Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘contract labor’

Classifying Workers as Independent Contractors in California is About to Become Harder

Tuesday, September 10th, 2019

The California Legislature is poised to pass Assembly Bill 5, an act that will reclassify up to two million California independent contractors as employees.  All indications are that the bill will pass in the coming days.  In an op-ed piece published in the Sacramento Bee on Labor Day 2019, California Governor Gavin Newsom expressed his strong support for passage of the bill:

“Reversing the trend of misclassification is a necessary and important step to improve the lives of working people. That’s why, this Labor Day, I am proud to be supporting Assembly Bill 5, which extends critical labor protections to more workers by curbing misclassification.”

If the bill passes final votes in the Democratic-controlled Senate, Governor Newsom likely will pass the bill into law with his signature before the Legislators adjourns on September 13th.  While AB-5 faces fierce opposition from Lyft, Uber, DoorDash and other economic powerhouses, passage of AB-5, with or without significant modifications, seems inevitable.  If passed into law, AB-5 will codify the California Supreme Court’s April 2018 Dynamex Operations West, Inc. v. Superior Court decision and fix certain problems created by the Court’s decision in Dynamex.

What Did the Dynamex Case Establish?

In the context of the rapidly expanding gig economy, the 2018 Dynamex ruling was one of the most consequential wage-related decisions in California in decades.  Although currently the new definition of “to employ” applies only to claims made under the California Industrial Welfare Commission Wage Orders, those Wage Orders reach deep into the workplace.  Wage Orders govern the classification of employees as exempt or nonexempt from overtime, the operation of alternative workweeks, minimum and overtime wage obligations, meal and rest periods, recordkeeping, uniforms and equipment, and even when employers are required to provide seats to workers.

What is the “ABC Test”?

In Dynamex the Supreme Court held that individuals engaged to perform work for others are employees unless the hiring party can demonstrate “(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”  This is the crux of the ABC Test.

Dynamex’s Scope is Both Broad and Limited

The Dynamex decision does not address the classification of workers with respect to other kinds of employment claims, including discrimination, harassment and expense-reimbursement claims.  As it currently stands in California, then, we have two competing tests to determine whether someone is an employee or independent contractor: (1) the multi-factor, economic realities test described in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, and (2) the ABC Test for claims under the Wage Orders.

Consequently, if an individual files a lawsuit claiming unpaid minimum wages (a Wage Order claim) and unlawful discrimination (outside the Wage Orders), a jury might be asked to apply two distinct employee tests to the different claims made by the same person.  A jury might find that the individual was an employee entitled to minimum wages under the ABC Test but that the individual was not an employee entitled to protections against discrimination under the definition of “to employ” set out in Borello.  As currently drafted, AB-5 does not clearly reconcile those differences.  AB-5 would apply only to definition of “to employ” in the Labor Code, Unemployment Insurance Code and the Wage Orders.

These differences in the legal definition of the term “to employee” should be addressed by the Legislature.  But in the interim, California courts will be called upon to reconcile the different definitions of “to employ” that currently exist in the cases that come before them.  Interesting appellate decisions are sure to address these kinds of issues in the coming months.

How Will Passage of AB-5 Effect Workers and Workplaces in California?

While AB-5 current carves out significant exceptions for certain professionals, including doctors, securities broker-dealers, lawyers, architects, accountants, cosmetologists and other licensed professionals, its impact will be felt broadly across California. Passage of AB-5 will grant employment rights and protections to workers who are currently not covered by labor laws, including workers compensation insurance, unemployment benefits and sick leave.  The importance of these benefits cannot be overstated.   California’s rich labor history is filled with such moments as these, from the passage of the first minimum wage law in 1916 to the first day of 2016 when the California Equal Pay Act went into effect.  Providing greater protections to more people in the workplace in California has always been central to our identity as Californians.

However, Dynamex and AB-5, if passed into law in the coming week, will also force employers and workers to reassess their working relationships.  AB-5 would sacrifice the freedoms we associate with working as independent contractors for protections guaranteed to workers engaged as employees.  Unless the Legislature carves out an exception for Uber and Lyft drivers, ride sharing and delivery companies like DoorDash, will be forced to change their fundamental people engagement models.

As expected, employer and industry groups are decrying AB-5 as a doomsday bill that will drive business away from California and severely damage the economy.  The largest players in the gig economy have billions riding on the outcome of the legislative process.  These groups have simultaneously lobbied for exemptions and threatened to void the outcome if AB-5 is signed into law.  If AB-5 is passed, which Uber and Lyft appear now to accept as likely, they have promised to challenge the law through a 2020 voter initiative. Jointly they have earmarked $60 million to a fight to overturn the law.  Given the issues permeating discussions within the Democratic Party in the run up to the 2020 presidential election, however, a California voter initiative meant to take away employment protections granted by AB-5 would have a steep uphill fight.

The California economy is the fifth biggest in the world, just ahead of the United Kingdom, and it has weathered serious challenges over the years as worker protections have expanded and costs to businesses have increased.  California will survive and thrive, and will likely establish precedent for similar movements in other blue states.

About the Author: Patrick R. Kitchin is the founder of Kitchin Legal APC, a San Francisco, California employment law firm. He has represented tens of thousands of employees in both individual and class action cases involving violations of California and federal labor laws since founding his firm in 1999. According to retail experts and the media, his wage and hour class actions against Polo Ralph Lauren, Gap, Banana Republic, and Chico’s led to substantial changes in the retail industry’s labor practices in California. Patrick is a graduate of The University of Michigan Law School and is personally and professionally committed to the protection of workers’ rights everywhere.

California Assembly votes to rein in gig economy abuses, this week in the war on workers

Monday, June 3rd, 2019

The so-called gig economy often rests on exploiting workers by misclassifying them as independent contractors, which means they don’t get minimum wage, unemployment insurance, workers compensation, overtime pay, or other protections that regular employees are guaranteed (at least in theory). That may be about to change in California, where the state Supreme Court ruled to clarify how workers are classified last year, and the Assembly passed a bill this week tackling the issue.

If the bill becomes law, employers could only classify workers as independent contractors if they could prove that the workers truly controlled their own schedules and working conditions, weren’t doing work central to the company’s business model, and had their own “independently established” business or role. That would have huge ramifications for huge companies like Uber, Lyft, and Amazon, but would also apply to workers at many small businesses. The bill does exclude many jobs, though, such as doctors, real estate agents, lawyers, and some hairdressers.

AB 5 passed 53 to 11 in the Assembly and now heads to the state Senate. “Big businesses shouldn’t be able to pass their costs onto taxpayers while depriving workers of the labor law protections they are rightfully entitled to,” tweeted Assembly member Lorena Gonzalez, one of the bill’s authors, in celebration of its passage.

This blog was originally published at Daily Kos on June 1, 2019. Reprinted with permission.

About the Author: Laura Clawson is labor editor at Daily Kos.

Should Workers Be Punished for Being Employed By Subcontractors? This Legal Battle Will Decide.

Thursday, January 10th, 2019

Over the last few decades, a growing number of American workers have effectively lost many of their labor rights because of the way their bosses structure the employment relationship. These workers are contractors who are hired by one company but work for another: the Hyatt Hotel housekeepers who actually work for Hospitality Staffing Solutions, the Microsoft tech workers who actually work for a temp agency called Lionbridge Technologies, and the Amazon warehouse workers who actually work for Integrity Staffing Solutions. These workers often perform the same work at the same place as other workers, frequently on a permanent basis.

But because their employers have entered into complicated contracts with each other, these workers have been unable to exercise their labor rights. If the workers can only bargain with the staffing company and not the lead company where they actually work, they are negotiating with the party that often has no power to change the terms of their employment. For that reason, workers have fought for a more inclusive definition under the National Labor Relations Act of what constitutes an employer—and when two employers are joint employers.

Recently, the Washington, D.C. Circuit Court of Appeals issued a major ruling that was a win for workers, and now this issue seems destined for the Supreme Court. As the legal battle heats up, workers everywhere should be paying close attention, since their livelihoods—or unions—could be affected.

Contracting expands as workers’ rights shrink

Under a traditional employment relationship, workers have one employer who has the power to hire, fire, pay, supervise and direct them. If such workers form a union, the law requires the employer to recognize the union and bargain in good faith. (Employers routinely violate the law and suppress workers’ labor rights, but workers at least have a theoretical path to collective bargaining.) Workers also have the right to picket and engage in other disruptive activities when they have a labor dispute with that employer.

However, there is a growing group of blue-collar, white-collar and service workers who find themselves working for two employers, either through contractors or temporary help firms. “In 1960 most hotel employees worked for the brand that appeared over the hotel entrance,” David Weil, former adminstrator for the Department of Labor Wage and Hour, explains in his 2014 book, The Fissured Workplace. “Today, more than 80 percent of staff are employed by hotel franchisees and supervised by separate management companies that bear no relation to the brand name of the property where they work.”

For those who work in a fissured workplace, organizing a union can be especially tough. The contracting firms have little power to raise wages or change working conditions, unless the company that controls the worksite agrees. Therefore, workers need both employers at the bargaining table.

Starting in 1984, the National Labor Relations Board (NLRB) began imposing difficult requirements to show that two employers are joint employers. By 2002, the NLRB was requiring that it be shown that the putative joint employer exercises direct and immediate control over employment matters. This meant that even when a company hired workers through a staffing agency to work at its site, chose the number of workers, gave specific work assignments and directions, and exercised supervision, it was not found to be a joint employer. Workers could, of course, form a union to negotiate with the staffing agencies, but those agencies usually have little room to maneuver alone.

Obama’s labor board

Recognizing this growing problem, in 2015 the NLRB changed the test to determine when two employers constitute a joint employer in its landmark Browning-Ferris Industries decision. No longer would workers have to show that both employers exercise direct control over them. Instead the NLRB recognized how power actually functions in the workplace and ruled that it would only require a showing that an employer had indirect or reserved control over the workers.

In its ruling, the NLRB recognized that for 30 years its approach to continuously adding requirements was moving in exactly the opposite direction from what was required: “As the Board’s view of what constitutes joint employment under the Act has narrowed, the diversity of workplace arrangements in today’s economy has significantly expanded.” And indeed, according to data from the Bureau of Labor Statistics’ most recent Contingent Worker Survey, there are approximately 2.3 million workers who work for contractors or temporary help agencies, and this figure captures only a portion of those that one could reasonably find have joint employers.

The NLRB’s new Browning-Ferris test looked at whether two employers actually share or codetermine employment matters by also considering reserved or indirect control. Therefore, an employer could no longer avoid its liabilities and obligations by structuring its power in an indirect fashion. James Hoffa, the president of the Teamsters, the union that represented Browning-Ferris workers, said at the time, “This decision will make a tremendous difference for workers’ rights on the job. Employers will no longer be able to shift responsibility for their workers and hide behind loopholes to prevent workers from organizing or engaging in collective bargaining.”

Similarly, employer-side attorneys recognized the scope of the decision. In their dissent in Browning-Ferris, NLRB Members Philip Miscimarra and Harry Johnson wrote that the decision was “the most sweeping of recent major decisions. Attorney Marshal B. Babson who represented the U.S. Chamber of Commerce in its opposition to this case, said at the time, “The decision today could be one of the more significant by the NLRB in the last 35 years. Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.”

The right strikes back

Reaction among corporate groups and Republicans was immediate, severe and comprehensive. Within two weeks, both House and Senate Republicans had introduced the Protecting Local Business Opportunity Act, which would amend the National Labor Relations Act to define joint employers as those who “directly, actually and immediately” exercise control. In 2017, the House passed its version of the bill in a vote that fell largely along party lines.

Once the NLRB came under Republican control and was presented with a case that touched upon the joint employer question, the NLRB, in the Hy-Brand case, overruled Browning-Ferris. This decision was so potentially damaging to workers that former NLRB Member and current executive director of the Labor and Worklife Program at Harvard Law School, Sharon Block, wrote that the decision constituted part of a “December Massacre.” 

But then, on February 9, 2018, the NLRB Inspector General issued a memorandum that determined that there was a “serious and flagrant problem and/or deficiency” in the NLRB’s deliberations surrounding the Hy-Brand case. Specifically, the memorandum found that Hy-Brand was effectively a “do-over for the Browning-Ferris parties,” and since NLRB Member William Emanuel’s former law firm represented Browning-Ferris in that case, he should have recused himself. Following this memorandum and Emanuel’s recusal, the NLRB unanimously vacated its Hy-Brand decision that overruled Browning-Ferris—and announced that Browning-Ferris was still good law.

The fight heats up

The Republican-controlled NLRB, intent on overturning the Browning-Ferris decision, decided to pass a rule redefining joint employers under its rarely used administrative rule-making authority. But since administrative rules require the agency to go through a series of steps and collect public comments, this rule will likely take years to become final. 

On December 28, 2018, the Washington, D.C. Circuit Court of Appeals, which, according to The New York Times, is “widely views as second in importance only to the Supreme Court,” released its long-awaited decision on the Browning-Ferris appeal. The Court issued an important and unqualified win for workers in affirming the NLRB’s 2015 Browning-Ferris decision, agreeing with the NLRB that its new Browning-Ferris test was firmly grounded in the common law. Using the unfortunate legal language of “master-servant,” the Court explained that “retained but unexercised control has long been a relevant factor in assessing the common-law master-servant relationship.”

The court fully affirmed the NLRB’s new Browning-Ferris joint employer test, but it sent the case back to the NLRB, because the NLRB did not fully apply its new test to all the facts of the particular case. This means that the NLRB must use its Browning-Ferris test going forward, which is good news for labor rights. 

The case is now headed to the NLRB, but that is unlikely to be the end of the road for this major issue. It is quite possible that this matter will eventually end up before the U.S. Supreme Court, and this should be cause for some concern among workers. The Supreme Court currently has an ultra-conservative majority, which has shown no hesitation in rewriting decades of law in support of employers in labor cases. As recently as 2014, the conservative majority of the Supreme Court engaged in a bizarre misreading of the definition of joint employer in order to deny labor rights to home healthcare workers. With the addition of Brett Kavanaugh, the Court has become more conservative since that time. Labor may have won this latest battle, but the fight is far from over.

This article was originally published at ThinkProgress on January 10, 2019. Reprinted with permission. 

About the Author: Moshe Z. Marvit is an attorney and fellow with The Century Foundation and the co-author (with Richard Kahlenberg) of the book Why Labor Organizing Should be a Civil Right.

Contract for Disaster: How Privatization Is Killing the Public Sector

Tuesday, October 4th, 2016

mtm0ndg4mjmzmzyxodm5mzc4Privatization is bad news for federal, state and local government workers, and the communities where they live. That’s according to a new report released Wednesday by In the Public Interest, a research group focused on the effects of privatization.

The study, “How Privatization Increases Inequality,” explores the role privatization plays in the American economy—compiling data on the estimated $1.5 trillion of state and local contracts doled out each year.

“A lot of decisions are small,” says Donald Cohen, executive director of In the Public Interest, but “if you add all that up, it’s very significant.”

Many government workers in the United States enjoy a robust structure of pay and benefits, including pensions, health care and paid time off. Workers operate in a structured environment that acts, as the report says, as a ladder of opportunity. A clearly outlined framework of positions and pay grades, backed by enforcement of antidiscrimination laws, makes government jobs particularly friendly to women and people of color—20 percent of public sector jobs are held by Black workers, while nearly 60 percent of public sector jobs are held by women.

(Joe Brusky/ Flickr)

(Joe Brusky/ Flickr)

For decades, work in the public sector has been a gateway to a middle-class life. But that’s changing.

Cohen notes that the Right managed to make privatization an ideological project. This shift has generated huge profits for corporations and harmed public sector workers and their unions.

“They want to contract out not because it makes sense, but because that’s their jobs. They’re right-wingers,” he says.

Privatized workers have lower rates of unionization, are paid less than their publicly-employed counterparts, don’t have access to benefits and experience high turnover, the report shows. Sometimes they work side-by-side with government employees, as at the University of California system, something that Cohen says is deliberate.

“Part of the strategy of management is to contract out part of the work to keep the pressure on the non-contract part of the work,” he says.

That strategy leaves workers shortchanged—literally. In 2013, the National Employment Law Project found that one in five federal contractors it interviewed was using Medicaid for health care, while 14 percent needed Supplemental Nutrition Assistance (SNAP). Reliance on federal benefits shifts costs from employers to taxpayers.

Contract employees are caught in a poverty trap that hurts not just them, but their communities. Workers who aren’t making money aren’t spending it, dragging down local businesses and creating a ripple effect in regional economies.

The report argues that poor recordkeeping and limited transparency make it extremely difficult to gauge the effects of contracting, and that the public needs to have access to such information. Legislators, advocates, unions and workers should be invested in how, when, where and why contract labor is used.

Is it improving services while keeping standards high for workers? Or is it being used as an ostensible cost-cutting measure, harming workers and shifting expenses to taxpayers and their communities?

We’re seeing a new era of work in America, and the move to contractors over directly-employed government workers is highlighting that shift as well as its consequences. For government workers, privatization is an economic shell game, and they are losing.

This blog originally appeared at inthesetimes.com on September 28, 2016. Reprinted with permission.

S.E. Smith is an essayist, journalist and activist is on social issues who has written for The Guardian, Bitch Magazine, AlterNet, Jezebel, Salon, the Sundance Channel blog, Longshot Magazine, Global Comment, Think Progress, xoJane, Truthout, Time, Nerve, VICE, The Week, and Reproductive Health Reality Check. Follow @sesmithwrites.

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