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Posts Tagged ‘independent contractors’

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].

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].