Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘independent contractor’

Delivery Drivers Sue Amazon Over Misclassification, Failure to Pay Overtime and the Minimum Wage

Tuesday, December 20th, 2016

With wage and hour lawsuits becoming increasingly common across the country, there was little reason for the lawyers at Amazon.com’s Seattle headquarters to be surprised when one landed on their doorstep recently. But they may have been concerned to learn that their newest legal adversary is “Sledgehammer Shannon” Liss-Riordan, a Boston attorney who gained legal fame by beating corporate giants like FedEx and Starbucks in just these kinds of contests.

The new lawsuit against Amazon is similar to one of Liss-Riordan’s best known cases—a suit against FedEx that charged the company was misclassifying delivery drivers as independent contractors when the workers were, as a matter of law, regular employees. Liss-Riordan won that fight and, this year, FedEx announced that it would give up on a series of related legal fights and pay $240 million to some 12,000 drivers in 20 states.

Liss-Riordan took the fight to Amazon in a suit filed October 4 in the U.S. District Court for the Western District of Washington. It charges Amazon and Amazon Logistics Inc. with violating the minimum wage law in Seattle, state labor law in Washington and the federal Fair Labor Standards Act (FLSA).

Liss-Riordan explains that Amazon is experimenting with a delivery system where the company contracts with individuals to use their own cars to pick up parcels at Amazon warehouses and deliver them to local customers. The drivers typically sign up for a specific work shift and are paid an hourly wage. They are not compensated, however, for expenses like gasoline, car maintenance, telephone calls, or other incidentals. When subtracting these expenses, drivers often end up earning less than the minimum wage and are denied overtime pay, she says.

That description of delivery methods was echoed by Stacy Mitchell, co-director of the advocacy group Institute for Local Self-Reliance. Along with co-author Olivia LaVecchia, Mitchell has just completed a major study of Amazon’s business practices that warns that the giant corporation is killing good jobs in local economies as it seeks to monopolize different sectors of the retail business.

“Amazon has substantially expanded its warehouses in recent years and is experimenting with the so-called ‘last mile’ of the delivery system. They are increasingly using on-demand drivers, and also regional couriers, to move goods,” Mitchell says. “In the past, this sort of ‘last mile’ delivery was typically done by the U.S. Postal Service or United Parcel Service. USPS and UPS jobs are good-paying union jobs, and Amazon is undermining these with its gig economy model.”

In These Times reached out to Amazon to comment on the lawsuit. Spokesman Jim Billimoria provided the following response:

“The small and medium sized businesses that partner with Amazon Logistics have their own employees and are required to abide by applicable laws and Amazon’s Supplier Code of Conduct, which focuses on compensation, benefits, and appropriate working hours. We investigate any claim that a provider isn’t complying with these obligations.”

Liss-Riordan says this sort of a defense is typical of large corporations, many of which have lost wage and hour lawsuits in court.

“It’s not what you say that counts, it’s what you do,” she said. “We’ve been able to demonstrate, time and time again, that a lot of these corporations just don’t live up to their stated policies when it comes to real-life employment practices on the ground. That’s why you see more and more of these suits.”

Indeed, a 2015 report from the law firm of Seyfarth Shaw LLP described an “onslaught” of litigation resulting in a record high number of federally-filed wage and hour cases in 2015. According to the firm, there were 8,781 such cases in 2015, compared to only 1,935 in 2000.

Asked about her nickname “Sledgehammer Shannon,” Liss-Riordan laughed out loud.

“It’s sort of silly. Mother Jones magazine did an article last year about a case I have against Uber, and I get a lot of jokes. I don’t care. The fact is, we will take on cases like this and fight them for 10 years if we have to.”

This blog originally appeared at Inthesetimes.com on December 12, 2016. Reprinted with permission.

Bruce Vail is a Baltimore-based freelance writer with decades of experience covering labor and business stories for newspapers, magazines and new media. He was a reporter for Bloomberg BNA’s Daily Labor Report, covering collective bargaining issues in a wide range of industries, and a maritime industry reporter and editor for the Journal of Commerce, serving both in the newspaper’s New York City headquarters and in the Washington, D.C. bureau.

Uber And Lyft Drivers Organize To Fight Exploitation

Monday, October 3rd, 2016

“Gig economy” corporations depend on a low-wage economy in which lots of people are looking for ways to get by. Their business model requires disposable people willing to take low-wage jobs with long hours and no benefits so they can pay the rent, doing things for people who need to save as much as they can, so they can pay the rent.

For example, if you’re driving for “ride share” companies like Uber or Lyft, those companies are making serious money. Meanwhile you’re probably working a lot of hours just to make rent. You drive for them, you obviously are an employee, but they say are a “contractor.” Contractors are basically employees who don’t get benefits, have to pay much more into Social Security, have to withhold their own taxes and pay them quarterly, can’t claim unemployment, don’t get Workers Compensation if injured on the job and many other disadvantages. There isn’t even a limit on the hours they work and they can’t get overtime.

The drivers (and other “contractors” around the country) say they are employees and deserve the rights and benefits of employees. Uber and other big corporations that exploit their workers as a business model claim their employees are “contractors” with no rights. Various courts, agencies, departments, etc are working to determine if they will be classified as employees or contractors.

Uber and Lyft Drivers Fighting To Unionize

Uber and Lyft drivers are fighting to do something about this and the best way to do something when you are being exploited on the job is to join a union so you are not fighting alone. In New York, for example, 14,000 Uber and Lyft drivers have signed up to say they want to join the local Amalgamated Transit Union (ATU) branch.

ATU’s website says,

“Founded in 1892, the ATU today is comprised of over 190,000 members, including: metropolitan, interstate, and school bus drivers; paratransit, light rail, subway, streetcar, and ferry boat operators; mechanics and other maintenance workers; clerks, baggage handlers, municipal employees, and others.”

Buzzfeed has the Uber/Lyft/ATU story, in Nearly 14,000 Uber And Lyft Drivers Sign Union Cards In New York

Nearly 14,000 Uber and Lyft drivers in New York have signed up to join the local branch of the Amalgamated Transit Union, according to a union spokesperson. The group plans to rally at the NYC Taxi and Limousine Commission (TLC) headquarters next week to demand a formal vote on unionizing.

The 14,000 sign-ups exceed the 30 percent threshold that federal regulators say must trigger an official vote, the union says. The cards signed by drivers indicate that they seek ATU membership and authorize the union to act as their collective bargaining agent.

The ATU’s Local 1181 is asking the Taxi and Limousine Commission (TCL) to force Uber and Lyft to allow a union vote. Crain’s New York Business explains why, in Union seeks to organize rideshare drivers in NYC,

In a letter to the commissioner that was delivered on Tuesday, Local 1181 President Michael Cordiello asked the TLC to “schedule and conduct a free and fair election for the drivers of these corporations to determine whether they choose to be represented” by the union.

“We make this demand in conformance with the stated mission of the TLC,” he wrote, citing its status as “the agency responsible for licensing and regulating” the city’s taxis and car services.

In an interview, Cordiello added that Tuesday’s rally was only the first step in the union’s strategy.

“There are a lot of other ways we can accomplish this, such as legislation,” he said in a reference to the ordinance passed in December in Seattle that entitled Uber and Lyft drivers to union representation. “We are unfolding what we believe will be a new direction for labor and for the technology work force.”

Drivers and the ATU Local held a rally Tuesday at the TLC office in Long Island City. Vice News covered that, in NYC Uber and Lyft drivers are protesting for union rights,

Drivers for the ride-hailing service Uber turned out in the streets of Queens on Tuesday morning, demanding their right to unionize outside the New York City Taxi and Limousine Commission in Long Island City.

“We demand living wage fares, no pool fares, protection from exploitation, union representation,” read one big green sign held up by one Uber driver, a middle-aged black man with a tan jacket and blue pork pie hat.

The ride-share workers — categorized as “independent contractors” rather than employees by tech companies like Uber and Lyft — had joined up with the Amalgamated Transit Union Local 1181, which represents city bus drivers. Copies of over 14,000 signed union cards sat in a fat bundle on the table in the center of the demonstration, 10,000 cards thicker since May.

The rally had the flavor of a protest,

It was an old-fashioned rally. The ride-share workers, joined by bus drivers, marched in front of the Taxi Commission barking out chants from a bullhorn. Cop cars flanked either side of the street as people who worked inside the Commission building slowed down to check out the protest.

A few passing Uber and Lyft drivers liked what they heard and waded into the demonstration to sign union cards.

“I support this,” said Jaydip Ray, 36, a skinny guy with a blue hoodie, moments after walking away from joining up, as another young man took his place. “We need benefits. Without benefits, we don’t have any future.”

The “gig economy” means that big corporations make billionaires, while their workers are called “contractors” who have no rights and don’t make squat. It’s one more way the system has been rigged.

This post originally appeared on ourfuture.org on September 30, 2016. Reprinted with Permission.

Dave Johnson has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.

Uber Drivers Learn that Sometimes the Perfect is the Enemy of the Good

Tuesday, September 20th, 2016

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Courts have an important responsibility to approve class action settlements and ensure that the plaintiffs and their attorneys are not selling out the class by colluding with the defendants. Sometimes, though, in their zealous protection of the absent class members, courts wind up forgetting the old aphorism attributed to Confucius: “Better a diamond with a flaw than a pebble without.” Uber drivers may wind up with pebbles rather than somewhat flawed diamonds. Crushed pebbles may make concrete, but even flawed diamonds could help pay a lot more bills.rough-diamonds

When veteran wage-and-hour litigator Shannon Liss-Riordan sought court approval for a $100 million settlement on behalf of a class of 385,000 Uber drivers in California and Massachusetts, she was denounced by some objectors for the compromise she reached, even after she volunteered to cut her fee in half. Then Judge Edward Chen of the U.S. District Court for the Northern District of California last month denied approval of the proposed settlement of the drivers’ independent-contractor-misclassification claims, finding that the settlement was not “fair, adequate, and reasonable,” as required to grant preliminary approval.

Judge Chen is one of the most careful protectors of absent class members and one of the most thoughtful jurists when it comes to adjudicating wage protections. In denying preliminary approval for the proposed independent-contractor-misclassification settlement, Judge Chen expressly endorsed the view that district court review of class action settlements should not be too lax – and particularly that the court’s review at the preliminary (as opposed to the final) approval stage should be more searching.  But, in this case, his decision disapproving the settlement may have unintended consequences.

In disapproving the settlement, Judge Chen acknowledged the risk posed by Uber’s previously-rejected arbitration provisions, stating: “The most obvious risk to Plaintiffs is, of course, that the Ninth Circuit [which sits as the Northern District of California’s reviewing court] will uphold the validity of the arbitration provision contained in the 2013 and/or 2014 agreements, which this Court found was invalid as a matter of public policy.” This is exactly what happened.

Last week’s decision from the Ninth Circuit upholding Uber’s arbitration agreements (which contained class waivers) in another case may mean that the vast majority of those 385,000 drivers will get nothing. The Ninth Circuit ruled that Judge Chen had erred in previously declaring Uber’s arbitration agreements unenforceable, and that in doing so, he had “ignore[d]” circuit precedent.

Now, to get anything at all, each driver may need to bring an individual arbitration against Uber and win, showing that he or she was more like an Uber employee than an independent contractor. This will be a tough showing and, as Uber well knows, the vast majority of drivers will never step forward to assert the risky claims at all.

Denying approval for the $100 million settlement, Judge Chen found that the settlement reflected a 90% discount on the full value of the drivers claims, with the exception of the claim under the Private Attorneys General Act (PAGA), for which the Court indicated that the settlement was a mere 0.1% of their full value. In particular, Judge Chen expressed concern that the PAGA claim had recently been added to the lawsuit to induce Uber to settle. Furthermore, Judge Chen questioned the value of the nonmonetary relief in the settlement, such as the provision that would allow drivers to accept cash tips (as opposed to in-app tipping as with Lyft), suggesting that riders accustomed to a cashless experience are unlikely to reach for their wallets.

It is possible that each of these terms was a compromise that was less than ideal for the Uber driver class members. Of course, any settlement of a wage-and-hour class action (or more broadly, any settlement of any lawsuit) is going to consist of a mix of terms, both good and bad for both sides of the dispute. But surely getting some money in a settlement – even an imperfect settlement – would be much better for hundreds of thousands of Uber drivers than getting nothing at all.

These Uber disputes raise central questions about the level of scrutiny a district court should apply to a class settlement – particularly given Judge Chen’s criticism of “lax review” – and whether the Court or class counsel is in a better position to evaluate the risks of non-recovery. While the court is charged with preventing collusive settlements to protect absent class members, ultimately, seasoned and responsible class counsel and class members both tend to care most about the bottom line, in light of the risks. With the benefit of hindsight, Liss-Riordan appears to have been right about the risks of proceeding with the litigation, and the settlement’s objectors were misguided.

The case is not over. Liss-Riordan has been signing up Uber drivers to pursue individual arbitrations in California. The PAGA claims on behalf of California drivers may not be compelled to arbitration. Nonetheless, the likelihood of a recovery nearing $100 million, or getting money for all 385,000 Uber drivers, looks bleak.

When reviewing class action settlements that were negotiated at arm’s length by experienced class counsel, where class counsel is able to articulate the rationale for their position, courts should be hesitant to second-guess counsel’s risk assessment. The perfect is often the enemy of the good in these cases, where a court – with a single decision – can erase years of work to obtain a successful result, absent some kind of an agreement between the parties. Particularly in the employment context, where workers should be recovering more than nominal amounts in any class resolution, those who do not wish to participate can always opt-out of a deal and pursue their own claims if they are so inclined. For the rest, though, receiving flawed diamonds might be a whole lot better than the alternative – getting dirt.

This blog appeared on Bryan Schwartz Law on September 16, 2016. Reprinted with permission.

Logan Starr is an associate at Bryan Schwartz Law, focusing on employment discrimination, whistleblower, and wage-and-hour claims. Previously, Mr. Starr served two years as a law clerk to the Honorable L. Patrick Auld, United States Magistrate Judge for the Middle District of North Carolina.

 Bryan Schwartz Law is an Oakland, California-based law firm dedicated to helping employees protect their rights in the workplace. Mr. Schwartz and his firm have fought to prohibit discrimination, retaliation, and harassment obtained reasonable accommodation for disabled employees, vindicated whistleblowers’ rights and ensured that corporations pay workers all wages they are owed. Bryan Schwartz Law has successfully litigated individual and class action complaints nationwide, helping to recover millions of dollars for thousands of employees, forcing corporations and Government agencies to change their practices and punish wrongdoers. Bryan Schwartz Law is also one of the few Bay Area-based law firms with extensive experience representing Federal employees in their unique Merit Systems Protection Board and Equal Employment Opportunity Commission complaints.

Uber Drivers Could Gain Thousands in Pay, Benefits as Full-time Employees

Wednesday, August 19th, 2015

NerdWallet logoUber drivers in six major U.S. cities would receive paid holidays and health care benefits worth an average of $5,500 a year, plus thousands more in mileage reimbursement, if the company provided them with the same benefits as its full-time employees, according to a new NerdWallet study.

The California Labor Commissioner’s Office ruled in June that Barbara Berwick, who worked as an Uber driver for just under two months, was an employee of the company rather than a contractor. The ruling ordered Uber to reimburse Berwick $3,878 for mileage and tolls plus $274 in interest.

Similarly, the Florida Department of Economic Opportunity decided in May that former Uber driver Darrin McGillis had been an employee, entitling him to unemployment benefits, according to a report in the Miami Herald.

While both decisions apply to the individuals involved only and Uber is appealing, if upheld, drivers across the nation could be motivated to seek status as full-time Uber employees.

The decisions related specifically to expenses and unemployment insurance. Drivers stand to gain even more if Uber recognizes them as full-time employees. Based on what Uber offers employees, drivers might expect:

  • Fully covered health insurance, including dental and vision benefits
  • Nine paid holidays
  • Business-driving reimbursement

Although the current rulings only apply to a few individuals, it may set a precedent for all drivers in the future. This analysis, while an estimate, is still an indicator of how much money is at stake.

Jeffrey Chu is an analyst covering insurance for NerdWallet. NerdWallet staff writer Aubrey Cohen contributed to this articleNerdWallet is a consumer-focused website dedicated to saving people money every day by helping them make better, more informed financial decisions.

 

California Labor Ruling Deals A Blow To Uber’s Strategy For Denying Drivers Benefits

Friday, June 19th, 2015

AlanPyke_108x108Uber must pay its drivers benefits, overtime, working expenses, and other standard compensation that the company has thus far avoided providing, the California Labor Commission has ruled.

The decision is not self-executing across the state and can only be directly applied in one specific driver’s case. But it signals to the company’s other employees that the body charged with adjudicating California labor law views Uber to be an employer with all the obligations that come with the label. Uber notes in a statement that the same commission had ruled the opposite way in a 2012 case, and that neither of those rulings would be binding in any other individual lawsuit over similar complaints by other drivers.

The ridesharing start-up, whose market value recently hit $50 billion, has relied upon paying drivers as though they were independent contractors rather than employees. Classifying a worker as a contractor negates most provisions of federal labor law, saving an employer thousands of dollars per year for each person they treat as a contractor.

If a company treats a contractor like an employee by exerting substantial control over day-to-day job activities, though, it risks being found guilty of misclassifying workers. Misclassification is a widespread problem, with complaints popping up everywhere from trucking to strip clubs to beauty parlors.

In California, Uber argued that its relationship with drivers is not controlling enough to constitute an employer-employee relationship, pointing out that they don’t set drivers’ hours or require a minimum number of trips in a shift. But California’s definition of the line between employment and contract work is primarily based on whether the worker is providing a service that’s integral to the main line of business of the company paying her. Labor commission lawyers examined Uber’s policies for drivers and overall business model and found the company’s argument weak.

“Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that defendants are involved in every aspect of the operation,” the commission ruled. By vetting would-be drivers, requiring them to register their vehicles with Uber, and terminating them if their approval ratings dip too low, the state found, Uber positioned itself as an employer rather than a non-controlling party to a contract.

The case that generated the ruling will only cost Uber about $4,000 in reimbursement payments to a driver named Barbara Ann Berwick. But its consequences could be much grander. If it cannot successfully appeal the finding, it will have to choose between fielding further individual lawsuits or reclassifying all its California drivers as regular employees to pre-empt the suits. That means paying unemployment insurance and other payroll taxes that aren’t triggered for contractors, as well as potentially being subject to overtime rules and made to reimburse drivers for work expenses like gas, tolls, and some traffic tickets.

Any multi-billion-dollar corporation should theoretically be able to absorb such costs. But they threaten to turn Uber into a much smaller-margin enterprise, one more akin to the traditional taxi company business model that the firm has made so much money disrupting. And because Uber’s market value is a fluid, on-paper number that depends on investor confidence and market analyst’s reading of the economic tea leaves, the California ruling could lead to some shrinkage in the car service’s worth and ability to raise private funds.

The ruling isn’t the end of the story, either. There are other civil cases outstanding in California and elsewhere that touch on similar issues and could be decided differently. And the sheer variety of different driver experiences, from people who drive a few hours a week for supplementary income to those who log long hours in vehicles leased from the company itself, suggests that it’s hard to pin down the entire category of workers with either the “employee” or “contractor” label that the law provides.

This blog was originally posted on Think Progress on June 17, 2015. Reprinted with permission.

About the Author: The author’s name is Alan Pyke. Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org. He previously worked as an organizer on various political campaigns from New Hampshire to Georgia to Missouri. His writing on music and film has appeared on TinyMixTapes, IndieWire’s Press Play, and TheGrio, among other sites.

Justice Gets Delivered To FedEx Workers

Thursday, June 18th, 2015

Emily-Foster_avatarFedEx says it “lives to deliver.” Last Friday, more than 2,000 of its workers finally received a delivery of justice from a federal judge.

A settlement in the case filed in U.S. District Court on behalf of the workers, Alexander v. FedEx Ground, means the company will pay $277 million to resolve the claims of FedEx Ground and FedEx Home Delivery workers who were victims of worker misclassification since the year 2000. These are workers FedEx classified as “independent contractors” but treated largely as if they were on the company payroll.

We first wrote about this last August, when the 9th U.S. Circuit Court of Appeals ruled that FedEx’s employees (in California and Oregon, and likely many states with similar employee-protection laws) are, in fact, “employees as a matter of law” – not independent businesspeople who had the level of control over their jobs that a self-employed person would expect to have.

“The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards,” the ruling said. “FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent.”

According to the Economic Policy Institute, worker misclassification is an increasingly common problem, “a business model for unscrupulous employers who use it to avoid employment-related obligations and save on labor and administrative costs.”

EPI says independent contractor misclassification occurs “when a worker who should be considered a direct employee of a business is treated as a self-employed contractor.” Françoise Carré, in his June 8, 2015 report for EPI titled “(In)dependent Contractor Misclassification,” workers who are misclassified are “ineligible for unemployment insurance, workers’ compensation, minimum wage, and overtime, and are forced to pay the full FICA tax and purchase their own health insurance.” Misclassification also “undermines their bargaining power and leaves workers more vulnerable to wage theft.”

Carré also wrote that misclassification leads to the federal and state governments losing revenue from necessary income taxes, while unemployment insurance, workers compensation and disability insurance systems are “adversely affected.”

It also makes it easy for companies to bypass requirements of the Fair Labor Standards Act and the 1986 Immigration Reform and Control Act.

The report points out that worker misclassification is most common in professions where “work is performed in isolation,” which FedEx drivers exemplify.

The ruling found that the company owes its drivers “for illegally shifting to them the costs of such things as the FedEx branded trucks, FedEx branded uniforms, and FedEx scanners, as well as missed meal and rest period pay, overtime compensation, and penalties.” Drivers were required to pay out of pocket for the trucks, uniforms, and scanners, and even the wages of other employees the company asked the drivers to hire.

After the settlement, the 2,000 workers were granted the rights and benefits entitled to employees under California’s laws. FedEx Ground’s independent contractor model was deemed unlawful, and the settlement is considered as one of the largest in recent history – showing that mislabeling workers can be economically catastrophic to a business.

That doesn’t mean that FedEx isn’t still trying to game the system so it doesn’t have to treat its workers as workers. The company has since 2011 implemented a new system in which delivery drivers are employees of a subcontractor to FedEx, and the trade publication Transport Topics quoted a FedEx spokesperson as saying that the company would “complete the transition to a new independent service provider agreement later this year.”

After Friday’s settlement, FedEx did tweet that new job openings were available. We’ll see if FedEx has learned its lesson about worker misclassification – or if the company is absolutely, positively delivering new ways to scam its workers.

This blog was originally posted on Our Future on June 16, 2015. Reprinted with permission.

About the Author: The author’s name is Emily Foster. Emily Foster is a regular contributor to Our Future.

“But I Signed An Independent Contractor Agreement…”

Wednesday, August 18th, 2010

Patrick KitchinThe Ninth Circuit Court of Appeals Weighs In On Workforce Classification Under California Law

Every time I review an independent contractor agreement I find myself humming George and Ira Gershwin’s song, It Ain’t Necessarily So from Porgy and Bess. In California, at least, such agreements do not prove that a worker is an independent contractor. (“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.” SG Borello & Sons v. Dept. of Industrial Relations)

Were it otherwise, of course, companies and individuals who hire workers would have an incentive always to require workers to sign independent contractor agreements so they might avoid the costs associated with maintaining a workforce made up of employees. Complying with minimum and overtime wage requirements, paying workers’ compensation insurance premiums, and making rest and meal breaks available are significantly more burdensome and expensive than maintaining a workforce made up of independent contractors. Further, because independent contractors generally are not protected by federal or state anti-discrimination laws, maintaining a workforce comprised of independent contractors can shield companies from civil rights lawsuits.

California’s Multi-Factor Approach

Under California law the existence of an independent contractor agreement is only one of over a dozen factors used by the courts to evaluate whether a worker has been properly classified under the law. The most important factor is the “right to discharge at will, without cause.” In a state where employment is “at will,” but where contracts often include specific provisions pertaining to the termination of the contractor’s services, the right to fire a worker without apparent consequence is a prime indicator of an employment relationship. As the California Supreme Court ruled back in 1989, other factors crucial to the classification determination are:
• whether the one performing services is engaged in a distinct occupation or business;
• the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
• the skill required in the particular occupation;
• whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
• the length of time for which the services are to be performed;
• the method of payment, whether by the time or by the job;
• whether or not the work is a part of the regular business of the principal;
• whether or not the parties believe they are creating the relationship of employer-employee;
• the alleged employee’s opportunity for profit or loss depending on his managerial skill;
• the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;
• the degree of permanence of the working relationship; and
• whether the service rendered is an integral part of the alleged employer’s business.

California courts are required to evaluate the specific terms of engagement carefully and analyze the conditions under which a person works for another before reaching a classification determination in a wage and hour or discrimination lawsuit. Further, under California law, one who works for another is presumed to be an employee, unless the employing party proves otherwise. The burden of proving the existence of an independent contractor relationship shifts to the “employer” to demonstrate its classification is proper once a worker presents sufficient evidence that he or she performed work for the company. Robinson v. George. This burden shifting is set out in the California Labor Code at section 2750.50.

While determining the proper classification of a worker is extremely fact intensive, and not every factor always points in the same direction, California appellate courts have been consistent in their use of the multi-factor approach set out more than 20 years ago by the California Supreme Court.

The Ninth Circuit Court of Appeals Weighs In

On August 5, 2010, the federal Ninth Circuit Court of Appeals analyzed California’s employment classification law in a lawsuit brought by “independent contractors” of a freight pick-up and delivery service who claimed they had been misclassified as independent contractors.

In Narayan v. EGL, Inc. the Ninth Circuit rejected the defendant’s contention that because its workforce signed independent contractor agreements, the court was compelled as a matter of law to find that its workers were properly classified as such.  The court applied the appropriate California classification test to the facts of the case and ruled that the relationship between the drivers and the freight-handling company was one of employment.  The independent contractor agreement was only one of several factors the court considered in coming to its Porgy and Bess conclusion:  Call it what you may, It Ain’t Necessarily So.

Evaluating the many factors deemed relevant to the determination of the nature of the relationship between the drivers and the company, the Court found, among other indices of an employment relationship, that EGL:
• trained the workers;
• provided them some tools of the trade;
• required them to wear company uniforms;
• required them to paint their vehicles in company colors;
• assigned them routes;
• required them to attend company meetings;
• required them to arrive at a company facility at a set time each day; and
• required them to apply for vacation time;

Based on its analysis of all of these characteristics of the relationship between the drivers and EGL, the Ninth Circuit determined that the lower court’s dismissal of the worker’s employment-based claims was contrary to California law. Though the drivers had signed independent contractor agreements with EGL, the facts demonstrated the workers were employees from start to finish.

While the Ninth Circuit decision in Narayan v. EGL is not earth-shattering or unexpected, the decision is important for California workers whose lawsuits are often transferred (“removed”) from state courts to U.S. District Courts within the Ninth Circuit . The decision re-affirms the Ninth Circuit’s recognition that its District Courts, like California’s Superior Courts, are obliged to use the multi-factor test set out by the California Supreme Court in S.G Borello & Sons v. Department of Industrial Relations many years ago. This is good news for California workers.

About the Author: Patrick Kitchin is a labor rights attorney with offices in San Francisco and Alameda, California. He has represented 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 1992 graduate of The University of Michigan Law School and is personally and professionally committed to the protection of workers’ rights everywhere.

Cheating Workers Out Of Rights, Benefits

Wednesday, June 2nd, 2010

Image: IBEWLawmakers Go After Employers Who Misclassify Workers as Contractors

Nearly three years ago, Warren, Ohio, Local 573 Business Manager Mark Catello found out the hard way how rampant is the illegal practice of misclassifying workers as independent contractors to circumvent labor law and cheat on taxes.

The local tried organizing cable workers at Baker Communications, a subcontractor for Time Warner Cable. Organizers got the majority of the 40-person unit to sign union authorization cards, but the National Labor Relations Board killed the unionization drive after agreeing with the company that most of its employees were independent contractors, making them exempt from the right to collectively bargain. “It’s a scam,” Catello said. “All the employees had to follow the company’s manual, wear the company’s uniform with the Baker Communications logo on it and follow their work schedule.”

San Francisco labor activists protest a construction contractor found guilty of cheating its employees out of wages and benefits.

San Francisco labor activists protest a construction contractor found guilty of cheating its employees out of wages and benefits.

Federal and state officials are now starting to aggressively crack down on employers who mislabel their employees as independent contractors—an act that cheats both taxpayers and workers out of billions of dollars.

According to Steven Greenhouse of the New York Times, more than two dozen states are stepping up their enforcement of employment laws by increasing penalties for employers who misclassify workers as contractors. And Congress recently introduced tougher legislation to punish lawbreakers.

‘Widespread Practice’

The practice is extensive, says James Parrott, chief economist of the Fiscal Policy Institute in New York. He testified earlier this year before the state Senate that an estimated 10 percent of the state’s workers are misclassified as independent contractors.

According to the Bureau of Labor Statistics, that number has been estimated to be as high as 30 percent in some states. Lax enforcement of the rules has only encouraged the practice.

In 2007, the Government Accountability Office reported that 10 million workers were classified as independent contractors, an increase of more than 2 million in just six years.

Misclassification ends up costing federal and state authorities billions in lost revenue. Companies that report employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes.

But misclassifying workers also cheats workers out of their rights and benefits. Laws regarding overtime, workers’ compensation, sick days and minimum wage don’t apply to independent contractors.

“This denies many workers their basic rights and protections and means less revenues to the Treasury and competitive advantage for employers who misclassify,” Jared Bernstein told the New York Times. Bernstein is a noted economist and aide to Vice President Joseph Biden. “The last thing you want is to give a competitive advantage to employers who are breaking the rules.”

The practice is particularly common in trucking and some sectors of the construction industry. It is also found in the telecommunications industry, particularly in satellite dish and cable installation.

And it’s not just fly-by-night operations that are guilty. Corporate giants FedEx, Target and Comcast have all been sued for misclassifying workers.

Counting their workers as contractors has also proven to be an easy way for employers to prevent unionization.

‘Keeps Them From Joining a Union’

For Eighth District Organizer Bob Brock, a crackdown on industry violators is long overdue.

Brock has been trying to organize workers who install home satellite dishes for more than a year. Many of these workers—located mostly in Idaho, Montana and Colorado—endure long hours, low pay, draconian work rules and unsafe working conditions. But according to their employers—including Direct TV and Star West Satellite—they are their own bosses.

“Most of these (satellite) companies operate a whole separate wing, which they staff with what they call independent contractors,” Brock said. “But they have to follow the companies’ regulations, their work hours and use their equipment. What kind of boss is that?”

Brock says that the IBEW has been successful in getting many of these workers to talk with organizers, but until their job status is changed, they can’t legally form a union.

He says he has seen workplaces where two different workers are doing the exact same job, but one is labeled an employee while the other is an independent contractor. “It’s a selective way for the company to get out of paying benefits and taxes and to keep them from joining a union.”

Educating Workers on Their Rights

But the IBEW hasn’t given up on organizing the satellite sector. The Eighth District has started an organization—Satellite Techs Allied for a New Direction—which brings together satellite workers to improve their working conditions. Organizers help workers document what’s going on in their workplace so they have evidence to back up their claims that they are full-time employees.

STAND also helps misclassified workers with tax advice and how to avoid being preyed on by unscrupulous insurance agents who try to sell them overpriced liability policies. It’s a long-term strategy, Brock says, but the campaign is starting to pick up steam. “The word is spreading throughout the industry. A lot of them don’t know about their rights and they are hungry to find out.”

The campaign is now moving into lobbying mode, with organizers talking to state leaders about rampant abuses in the satellite installation industry. “This is a good time, because with the budget shortfalls, politicians are more eager to crack down on tax cheats,” Brock said.

Rampant Abuse

Broadcasting is another industry where the practice has become widespread. “Many broadcast technicians will work for one of the big networks, be considered an employee, but then go work for another network, do the exact same job, and all of a sudden they become contractors,” said Broadcasting Department Director Ro Wratschko.

Many smaller production companies are also notorious for misclassifying employees to give them unfair advantage over local signatory companies. “They are bidding for the same work as our union shops but they are illegally getting out of paying the same taxes we do, so they have a leg up,” he said.

While not as rampant in the electrical construction industry as it is in other trades, many inside locals have confronted nonunion contractors trying to pass off their employees as contractors. Last fall, Dublin, Calif., Local 595 helped bring to light one Bay Area contractor who cost the state and her employees millions of dollars by illegally misclassifying them.

“It’s the primary means for nonunion contractors to get out of their responsibilities to their employees and try to cut into our market share,” said Kirk Groenendaal, Special Assistant to the International President for Membership Development.

Federal prosecution of companies that misclassify their workers as contractors was nonexistent under the Bush administration, says Political and Legislative Department International Representative Dan Gardner, but the tide is turning.

President Obama has promised to hire an additional 100 investigators to look at companies accused of misclassifying workers and the Internal Revenue Service announced in February that it was launching a three-year nationwide investigation of the practice.

On Capitol Hill, Massachusetts Sen. John Kerry (D) has introduced the Taxpayer Responsibility, Accountability, and Consistency Act of 2009—with Rep. Jim McDermott (D-Wash.) sponsoring a House version—which beefs up enforcement of worker classification regulations and closes tax loopholes used by unscrupulous employers.

In April, Ohio Sen. Sherrod Brown (D) introduced a similar bill—the Employee Misclassification Act—that focuses on tougher enforcement of the Fair Labor Standards Act.

The Department of Labor also recently announced tougher regulations of worker classification regulations, calling on employers to disclose to their employees their work status.

State authorities are also intensifying their crackdown. In Iowa, a six-month investigation by the labor department recently found more than 100 companies guilty of misclassifying employees, while in California, Attorney General Jerry Brown is aggressively going after lawbreakers, recently filing a $4.3 million lawsuit against a construction company with several public works contracts that he says cheated workers out of wages.

In Nebraska, a bill is under serious consideration that would target trucking and construction companies that abuse the independent contractor label.

Gardner said that the IBEW is working closely with NECA contractors and other businesses to push Congress to endorse Sens. Kerry’s and Brown’s legislation to crack down on lawbreakers. “It’s wrong for workers, wrong for taxpayers and wrong for the businesses that play by the rules and follow the law.”

This post originally appeared in IBEW.org on June 2, 2010. Reprinted with permission.

About the Author: Alexander Hogan is Communications Specialist for the IBEW.

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