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Posts Tagged ‘independent contractors’

New DOL Rule Aims To Allow Benefits For Independent Contractors

Posted on: January 8th, 2021

By: Justin Boron

Independent contractors can receive ‘employee’ type benefits without becoming “employees” under a rule finalized by the U.S. Department of Labor Wednesday.

The provision is part of a final DOL rule that re-vamps the independent contractor classification test. It aims to allow companies to make independent contractor opportunities more attractive without having to also accept the other financial and administrative burdens that accompany compliance with labor and employment laws that protect employees.

“For example, payment of proceeds owed into a worker’s own health plan or retirement account would not indicate an employment relationship,” the DOL wrote in response to comments received during the review process.

Of course, there are caveats.

First and foremost, all of the other required elements of the independent contractor relationship must be maintained. For example, the independent contractor must still exercise the appropriate degree of control over their work and opportunity for profit or loss as a result of personal investment. 

Second, a company risks the independent contractor status if the benefits too closely resemble the ones that the company provides its full and part-time employees.

The DOL stated: “providing a worker with the same employer-provided health or retirement plans on the terms that a business also gives its own employees may indicate the worker is not an independent contractor but rather an employee.” Additionally, paid leave or bonuses similar to those that employees receive also could jeopardize the independent contractor status.

The fact that benefits might need to be different and provided separately could dissuade smaller companies from even bothering. But the rule could provide an attractive incentive for large companies that rely heavily on independent contractors to perform services.

It remains to be seen if this rule will have a significant impact on labor strategy. But at the very least, it eliminates one element of the independent contractor test that many critics had called outdated.

To review the entire rule, visit https://www.dol.gov/agencies/whd/flsa/2021-independent-contractor

If you have questions or would like more information, please contact Justin Boron at [email protected].

Under Attack Again: California Attorney General Announces Misclassification Lawsuit Against Uber and Lyft

Posted on: May 7th, 2020

By: Ryan Greenspan

On May 5, 2020, California Attorney General Xavier Becerra announced that the State of California will be suing Uber and Lyft for misclassifying their drivers as independent contractors.  The precise details of the suit are not presently known, but it is being reported that Uber and Lyft are being accused of violating Assembly Bill 5, went into effect on January 1, 2020 and dramatically changed the legal requirements in California to qualify as an independent contractor.

In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court established a 3-factor test employers must satisfy to prove that a worker is properly classified as an independent contractor.  Employers must prove the following:

1) that the worker has freedom from control over how to perform the services they provide;

2) that the services provided are outside the business’s normal variety; and

3) that the worker is engaged in an independently established role. 

Assembly Bill 5 codified the Dynamex decision while carving out limited exceptions.  Assembly Bill 5 was expected to significantly impact several of the app-based companies based in California, particularly those commonly known as being part of the “gig economy.”  Companies such as Uber and Lyft have always classified their drivers as independent contractors, which afforded workers the opportunity to set their own hours and work for multiple companies, but also meant those workers did not receive various benefits afforded to employees, such as healthcare, workers’ compensation, expense reimbursements, and a guarantee that they would be paid at least the minimum wage. 

Enforcement litigation does not come as a surprise.  Shortly after Assembly Bill 5 went into effect, Uber and Lyft announced that they would refuse to reclassify their drivers as employees.  In February 2020, a federal judge denied a request from Uber and food delivery company Postmates for a preliminary injunction that would have exempted them from the new law.

Prior to Assembly Bill 5 going into effect, Uber and Lyft assisted in the funding of a statewide ballot measure known as the Protect App-Based Drivers & Services Act.  The Act is expected to be voted upon in the November 2020 election.  If passed, companies such as Uber and Lyft would continue to be permitted to classify their drivers as independent contractors while providing several benefits to their workers, such as a guarantee of at least 120% of the minimum wage, 30 cents per mile for expenses, and a healthcare stipend. 

Uber and Lyft have largely been able to defend or settle a series of class action lawsuits over the issue of worker classification.  However, an enforcement lawsuit from the state presents a unique challenge to the app-based companies because there is less opportunity to reach a settlement than there is with a private plaintiffs’ attorney.

While this case is in its infancy, the outcome will have a tremendous impact on the approximately 500,000 drivers working for Uber and Lyft in California, as well as thousands more who work for companies such as Doordash. If you have any questions or would like more information on this lawsuit or Assembly Bill 5, please contact Ryan Greenspan at [email protected].                        

Can a California Lawyer be Disciplined for a Paralegal’s Misconduct?

Posted on: March 27th, 2019

By: Greg Fayard

In some circumstances, a California lawyer can be disciplined by the State Bar for a paralegal’s misconduct. This type of discipline was not possible under the State’s old lawyer-ethics rules. Rule 5.3 of the new rules requires attorney-managers to make sure nonlawyers—such as law students, investigators, legal assistants or paralegals—are not violating any ethical rules. A supervising lawyer, which could be an associate (so long as he or she has direct supervisory authority over the nonlawyer), can be responsible for the ethical breach of a paralegal if the lawyer is aware of an ethical violation, had a chance to avoid or mitigate the ethical lapse, but did nothing.

For example, if a paralegal is disclosing confidential client information without the client’s consent (a clear ethical breach, see Rule 1.6) and the paralegal’s supervisor knew about it, but did nothing, the supervising lawyer can be disciplined for the paralegal’s misconduct.

California lawyers, therefore, are obligated to make reasonable efforts to ensure that their law office has measures which assure that nonlawyer conduct is compatible with the professional obligations of lawyers. This directive applies to both nonlawyer employees and independent contractors. Further, under Rule 5.3, any measures ensuring nonlawyer ethics compliance should consider whether the nonlawyers have legal training.

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

Ninth Circuit’s Decision Upholding Arbitration Clause Enables Uber To Sidestep Substantive Issues Regarding Misclassification

Posted on: October 10th, 2018

By: Laura Flynn

In O’Connor v. Uber, a case in which California Uber drivers assert they should be categorized as employees rather than independent contractors, the Ninth Circuit Court of Appeals recently issued an order reversing the district court’s denial of Uber’s motions to compel arbitration. The Court rejected Plaintiffs’ assertion Uber’s arbitration agreements were unenforceable. The Court’s decision reversing the order denying arbitration was based on Mohamed v. Uber, 848 F.3d 1201 (9th Cir.  2016) wherein the Court found the relevant provisions delegated the threshold question of arbitrability to the arbitrator, that the delegation provisions were not adhesive and were therefore not procedurally unconscionable, and that the provisions allowing drivers to opt-out of arbitrations were not illusory. The Court rejected Plaintiffs’ additional argument the arbitration agreements were unenforceable because they contained class action waivers that violate the National Labor Relations Act of 1935 pointing to the recent Supreme Court decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). As the class certification by the district court was premised on its determination the arbitration agreements were unenforceable, the order certifying a class of approximately 160,000 Uber drivers was also reversed.

Based on the Court’s decision, it appears Uber drivers will have to purse their misclassification claims individually through arbitration. The limited pool of arbitrators, the amount of time it takes to arbitrate an individual claim, the smaller payout for attorneys, and lack of precedential value associated with arbitrations will likely discourage some drivers from pursuing their claims.

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

 

For further reading, see our blogs discussing this matter:

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].