled that a strict ABC Test would be used for determining whether someone is an independent contractor or an employee under California’s Industrial Wage Orders, which cover minimum wage, overtime, meal and rest breaks, and a few other wage-related subjects.

Under AB 5, the Dynamex ABC Test will also be used to determine whether someone is an employee under all portions of the California Labor Code and the Unemployment Insurance Code.  That means independent contractors in California will be presumed to be employees of the entity for which they perform services under these laws, unless the business can prove all three of the ABC Test factors below:

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

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

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

As discussed here, Part B of the test is the hardest to meet.

Unless all three factors of the test are satisfied, the workers will be considered employees under California law, and all of the following state law requirements will apply:

  • Minimum wage
  • Overtime, if not exempt, including daily overtime
  • Meal and rest breaks
  • Reimbursement of expenses
  • Paid sick leave
  • Paid family leave
  • Various notice, poster, and wage statement requirements
  • Timekeeping record requirements
  • Unemployment coverage
  • Workers compensation coverage
  • Paycheck timing requirements
  • On-call, call-back, and standby pay requirements
  • Travel time payment requirements
  • Final paycheck requirements
  • Commission rules

This is not intended to be a complete list of all California laws that apply to employees, but these are some of the most likely areas where businesses would find themselves to be in a state of noncompliance if their independent contractors are deemed to be employees under AB 5.

There are a number of exemptions to the bill, but they are narrowly crafted.  Barbers and estheticians, for example, are not affected.

If signed, the law will take effect January 1, 2020, although some provisions may be applied retroactively.

This bad news leads to the obvious question you astute readers will ask: So what are my options if I use independent contractors in California?

I am putting the finishing touches on The Playbook: Now That California Has Passed AB 5, What Are the Options for Businesses Using Independent Contractors?

The Playbook will be available at no cost and will be released as a BakerHostetler Client Alert. I will post a link here, once it is available.

In the meantime, let me know if you’d like more information about how AB 5 might affect your business. If you can’t reach me, I’m probably on the phone, trying to hire my own emotional support clown.

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

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Do Over for California’s ABC Test? Retroactivity Issue is Headed Back to the State Supreme Court

Independent contractor ABC Test cow

“Placido Domingo’s pretty great, but I also love Pavarotti.”

In Hampshire, England, there is a veterinarian who sings opera to cows.

Now if your spidey-sense is as tingly as mine, you’ll immediately realize there is something wrong with this picture. It’s obvious, right? It should be an opera singer who sings opera to cows, not a veterinarian. Vet school does not include the proper classical training.

While this Hampshire vet has apparently not realized he is out of his lane, the Ninth Circuit Court of Appeals last week did acknowledge it was operating out of its lane in a major case involving independent contractors. The Ninth Circuit is withdrawing a major decision it released in May 2019 and sending that issue to the California Supreme Court instead.

In May, we wrote about the ruling by the federal Ninth Circuit Court of Appeals that’s being withdrawn. In that case, the Ninth Circuit ruled that California’s ABC Test (the Dynamex Test) for deciding the Independent Contractor vs. Employee question would apply retroactively. (You can read my seething critique of that ruling, Vazquez v. Jan-Pro, here.)

The Dynamex decision is the one in which the California Supreme Court made up an ABC Test as the new standard for determining whether someone is a contractor or an employee under California’s wage and hour laws (claims of overtime, minimum wage, meal and rest breaks, etc.). The ramifications are enormous for California businesses.

Now back to the May 2019 Vazquez ruling. In that case, the Ninth Circuit ruled that California businesses should have been applying the ABC Test that was made up in Dynamex, even though that test did not yet exist. Seems pretty unfair, doesn’t it? Very unfair.

Last week, the Ninth Circuit withdrew its ruling in the May 2019 Vazquez case. This is half good news, not all good news.

The Ninth Circuit didn’t concded that its May 2019 decision was wrong (even though it was, heh heh). Rather, the Ninth Circuit decided that — like a veterinarian singing opera to cows — it had been operating out of its lane. The Ninth Circuit now says that the California Supreme Court — not the federal Ninth Circuit Court of Appeals  —  should be the one to decide whether the ABC Test applies retroactively.

The California Supreme Court case is definitely one to watch. Industry groups from around the country are likely to weigh in. Many will file amicus briefs (non-party “friend of the court” memos) to try to persuade the court that retroactivity would be unfair and would have significant negative effects on California businesses and the state’s economy.

For now, the question of whether the Dynamex ABC Test applies retroactively is again unresolved. That means there is a period of a few years extending back from April 2018 in which nobody knows what the test is for determining whether someone was then an employee or an independent contractor under California’s wage and hour laws.

That’s important because the are a lot of lawsuits alleging that independent contractors are misclassified. Some have been decided, some have not. Could some cases that were already decided be reopened?

We’ll keep an eye on this case as it makes its way through the California Supreme Court. We’ll also be watching for new developments among bovine opera aficionados. I want to know whether the cows think this veterinarian singer is any good.

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

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Opinion Piece Asks California Not to Be the Pigeon in this Photo

Pigeon head Tuileries - independent contractor misclassification Todd LebowitzI took this picture last week in Paris, walking through the Jardin des Tuileries with my family, just outside the Louvre.  

If you think of the statue as being ride-share giants Uber and Lyft, and if you think of the California state legislature as the pigeon, you’ll know why Uber and Lyft’s chief executives joined forces to write this opinion piece in the San Francisco Chronicle.  

As we explained here, California seems likely to pass a bill that would rewrite California law in a way that will instantly convert many — perhaps most — independent contractors into employees.  The bill would take the ABC Test created last year in the Dynamex case and apply it to the entire California Labor Code, as well as to state unemployment law. (Currently, the ABC Test applies only to state wage and hour claims, and a more neutral balancing test applies to other state law claims.)

The law, if passed, would undoubtedly fuel new claims against Uber and Lyft, alleging that ride-share drivers are employees under state law.

In the opinion piece, the companies argue in favor of legal reform, but in a way that does not threaten to change drivers into employees.

The Uber-Lyft proposal would secure three new types of protections for ride-share drivers, while safeguarding their status as independent contractors. The proposal would:

  1. Set up a portable benefits system for gig workers, including retirement savings accounts, paid time off, and lifelong learning opportunities;
  2. Create a drivers’ association, in partnership with state lawmakers and labor groups, to represent drivers’ interests and administer benefits; and
  3. Establish a new driver pay system that includes greater earnings transparency for the work performed between accepting a ride and dropping off a passenger after accounting for reasonable expenses.

So why can’t Uber and Lyft just do these things on their own? Because if they did, the current legal system would likely treat those acts of goodwill as evidence that Uber and Lyft were treating the drivers as employees.

Current labor laws were not written with the gig economy in mind. The law right now is an all-or-nothing proposition — independent contractor or employee. The modern economy, though, requires a middle ground — an alternative that allows app companies to provide greater benefits and protections to drivers without running the risk that these well-meaning gestures could convert the drivers into employees.

Pigeons are going to poop on statues forever. Marble heads provide a comfortable spot for loosening the ol’ avian bowels, and we all know it’s hard to find a good public toilet these days. But some things should not be set in stone. Let’s hope the California assembly backs off of the fast track for A.B. 5 and instead tries something new. The system proposed in the joint Uber-Lyft opinion piece would help drivers and would help the gig economy continue to thrive. 

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

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