On January 25, 2019, the National Labor Relations Board reaffirmed its adherence to the traditional common law independent contractor test for determining whether a worker is an employee or an independent contractor under the National Labor Relations Act.

In SuperShuttle DFW, Inc., the Board expressly overruled its 2014 FedEx Home Delivery decision. In FedEx, the Board drastically reduced the significance of entrepreneurial opportunity in the determination of independent contractor status. FedEx emphasized the right to control factors relevant to the so-called “economic realities” test and gave weight to whether a worker was in fact “seizing” actual opportunities and rendering services as part of their own independent business.

SuperShuttle DFW, Inc. is significant as it abandons the Obama-era standard and gives a boost to companies using contract labor by elevating the importance of entrepreneurial opportunity in the independent contractor analysis. Insodoing, the Board returns the legal framework to its traditional common law roots and adds the examination of entrepreneurial opportunity. The decision suggests that moving forward, the Board “evaluate the common-law factors through the prism of entrepreneurial opportunity when the specific factual circumstances of the case make such an evaluation appropriate.”

Continue Reading Emphasizing “Entrepreneurial Opportunity,” The NLRB Returns To Business-Friendly Independent Contractor Test

With the modern workforce comes modern employment problems. Businesses and workers alike have embraced the “gig economy,” but employment laws were not designed for workforces dominated by independent contractors and freelancers. This disconnect leaves gig economy businesses open to significant liability where such workers should have been classified as employees under the law.

Continue Reading New York Delivers Good News For Independent Contractors, But Risks Remain

On June 14, franchisors received good news when the US District Court in the Eastern District of Illinois ruled that Jimmy John’s Franchise, LLC is not a joint employer of its franchisees’ employees.

In 2014, former employees of various Jimmy John’s franchisees brought a collective action against their former franchisee employers and against Jimmy John’s Franchise, LLC. The former employees alleged they were misclassified as exempt under the FLSA and consequently denied overtime pay. They also claimed that Jimmy John’s, as an alleged joint employer, was jointly liable for their damages.

On summary judgment, the Court applied a modified version of the Seventh Circuit’s Moldenhauer test to determine joint employment. It stated that all of the factors reviewed boiled down to one essential question: whether
Jimmy John’s exercised control and authority over franchise employees in a manner that caused the FLSA violation (at least in part). And, the Court determined that the evidence demonstrated that the franchise owners determine how to classify and compensate franchise employees — not Jimmy John’s. As such, Jimmy John’s did not exercise control over the alleged FLSA violation and was not a joint employer.

Click here to read more on the decision and its impact on franchisors.

On April 30, the California Supreme Court issued an opinion radically changing the legal landscape for any company engaging independent contractors in California. Dynamex Operations West Inc. v. The Superior Court of Los Angeles County changes the legal test for determining whether workers should be classified as employees or as independent contractors under California’s wage orders. The Court scrapped the multifactor, flexible test (known as “Borello”) that has been used in California for decades. It adopted the “ABC” test, a standard that has its roots in determination of unemployment tax status in other states and presumes workers are employees instead of independent contractors.

This extraordinary decision will have far-reaching consequences for California companies reliant on independent contractors and likely spur a landslide of litigation for years to come. As such, we are recommending that companies engaging independent contractors in California, in any industry, work with counsel to revisit classification decisions and undertake a cost/benefit analysis of reclassifying workers in the near term.

For more, please read our alert HERE.

On February 8, 2018, in what is believed to be the first time a gig economy case has been fully decided on the merits, a California federal judge ruled in favored in favor of the company and held that the delivery driver was properly classified as an independent contractor.

The opinion of US Magistrate Judge Jacqueline Scott Corley states that “[a]fter considering all of the Borello factors as a whole in light of the trial record, the Court finds that Grubhub has satisfied its burden of showing that Mr. Lawson was properly classified as an independent contractor.”

In rejecting the driver’s claim that he was actually an employee entitled to minimum wage, overtime and other benefits associated with employee status, the Court awarded the gig economy a significant victory.

Continue Reading Score One For The Gig Economy: California Federal Judge Upholds Independent Contractor Status Of Grubhub Delivery Driver

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law bringing significant changes to US tax law. One provision of the Act may further incentivize individuals to work as independent contractors instead of as traditional employees.

The new provision allows for independent contractors, and for service providers structured as a partnership or other flow-through entities, the potential to deduct up to 20% of their revenue from their taxable income. And while some companies might view the opportunity to re-classify individuals from employees to independent contractors as a “win–win” scenario, it could create substantial legal exposure for employers.

Continue Reading New Tax Law Could Incentivize Employees To Become Independent Contractors – Employers Should Proceed With Caution

After a Texas federal judge struck down the Department of Labor’s proposed overtime rule, as discussed here, the DOL dropped its appeal of the preliminary injunction the same judge granted in November 2016. As we previously noted, the Fifth Circuit appeal of the injunction, which blocked the Obama-era overtime rule from going into effect, became moot following the district court’s judgment on August 31, 2017.

Notably, however, the Department of Justice (on behalf of the DOL) can still appeal the court’s final judgment entered last week. It is unclear whether the DOL will appeal the ruling to challenge whether the agency has the authority to set any salary test for the exemption analysis. Or whether the DOL will instead propose its own version of a new overtime rule (or keep the current version intact). Employers should therefore keep an eye on any developments. Of course, we will continue to monitor and provide updates of any changes to overtime requirements.

Starting last summer, employers began preparing to comply with the Obama administration’s revisions to the Fair Labor Standards Act (FLSA) regulations for the executive, administrative, and professional overtime exemptions (“white collar” exemptions). If implemented, the revised overtime rule would dramatically expand the number of workers eligible for overtime pay and would impact most U.S. employers. Because of legal challenges to the new rule, however, its validity has been up in the air for nearly a year. And the change from the Obama to Trump administration only created more uncertainty for employers. Right before the Labor Day weekend, a federal court in Texas issued an order invalidating the new overtime rule. Although we expect challenges to the court’s ruling, and the Trump DOL may propose its own revisions, the court’s order provides employers grappling with the proposed changes to the overtime exemptions with some clarity.

To read more, click here.

U.S. Secretary of Labor Alexander Acosta announced in a June 7, 2017 press release that the U.S. Department of Labor (DOL) has withdrawn two of its recent administrator’s interpretations. One of the administrator’s interpretations, issued in 2015, focused on the misclassification of employees as independent contractors under the Fair Labor Standards Act (FLSA) and indicated that the DOL would be more closely scrutinizing independent contractor classifications. The other administrator’s interpretation, issued in 2016, examined joint employment relationships under the FLSA. Both interpretations were widely considered to be an attempt by the DOL to expand the coverage and enforcement of the FLSA. The withdrawal of the guidance documents likely indicates a shift in enforcement focus of the DOL under the Trump administration.

To read more, click here.

While no one knows exactly how Donald Trump’s election as President will impact labor and employment laws in the country, it is a safe bet that there will be changes. Because Trump was virtually silent on the campaign trail regarding the specifics of any employment law policies, we are left to speculate on any upcoming changes.  We provide a brief overview of our best educated guesses on what changes could be in store given the election results.  Given Trump’s position on government enforcement and his pro-business stance, there is an expectation of changes to several employment-related laws. Continue Reading What Trump’s Election Means for Employment Laws