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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New ABC Test Under Federal Labor Law? Dem-Sponsored Bill Would Make That Change

Independent contractor misclassification NLRB peacock

All eyes on me!

According to The Atlantic, when a peacock spreads and shakes its elaborate feathers, it shakes them at 26 times a second, which creates a pressure wave that is sensed by a female peahen through the crest atop her head. This precise frequency causes the female’s crest to vibrate in a way that is apparently very sexy for peafowl. The male seeks attention and, with just the right vibrations, he lets all the single pea-ladies know that he wants some action. Note to pea-fellas: If you like it, then you shoulda put a ring on it.

In a crowded field of Democratic Presidential hopefuls, something similar is happening, but it’s less pretty, less sexy, and less appealing for businesses across the country.

As Democratic legislators vie for union support in the upcoming 2020 election, they’re making sure to signal to workers and unions that they’ve got pretty feathers and they’re not afraid to use them. A new bill co-sponsored by Presidential hopefuls Kamala Harris (Calif.), Bernie Sanders (Vt.), Elizabeth Warren (Mass.), Cory Booker (N.J.), Kirsten Gillibrand (N.Y.), Amy Klobuchar (Minn.), and Rep. Tim Ryan (Ohio) would amend the National Labor Relations Act (NLRA) to redefine “employee” and “joint employment.”

The Protecting the Right to Organize Act of 2019 would impose a strict Dynamex-style ABC Test for determining Who Is My Employee? under the NLRA. A worker would be deemed an employee under the NLRA by default and could only be deemed an independent contractor if all three of the following could be proven:

(A) the worker 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, and
(B) the worker performs work that is outside the usual course of the hiring entity’s business, and
(C) the worker is customarily engaged in an independently established trade, occupation, or business.

This is the same strict ABC Test adopted by the California Supreme Court in Dynamex and by the Massachusetts legislature for its state wage and hour claims.

The Act would also redefine joint employment. It would require that an entity be deemed a joint employer under the NLRA if it “codetermines or shares control over the employee’s essential terms and conditions of employment.” So far, so good. But then there’s this: “In determining whether such control exists, the Board or a court of competent jurisdiction shall consider as relevant direct control and indirect control over such terms and conditions, reserved authority to control such terms and conditions, and control over such terms and conditions exercised by a person in fact.”

The Act would stymie the NLRB’s current effort at passing a new regulation that would limit “joint employment” to situations where actual control is exerted (not merely reserved) and where that control is exerted over essential terms and conditions of employment, such as hiring, firing, and pay.

Most damaging of all (but not related to independent contractor or joint employment issues), the bill would fundamentally change the collective bargaining process by imposing binding arbitration on the parties to resolve any disputes in contract negotiation. That change, if it were ever adopted, would change the nature of bargaining as we know it, potentially removing much of the incentive for unions to bargain in good faith.

If the Act emerges from committee, it will likely pass the House but has no chance of success in the Senate. Even if it passed, it would almost certainly be vetoed by Trump anyway.

For now, the Act is a political move intended by the Democratic Presidential hopefuls to demonstrate their pro-worker, pro-union credentials. For a certain audience, the Act looks pretty and may vibrate some crests. But for at least the next two years, this display of feathers is not likely to lead to any action.

Bonus feature: For another peacock-related post, click here.

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

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Say It Like You Mean It! NLRB Says Uber Drivers are Independent Contractors

All You can Eat Seats - Independent contractor misclassification

Section 223 looks delicious!

I was in Phoenix last week and saw this sign at a Diamondbacks Game. The seats in Section 223 were probably plastic and hard to chew but otherwise looked pretty tasty. Still, I don’t think I could eat more than a few at a time.

Ok, I know what the sign intended, but my reading is a fair one too. Right? The message wasn’t quite clear.

The NLRB was much more clear in the message it sent last week in an Advice Memorandum from the Office of the General Counsel. The Board opined that UberX and UberBLACK drivers were independent contractors, not employees of the ride-share app.

The opinion letter applies only to federal labor law (the NLRA), not to wage and hour law, employee benefits law, tax law, or the vast potpourri of state laws, but it’s another sign that the current administration is intent on protecting independent contractor relationships — if the relationships are properly structured.

The memo applied the same Right to Control Test for determining Independent Contractor vs. Employee that the Board used in January in its SuperShuttle decision. In SuperShuttle, the Board ruled that a group of airport van drivers were independent contractors, not employees, under the National Labor Relations Act. The ten-factor Right to Control Test used by the Board is explained here.

This NLRB Advice Memorandum arrives less than three weeks after a similar opinion letter from the Department of Labor (DOL). The DOL’s April 29 letter concluded that service providers who use “virtual marketplace” apps to find customers are independent contractors, not employees. While the letter doesn’t identify the app it reviewed, the DOL’s analysis seems to apply to Uber and other ride-share apps and to the service providers (drivers) who use these apps to find customers. The DOL’s letter addressed only the Fair Labor Standards Act (FLSA), which applies a six-factor Economic Realities Test for determining Independent Contractor vs. Employee. Different law, different test. 

Here are four takeaways from the two letters, viewed together:

  1. Different tests apply to different laws, even for similar circumstances. That’s been a consistent theme in this blog, and these two letters — one interpreting the NLRA and the other interpreting the FLSA — reinforce the different approaches. Click here for a chart showing the different tests for Independent Contractor vs. Employee, as of January 2019.
  2. The current administration and its executive agencies are much friendlier toward independent contractor relationships than their Obama-era predecessors. The Obama DOL and NLRB were outright hostile toward independent contractor relationships (see examples here for DOL and here for NLRB), so this is a major change.
  3. These are not court decisions and do not bind the federal courts, even as to NLRA and FLSA cases.
  4. These opinions apply only to the NLRA and the FLSA — two of the many federal laws that apply only to employees, not independent contractors. The opinions do not directly impact federal tax law or employee benefits law, and they do not impact any of the myriad state laws. In other words, the states don’t care.

The area of independent contractor misclassification and the never-ending quest to determine Who Is My Employee? continues to evolve at a pace that should keep readers on the edge of their seats. Just don’t sit too close to the edge, because if you abandon your seat, someone at a D-Backs game might try to eat it.

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

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Which Claims Are Covered by the Dynamex ABC Test? Here’s a Chart for California. (Time to Give Up on Positive Thinking?)

Chart Dynamex which claims does the ABC Test cover in California

Cook before eating?

A Mongolian couple died from the bubonic plague earlier this month after eating raw marmot meat. An official from the World Health Organization told the BBC that the couple ate the rodent because they believed it would bring them good health. It didn’t.

Positive thinking can be powerful, but not as powerful as bubonic plague.

California businesses that use independent contractors should be similarly cautious about any positive thinking. After a series of court decisions and a new opinion letter from the California Labor Commissioner, use of the Dynamex ABC Test for determining Independent Contractor vs. Employee is expanding.

Which claims now use the Dynamex test for determining Independent Contractor vs. Employee? Here’s the latest list — at least according to the California Labor Commissioner and my reading of recent court decisions:

Dynamex ABC Test applies:

  • Overtime;
  • Minimum wage;
  • Reporting time pay;
  • Record keeping (including itemized pay stub obligations);
  • Business expense reimbursement for cash shortages, breakage, or loss of equipment;
  • Business expense reimbursement for required uniforms, tools, and equipment; and
  • Meal and rest periods.

It depends:

To determine Independent Contractor vs. Employee for these claims, the Labor Commissioner and a California Court of Appeal instruct that the Dynamex ABC Test applies if the claim is focused on enforcing payment of minimum wage, overtime, and other obligations set forth in the Wage Orders. If not, then the ABC Test does not apply.

The general rule, according to the opinion letter, is that the Dynamex ABC Test applies to any claims that seek to enforce obligations described in one of the Industrial Wage Orders

The opinion letter does not carry the weight that a court decision does, and it makes some assumptions that the California Supreme Court did not make when it adopted the ABC Test in Dynamex. So there’s always a chance that the California Supreme Court might rule that the scope of the Dynamex test is supposed to be limited to a narrower range of claims. But this is California, so that does not seem likely. In other words, don’t sample that marmot meat.

Dynamex does not apply (we think):

  • Workers’ compensation claims;
  • Unemployment claims;
  • Wrongful termination;
  • Discrimination, harassment, or retaliation;
  • Tax obligations; and
  • Employee benefit obligations.

For these claims, either the S.G. Borello balancing test should apply if the claims are asserted under California law. For tax and employee benefit claims asserted under federal law, the Right to Control Test will apply. Read more here to understand how one California Court of Appeals determined which test applies to which claim. (Including entirely unnecessary references to G-L-O-R-I-A Gloooooria!)

One of the reasons independent contractor misclassification claims can be so challenging to defend is because different tests apply to different claims. This is not just a California problem.

The same problem exists under federal law, with one test applying to federal wage and hour claims (FLSA), another test applying to tax, benefits, and discrimination claims, and a moving target as to which test applies under federal labor law (NLRA).

Here is a similar chart, showing which test applies to which federal law claims.

In California, it’s getting harder and harder to prove independent contractor status, especially for claims applying the Dynamex ABC Test. Many Californians are into zen, meditation, and positive thinking, but the power of positive thinking might not get you too far when it comes to trying to preserve independent contractor status. There are still defenses, and it’s still possible to maintain independent contractor status in California, but it’s not easy.

Fighting misclassification claims in California can sometimes feel like eating raw marmot meat. It might seem like a good idea at first, but then you could end up with bubonic plague.

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

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Not Even Cher Could Turn Back Time, But the Ninth Circuit Just Did; Dynamex Test Now Applies Retroactively in California

Clock independent contractor misclassification dynamex

In a mediocre and overplayed 1989 pop song, Cher sang about how she wished she could turn back time. If she could turn back time, according to the song, she’d take back those words that’ve hurt you and you’d stay.

The music video for “If I Could Turn Back Time” takes place on the deck of the battleship USS Missouri, which the U.S. Navy allowed because it believed the video could help boost recruitment. (How, exactly?) The song reached number one on the pop charts in Australia and Norway, causing me to question the collective judgment of the citizens of these otherwise fine nations.

As Cher well knew, you can’t turn back time. Doing so would cause all sorts of problems. As we will now see in California.

On May 2, the Ninth Circuit Court of Appeals ruled that California’s Dynamex decision (from April 2018) must be applied retroactively. In the Dynamex case, the California Supreme Court had ruled that a strict ABC Test should be used to determine whether workers are considered employees or independent contractors under California’s wage orders.

You can read more about the test here, but what’s most important for now is that the test is really hard to meet. That’s why in Vazquez v. Jan-Pro Franchising International, Jan-Pro argued that since it was being sued for events that took place before the Dynamex ruling, its lawsuit should be decided under the test that was used before the Dynamex ruling. Jan-Pro argued that the Dynamex decision made up new rules in the middle of the game, and Jan-Pro should not be held to the new, made-up rules for time periods before the new rules were made up.

That seems logical to me, but not to the Ninth Circuit. Instead, the Court of Appeals ruled that Dynamex must be applied retroactively. The Court’s reasoning makes little sense.

The Court based its decision on the general rule that new statutes are applied prospectively, but court decisions are applied retrospectively. That makes sense as a default rule — but only if the court decision is interpreting the text of a statute or is applying a well-known rule to a set of facts. 

The ABC Test was invented by the California Supreme Court in its April 2018 Dynamex ruling. That test did not exist in any California statute enacted by the legislature or in any regulation. Before the Dynamex case, no business in California had any reason to believe that an ABC Test was the test — especially since for decades a different test had been used. The Dynamex decision, therefore, was much more like the enacting of a new statute than the judicial interpretation of a long-standing law. 

In fact, the Ninth Circuit’s decision last week goes so far as to admit that the Dynamex decision was, in essence, the adoption by California’s Supreme Court of a Massachusetts statute that had never been passed by California’s legislature.  The Ninth Circuit ruling includes this sentence, which precisely demonstrates my point:  “Thus, by judicial fiat, California incorporated Massachusetts’ employment classification statute into its labor laws.” Before April 2018, Massachusetts had an ABC Test, by statute. California did not.

Judicial fiat! That quote says it all. Judicial fiat is when the judiciary (not the legislature) creates a new law. It is a term most commonly used to criticize a judicial decision as going too far and usurping the role of the legislative branch.  But here the Ninth Circuit concedes that’s what the California Supreme Court did in Dynamex.  Since the Dynamex decision adopted a Massachusetts statute by judicial fiat, then the only fair way to apply that rule is to treat it like a statute and apply it only prospectively. But no.

It seems blatantly unfair for a court to make up new rules by adopting a different state’s statute — one that California’s legislature never adopted — and then to hold California’s businesses liable for failing to comply with a set of rules that did not yet exist.

So, Todd, tell me how you really feel.

Anyway, that’s now the law in California. The ABC Test invented by California’s Supreme Court in the Dynamex court now applies when determining whether someone is an employee under California’s wage orders, even for time periods before the test was invented.

You can read more about the Dynamex decision here and here.

California business are being advised to consider moving to Australia.

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

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Slip Slidin’ Away? Truckers’ Fall Short in Bid to Overturn California’s Dynamex Standard (Plus: Bonus Quiz for Paul Simon Fans)

Truckers Western States dynamex independent contractor misclassificationIt seems a little presumptuous that when Paul Simon released the single, “Slip Slidin’ Away,” he released it as one of two new songs on his 1977 Greatest Hits, Etc. album. How is it a greatest hit before it’s been released? But sure enough, the song rose to #5 on the Billboard charts. Today’s Challenge: Ten bonus points will be awarded to anyone who can name the other new song that debuted on Simon’s 1977 Greatest Hits, Etc. compilation. The answer is at the end of the post.

In July, we wrote about “Convoy,” a 1975 song about a fictional trucker rebellion, as a way to introduce a new lawsuit filed by the Western States Trucking Association. The lawsuit seeks to invalidate California’s burdensome ABC Test (the Dynamex test), which is now used to determine who is a contractor and who is an employee under California wage and hour law.  The truckers argued that the law — as applied to truckers — was preempted by federal laws that seek to promote uniformity in the interstate transportation industry.

Based on a recent decision in a California federal court, the truckers’ hopes of invalidating Dynamex may be Slip Slidin’ Away.

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Too Many Beef Livers? NLRB Addresses How It Will Review 29,000 Comments on Its Proposed Joint Employer Rule

NRLB Ring too many beef livers avocadosToo much of a good thing can be a bad thing. For example, according to this article in Popular Science, consuming 240 avocados in one sitting would put the average man at risk of sudden death by potassium poisoning. (It doesn’t say how many avocados an above-average man could eat, but presumably the number is similar.) 

A similarly bad outcome can result from over-consumption of beef livers, although it would take approximately 431 pounds of beef livers before the toxicity of excessive vitamin A might cause a man to think he should have stopped after 430.

Lots of comments can overwhelm an administrative agency’s internal organs as well. As we discussed here, the NLRB has proposed a new regulation that would make it harder to establish joint employment under the National Labor Relations Act. In response to the Notice of Proposed Rulemaking, the Board has received nearly 29,000 comments from interested organizations, unions, academics, business owners and individual workers (like Cindy, perhaps) about the proposed new rule.

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