Articles Posted in Misclassification

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Lev Craig

On February 15, 2018, Judge William Alsup of the U.S. District Court for the Northern District of California granted class certification in Dulberg v. Uber Technologies, Inc., a suit filed in February 2017 alleging that Uber’s pricing and payment model deprives drivers of fair pay for their work. This decision will allow as many as 9,197 Uber drivers from across the United States to pursue their claims as a class.

Uber is among the most successful of a number of rapidly growing companies that are part of the so-called “gig economy.” The U.S. Department of Labor defines a “gig” as a “single project or task for which a worker is hired, often through a digital marketplace, to work on demand.” Gig economy and freelance workers, such as Uber drivers, are becoming an increasingly visible and important component of the U.S. workforce; an estimated nearly four million freelancers work in the New York City area alone. Yet while gig economy workers may enjoy certain benefits—such as scheduling flexibility—they are also often at a disadvantage in comparison to traditional employees. Gig economy workers are almost invariably classified as independent contractors and are thereby cut off from most of the legal protections afforded to employees, including minimum wage and overtime laws, as well as employment benefits like health insurance—and many freelancers report difficulty getting paid for their work on time or at all.

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By Owen H. Laird, Esq., and Edgar M. Rivera, Esq.

Recognizing the unequal bargaining power between employees and employers, employment laws such as the Fair Labor Standards Act (FLSA) create rights and protections for employees. And, while identifying whether a worker is an employee or not may seem relatively straightforward at first glance, the question can, in reality, be surprisingly complicated. Between traditional employees, independent contractors, and paid and unpaid interns, modern workplaces include a variety of different types of workers, only some of whom are entitled to the rights and protections created by laws like the FLSA.

A recent decision by the U.S. Department of Labor (DOL) changed the standard by which the DOL determines whether interns qualify as employees under the FLSA for the purposes of minimum wage and overtime rights. In 2010, the DOL adopted a six-factor conjunctive test for interns, whereby a legitimate internship relationship would exist only if all six factors were met. Those factors were:

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Owen H. Laird, Esq.

We regularly write about overtime issues for employers and employees.  The Fair Labor Standards Act (FLSA) creates a baseline right to overtime for millions of employees, and many states have enacted their own labor laws to enhance those rights.

However, the FLSA and its state counterparts do not require employers to pay all employees overtime; these statutes include large swaths of workers who are “exempt” from the overtime pay requirements.  For example, the FLSA includes exemptions for “professional” employees, which includes individuals such as doctors, teachers, architects, and most employees who need to have an advanced degree; “executive” employees, which includes many individuals who have managerial or supervisory responsibilities; “administrative” employees, which includes individuals who, roughly, perform office work related to the employer’s business operations and can function autonomously; and more specific exemptions for certain industries, such as outside salespeople and agricultural workers.  These exemptions are complex, and the single-sentence summary above does not do justice to the millions of hours that thousands of attorneys have spent litigating these issues.  In short, lawyers, judges, and administrators must look at an employee’s specific job responsibilities to determine whether they are exempt or not.

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Owen H. Laird, Esq.

The U.S. Supreme Court recently agreed to hear two cases that will have major ramifications for workers across the country. One case threatens one of organized labor’s most important rights, and the other impacts employees of car dealerships nationwide.

The Court agreed to hear arguments on Janus v. American Federation of State, County and Municipal Employees, which concerns a union’s right to take dues from non-members who are in the same bargaining unit as members the union represents. This issue of union dues has been long, and corporate interests have been successful in gradually rolling back organized labor’s ability to raise funds.

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Edgar M. Rivera, Esq.

In McKeen-Chaplin v. Provident Savings Bank, FSB, the Ninth Circuit ruled that mortgage underwriters employed by a bank were entitled to overtime compensation for hours worked in excess of 40 in a work week.  The Ninth Circuit held that, because the mortgage underwriters’ primary job duty did not relate to the bank’s management or general business operations, they did not fall under the administrative exemption to the overtime requirements of the Fair Labor Standards Act (FLSA).

To show that an employee qualifies for the FLSA’s administrative exemption, an employer must demonstrate that the employee’s primary duty involves office or “non-manual work directly related to the management policies or general business operations” of the employer or its customers. This requirement is met if the employee engages in “running the business itself or determining its overall course or policies,” not just in the day-to-day carrying out of the business’ affairs. Said otherwise, “an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.”

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By Owen H. Laird, Esq.

Last month, President Trump laid out a tax cut plan that, among other things, would lower the corporate tax rate to fifteen percent from the current rate of thirty-five percent. This reduction in the corporate tax rate is one of the most significant changes proposed by Trump; his plan would primarily benefit corporations and the wealthy. Although President Trump is constantly in the headlines, even to the extent that a signature tax proposal is overshadowed, it is important to pay attention to the less sensational actions taken by the Trump administration that will have long-lasting effects on the American public.

A recent article in the New York Times delved into potential effect of the drastic cut to the corporate tax rate: if the corporate tax rate is significantly less than the personal income tax rate, individuals would be incentivized to form corporations and pass any income they earned through that corporate entity, forsaking the traditional employee-employer relationship. Many workers are already considered “independent contractors” rather than employees. If these independent contractors formed a C-corporation and ran their income through it, that income would be taxed at the corporate rate, rather than the normal individual rate. If the tax incentives were high enough, whole classes of workers might choose to restructure their employment by becoming independent contractors and incorporate themselves in order to lower their tax burdens.

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Lev Craig

On April 12, 2017, the Second Circuit affirmed the district court’s decision in Saleem v. Corporate Transportation Group, Ltd., finding that a group of black-car drivers had been properly classified as independent contractors under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). The court held that the drivers’ significant degree of independence prevented them from establishing that they were employees within the meaning of the FLSA or NYLL.

Under New York law, black cars are defined as a “type of for‐hire vehicle (along with livery vehicles and limousines) that provide ground transportation by prearrangement with customers.” The Saleem plaintiffs are a group of black-car drivers serving clients throughout the tri-state area; the defendants were operators and administrators of a black-car dispatch, which sells black-car franchises to individual drivers and refers the dispatcher’s clients to the driver. Each driver signed an agreement with a franchisor, stating that the driver was not an “employee or agent” but instead a “subscriber to [the franchisor’s] services offered,” that the driver would “at all times be free from [the franchisor’s] control or direction,” and that the franchisor would not “control, supervise or direct” the driver’s work. The agreements did not prohibit drivers from transporting customers for other companies, including competitors, but did require that drivers comply with policies set out by each franchisor, such as rules concerning dress code and vehicle cleanliness.

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Lev Craig

On March 13, 2017, the U.S. Court of Appeals for the First Circuit reversed the district court’s granting of summary judgment in O’Connor v. Oakhurst Dairy, an unpaid overtime case brought by delivery drivers for Oakhurst Dairy (“Oakhurst”), a Maine local milk and cream company. The First Circuit found that the district court had incorrectly categorized the drivers as exempt from overtime under an ambiguous section of the Maine state wage-and-hour law—all, as First Circuit Judge David J. Barron wrote in the O’Connor opinion, “[f]or want of a comma.”

The O’Connor plaintiffs filed suit in the United States District Court for the District of Maine in May 2014, seeking unpaid overtime wages under the Fair Labor Standards Act (“FLSA”) and the overtime provisions of the Maine state wage-and-hour statute, 26 M.R.S.A. § 664(3). They alleged that Oakhurst had misclassified them as exempt under Exemption F of the Maine state overtime law, which states that employees engaged in “canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of […] [p]erishable foods” do not receive overtime protections.

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Edgar M. Rivera

As reported by Reuters, Democratic New York State Assemblyman Joseph Morelle has proposed introducing legislation that would allow workers at gig-economy companies to opt into a company-funded portable benefits program. Gig-economy companies use independent contractors to provide rides (like Uber and Lyft), deliveries (like UberEats), housecleaning (like Handy), and other services through websites and apps. They claim not to employ their workers but instead hire independent contractors to provide their customers services. However, independent contractors generally do not receive basic employment benefits, including health insurance, and as more workers join the gig economy, more are forced to secure health insurance elsewhere or go without. Assemblyman Morelle said that he plans to introduce the legislation early next year; it would be the first bill of its kind in the United States.

Perhaps anticipating the sting of impending legislation, Handy, a web-based home cleaning services company, has circulated a draft bill that would establish guidelines for a portable benefits plan for New York workers at gig-economy companies.  Its draft bill establishes a program whereby participating gig-economy companies would pay the equivalent of 2.5% of workers’ income into individual health savings accounts. Handy’s cleaners in New York earn approximately $20 an hour and work, on average, 10 hours a week. A 2.5% health stipend deposited into an individual account would amount to about $800 a year for a Handy worker earning $33,000—less than one third of the cost of an individual silver plan on the New York State health insurance market, according to the Kaiser Family Foundation.  n return, workers who enter into the program accept their classification as nonemployees, which proscribes them from suing for benefits like overtime pay, joining unions to collectively bargain for better benefits, and receiving mandatory employer payroll contributions, like Social Security and Medicare.

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By Owen Laird, Esq.

A recent decision by the Ninth Circuit Court of Appeals has cast into doubt the validity of a range of lawsuits against Uber by its drivers.  The decision held that the mandatory arbitration provision in Uber’s contracts with its drivers is enforceable; as a result, Uber drivers may be foreclosed from bringing vast majority of their claims against Uber in court.

The ongoing legal saga between Uber and their drivers is one of the most significant labor disputes in the United States today.  Uber – the multi-billion-dollar taxi app – and its Silicon Valley startup brethren seek profitability by transforming the way people interact, work, and live their lives.  In Uber’s case, a central aspect of that transformation is redesigning the traditional employee/employer relationship: Uber classifies its drivers as independent contractors, not employees.  This decision benefits Uber and disadvantages its drivers because independent contractors do not receive the same basic legal privileges ­– such as anti-discrimination protections, minimum wage, and overtime – that employees do.