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Posts Tagged ‘independent contractors’

Independent Contractor Or Employee?

Posted on: September 20th, 2018

By: Marshall Coyle

The California Supreme Court has established an “ABC test” that could make it extremely difficult for the state’s truckers to use independent contractors. In Dynamex Operations West Inc. v. Charles Lee, (Case S222732, April 30, 2018) the Supreme Court endorsed what is called the three-pronged ABC test legal standard.

In Dynamex the lawsuit involved allegations by drivers that Dynamex, a nationwide package and document delivery company, had misclassified its delivery drivers as independent contractors rather than employees. The high state court affirmed the appeals court ruling that supported the workers, endorsing what is called the three-pronged ABC test legal standard.

To be classified as an independent contractor, the ABC test requires that: (A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work; (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 of the same nature as the work performed.

The state Supreme Court said that in recent years federal and state regulatory agencies have declared that the misclassification of workers as independent contractors rather than employees is a serious problem that deprives federal and state governments billions of dollars in tax revenue and millions of workers of labor law protections.

“On the one hand, if a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours and working conditions of employees,” the court wrote in its opinion.

“On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families.”

If you have any questions or would like more information, please contact Marshall Coyle at [email protected].

California’s New Independent Contractor Test

Posted on: July 11th, 2018

By: Christine Lee

On April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court, No. S222732, in which the Court adopted an extremely broad view of workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This decision will undoubtedly lead to increased litigation challenging classification of workers across the state as employers will now have a much higher burden to defeat such claims.

Under the new “ABC” test set forth in Dynamex, a worker will be presumed to be an employee unless the hiring entity proves all of the following:

(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 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 of the same nature as the work he or she performed for the principal.

An employer’s failure to establish any one of the three factors will result in a determination that the worker is an employee as a matter of law.  The Court’s ruling specifically applies to claims asserted under the IWC Wage Orders, which impose obligations related to minimum wages, overtime, and required meal and rest breaks. It is presently unclear how the case applies to claims arising under other statutes.

We encourage all companies doing business in California to immediately evaluate classification of outside contractors or vendors.  Under Dynamex, the vast majority of persons performing services for a company will be considered employees if they are performing work within the usual course of the company’s business, even if those individuals act autonomously and are free from control or direction of the hiring entity.

Therefore, we strongly encourage employers to consult with counsel to evaluate and consider reclassifying independent contractors or risk finding themselves on the losing end of an expensive and painful misclassification case.

If you have any questions or would like more information, please contact Christine Lee at [email protected].

Independent Contractor vs Employee Status in the Gig Economy

Posted on: May 31st, 2018

By: Daniel Walsh

As recently noted by FMG’s Connor Bateman, Courts across the country are now reexamining coverage issues stemming from auto insurance policies held by drivers working with Transportation Network Companies (“TNCs”) such as Lyft and Uber.

In Dynamex Operations W. v. Superior Court, 2018 Cal. LEXIS 3152, the California Supreme Court set forth a refined and more inclusive standard on the classification of employees vs. independent contractors in the “gig economy” commonly associated with Lyft and Uber but also extending to various delivery services.   An underappreciated side effect of this decision is the effect upon coverage issues that have been litigated for years throughout California courts.  With a robust gig economy in California, the Courts have seen a high number of general liability cases that have turned upon the Trial Court’s interpretation of employee vs independent contractor status.  This, in turn, has created a high volume of declaratory relief lawsuits centered upon liability coverage for the actions of a gig economy participant, as most insurance policies grant coverage to an employee but deny it to an independent contractor.  With the Court clarifying that distinction in Dynamex, California insurance coverage opinions regarding personal injury liability in the gig economy will now require a new focus and analysis.

If you have any questions or would like more information please contact Daniel Walsh at [email protected].

A Millennial Gig

Posted on: February 21st, 2018

By: David M. Daniels

With Contribution By: Jason C. Dineros

The Obama Administration’s federal enforcement relaxations for marijuana use in 2013, brought with it the development of a viable market industry from what was previously looked upon as taboo—akin to “that stoner stage you went through in high school, but grew out of.” As start-ups were popping up wanting to be frontrunners in an industry that had as much anticipation as whiskey distilleries in the years that followed prohibition, so did the need for legal consultation and representation.  No longer was the idea of marijuana dispensaries becoming as common as liquor stores a far too funny dream or overly paranoid nightmare—depending on the effect—concepts including edible bakeries, “weed lounges,” and cannabis-friendly restaurants and pop-ups also materialized.

A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements.

The trend toward a gig economy has begun. A study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors. Findings from Adobe revealed that as many as one-third of the 1,000 U.S. office workers they polled had a second job and more than half (56%) predicted we would all have multiple jobs in the future. The annual report from Upwork and freelancers Union found that more people than ever are choosing to freelance, up to 55 million this year, or 35% of the total U.S. workforce. As many as 81% of traditional workers they surveyed said they would “be willing to do additional work outside of [their] primary job if it was available and enabled [them] to make more money.

There are a number of forces behind the rise in short-term jobs. For one thing, in this digital age, the workforce is increasingly mobile and work can increasingly be done from anywhere, so that job and location are decoupled. That means that freelancers can select among temporary jobs and projects around the world, while employers can select the best individuals for specific projects from a larger pool than that available in any given area.

Digitization has also contributed directly to a decrease in jobs as software replaces some types of work and means that others take much less time. Other influences include financial pressures on businesses leading to further staff reductions and the entrance of the millennial generation into the workforce. The current reality is that people tend to change jobs several times throughout their working lives; the gig economy can be seen as an evolution of that trend.

In a gig economy, businesses save resources in terms of benefits, office space and training. They also have the ability to contract with experts for specific projects who might be too high-priced to maintain on staff. From the perspective of the freelancer, a gig economy can improve work-life balance over what is possible in most jobs. Ideally, the model is powered by independent workers selecting jobs that they’re interested in, rather than one in which people are forced into a position where, unable to attain employment, they pick up whatever temporary gigs they can land.

The gig economy is part of a shifting cultural and business environment that also includes the sharing economy, the gift economy and the barter economy.

For further information or for further inquiries involving labor and employment law, commercial liability, or hospitality law, you may contact David M. Daniels, the Co-Chair of the Commercial and Complex Litigation Practice Section of Freeman Mathis & Gary, LLP, at [email protected].

 

Dangers of Hiring Independent Contractors

Posted on: July 22nd, 2013

By: Leanne Prybylski

Many contractors hire independent contractors, rather than employees, to avoid paying taxes and benefits.  Contractors should be aware, however, that the costs of misclassifying employees as an independent contractors could end up being more expensive than it would have been to pay the taxes and benefits for the employees in the first place.  For more information, see the recent article by Leanne Prybylski, “The Dangers of Hiring Independent Contractors.”