Moonlighting Police Officers Are Not Independent Contractors 2019-02-13T16:56:08-07:00

Posted on February 13, 2019

Even the courts have noticed that U.S. workers often hold more than one job. Yesterday the Sixth Circuit Court of Appeals held that police officers who worked second jobs as security guards or directing traffic were not independent contractors, but actual employees of the security company. The police officers typically worked full-time for local police departments and, when off-duty, worked for the private security company to supplement their income. The company argued the officers were independent contractors because they could decline assignments, were required to use personal “police-style” vehicles, had no direct supervision, and did not depend on the company for their income. They had a primary income from the police department.

US Department of Labor argued that the company (and the District Court) over-emphasized the fact that the officers’ second job was not their primary source of income. The Sixth Circuit agreed. In rejecting the lower court’s “income-based rule,” the Court highlighted that whether a worker has multiple sources of income says little about the worker’s employment status.

Lesson learned? Regardless of whether a worker works for one, two, or more companies at the same time, employers have to look realistically at the factors that determine employee status. One key fact is whether the worker’s tasks are integral to the company’s business. Here a security company had the police officers acting a security guards. That work was integral to the company’s business.

Acosta v. Off Duty Police Services Inc., Nos. 17-5995 and 17-6071 (6th Cir. Feb. 12, 2019).

NLRB Brings Back Independent Contractor Test 2019-01-25T18:00:53-07:00

Posted on January 25, 2019

By Patrick Scully

In a case handled by Sherman & Howard’s Labor and Employment Department, the National Labor Relations Board (“NLRB”) returned to its traditional independent contractor test, reversing the Obama Board’s 2014 decision in FedEx Home Delivery, 361 NLRB 610, and finding the Dallas/Ft. Worth SuperShuttle franchisees to be independent contractors. The Board explained that the FedEx decision improperly minimized the consideration of whether alleged independent contractors had significant “entrepreneurial opportunity” for gain and loss. In addition, the Board clarified that regulatory requirements imposed on the SuperShuttle franchisees could not be considered “control” asserted by the alleged employer. The Board concluded that in light of the franchisees’ ownership and control over their vans, their near complete freedom to independently control their schedules and accept or reject work, the absence of supervision, and the franchisees’ significant entrepreneurial opportunity, they could not be considered employees covered by the National Labor Relations Act. In a strongly-worded dissent, Member McFerran quipped “calling the SuperShuttle drivers ‘entrepreneurs’ or ‘small business owners’ doesn’t make them any less employees.” We respectfully disagree with the dissent.

SuperShuttle DFW, Inc. and ATU Local 1338, 367 NLRB No. 75 (January 25, 2019).

DOL Trashes Obama-Era “Guidance” 2017-06-09T13:11:12-06:00

Posted on June 9, 2017

By John Alan Doran

Wednesday the DOL announced that it was withdrawing two critical pieces of “guidance” issued under the Obama administration. The first piece addressed the DOL’s rather narrow view of who is an independent contractor (S&H Blog Post: DOL Says Employers Are Morons). The second piece established an extremely broad view of joint employment (S&H Blog Post: Joint Employment Wage/Hour). Taken together, the guidance pieces made it much harder for employers to navigate through the gig economy. The withdrawal of these guidance pieces obviously helps employers who use contractors or have potentially joint employer relationships. But the DOL did not suggest what enforcement strategy it may follow in the absence of these guidances, so the impact in real-world terms remains to be seen. Nonetheless, this provides some indication that our new Secretary of Labor is moving forward, at least in some respects, to reverse some of the prior administration’s approaches.

One More Reason Misclassification Kills 2016-09-15T14:38:14-06:00

Posted on September 15, 2016

By John Alan Doran

You’ve heard plenty about the evils of misclassifying employees as independent contractors. And, according to the DOL, among others, you’re still doing it wrong. The NLRB doubled down on this recently when the NLRB General Counsel released an advice memorandum stating that an employer’s misclassification of employees as independent contractors also violates the National Labor Relations Act.

In a nutshell, a freight cargo employer informed its drivers that they were all independent contractors and therefore the company’s recent settlement of unfair labor practice charges did not apply to the drivers. The NLRB General Counsel took umbrage with this position and concluded that an employer’s misclassification of employees as independent contractors “chills” employees’ exercise of Section 7 rights under the NLRA. The General Counsel found that there could be no conceivable reason why an employer would treat employees as independent contractors other than to chill Section 7 rights. Really?

So, add the NLRA and potential unfair labor practice charges to the “parade of horribles” employers face when they misclassify employees as independent contractors. And, add misclassification as another attempt by the NLRB to grossly expand its own jurisdiction under the NLRA.

5 Keys to New AZ IC Law 2016-08-05T16:20:49-06:00

Posted on August 5, 2016

By John Alan Doran

We have repeatedly blogged on the Pushmi-Pullyu world of independent contractor relationships, a world in which employers can do no right. (DOL Says Employers Are Morons) Well, Arizona recently enacted a law providing at least some level of clarity to independent contractor status. HB 2114 creates a purely voluntary mechanism through which a service provider can self-identify as an independent contractor to a hiring entity. Once the service provider fulfills the self-identification requirements, there is a rebuttable presumption that an independent contractor relationship exists. The rebuttable presumption is a huge help to hiring entities in Arizona, who would otherwise bear the burden of proving “by clear and convincing evidence” that an independent contractor relationship exists. The voluntary self-identification process requires the service provider to sign a Declaration that contains certain requirements and typical indices of independent contractor status, all of which is specifically laid out in HB 2114.

There are 5 points of note with respect to HB 2114.

Once again, it is purely voluntary—you don’t have to have a Declaration in place, and the lack of a Declaration will not be used against you when determining whether an independent contractor relationship exists. But, you lose the rebuttable presumption if you don’t have one.
It only applies to compliance with Arizona laws. It does not trump independent contractor tests from the IRS, DOL, NLRB, etc., nor does it help you in other states in which you do business.
You must actually comply with the terms of the Declaration. It is not a mere paper hurdle. If the reality of the relationship does not align with the representations in the Declaration, you will lose the rebuttable presumption.
HB 2114 throws hiring entities (particularly staffing agencies and PEOs) a bone by providing that any supervision or control of the contracting party by the hiring party that occurs because it is required by law or a licensing requirement cannot be considered when determining whether an independent contractor relationship exists.
Finally,
HB 2114 takes effect tomorrow, so the time to get your independent contractor relationships in proper working order with respect to Arizona law is now.

Court Pulls Curtain on NLRB Ruling 2016-02-04T10:01:52-07:00

Posted on February 4, 2016

By Patrick Scully

The Eleventh Circuit Court of Appeals overturned the NLRB’s finding that stagehands in the Atlanta area were employees rather than independent contractors. The Court found that the NLRB repeatedly misapplied the law and disregarded undisputed facts that rendered the stage hands independent contractors. Among other things, the Court determined that the NLRB improperly discounted the right of the stage hands to accept or refuse work, gave no weight to the independent contractor agreement, and improperly concluded that the company controlled the manner and means of work. This case is an important setback for the NLRB, which is currently considering ways to alter its test for independent contractor. Hopefully, the Board will take the Court’s cue that not everyone is an employee subject to NLRB jurisdiction. (Crew One Productions, Inc. v. NLRB, February 3, 2016, Pryor, W.)

DOL Says Employers Are Morons 2015-07-16T11:04:55-06:00

Posted on July 16, 2015

By John Alan Doran

Okay, that’s not what the DOL said exactly. But the DOL did say today that companies far and wide are just wrong on which workers are employees and which are independent contractors for purposes of the FLSA. In an “Administrator’s Interpretation,” the DOL today re-asserted that it believes almost all individuals providing services to a company are employees and most companies who claim to be using independent contractors are simply misclassifying actual employees.

In what we only wish were a tongue-in-cheek commentary, the DOL’s own blog describes the Mis-“Interpretation” as an attempt to give employers “clarity” on employee status under the FLSA. Unfortunately, the DOL Mis-“Interpretation” repeatedly chants the mantra that the FLSA defines “employee” in the broadest sense imaginable and then states a plethora of factors (all of which appear to suit the DOL and not job-creators) to be balanced in light of the FLSA’s definition. What clarity has the DOL provided when its stated position conflicts with the I.R.S. definition of “employee,” conflicts with laws in the majority of the states with respect to employee status, and repeatedly states that every classification requires an individualized balancing of multiple factors against an incompatible statutory definition?

Uber Driver Gets Tips and Tolls 2015-06-24T13:44:22-06:00

Posted on June 24, 2015

By Doug Towns

Employers that rely primarily on independent contractors continue to come under scrutiny. Recently, an Uber driver, Barbara Anna Berwick, brought a suit under California law arguing that she should be reimbursed for various expenses, including tolls and parking tickets, associated with her personal car that she used to carry Uber customers. Contending that the driver was an independent contractor, not an employee, Uber argued it did not have to reimburse her for these expenses. Ultimately, a California Hearing Officer concluded that the driver was an employee, at least for purposes of getting reimbursement. Uber Technologies, Inc. v. Berwick, No. 11-46739 (Cal. Lab. Comm’n June 3, 2015). The key fact was that the driver provided the very service that Uber provides – transportation.

Click here for additional information about the case.

Tactics Kill Arb Agreement 2015-03-11T02:00:46-06:00

Posted on March 11, 2015

By Lori Phillips

In Roe v. SFBSC Management, LLC, No. 14-cv-03616 (N.D. Cal. Mar. 2, 2015), a federal district court in California rejected a night club’s attempt to compel arbitration by a class of performers who claimed they were misclassified as independent contractors. The court rejected the terms of the arbitration agreement as “substantively unconscionable” because they were too one sided: the performers (but not the night club and its affiliates) were restricted from bringing class actions and the parties had to bear costs equally. The court also found the agreement to be “procedurally unconscionable;” the employer presented the agreement to the performers while they were “mostly naked,” “rushed” them into signing, and told them they could not take the agreement home to review. Because the agreement was both substantively and procedurally unconscionable, the court declared it unenforceable. As the court stated, “arbitration, however valuable and strongly preferred, is meant only to provide an alternative forum to litigation, not to overstuff one party’s quiver . . . .” Moreover, the night club set an example of what not to do when presenting an arbitration agreement to one’s employees or independent contractors. Employers should give workers an opportunity to review and decline the arbitration agreement, and, at least, wait until the workers are wearing clothes.

NLRB Rejects Opportunity 2014-10-03T13:27:12-06:00

Posted on October 3, 2014

By Patrick Scully

On September 30, 2014, the NLRB rejected the opinion of the District of Columbia Circuit in FedEx Home Delivery v. NLRB, 563 F.3d 492 (D.C. Cir. 2009) and found that an individual’s entrepreneurial opportunity for gain or loss IS NOT an animating factor in determining whether that individual is an independent contractor. Accordingly, the NLRB found that FedEx Home Delivery’s Hartford, Connecticut drivers are employees eligible to be organized by the International Brotherhood of Teamsters. FedEx Home Delivery, 361 NLRB No. 55 (September 30, 2014). Although the NLRB majority indicated that entrepreneurial freedom “remains a relevant consideration”, it appears that this NLRB has no intent of considering such freedom as a counterweight to what the NLRB regards as “employer control” in these circumstances. Given that the NLRB generally concludes that business contracts entered into by independent contractors are evidence of “pervasive control” by an employer, this decision will likely be the first of many in which the NLRB converts independent contractors to “employees” covered by the NLRA. The only good news is that FedEx has a right to appeal the NLRB’s decision to the District of Columbia Circuit.

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