Analysis and commentary by Reed Smith attorneys on developments in employment and labor law
In early 2020, New Jersey Governor Phil Murphy signed a series of bills aimed at identifying and penalizing entities for misclassification of employees as independent contractors. Yesterday, Governor Murphy signed four additional laws into effect to build upon and expand these efforts: A5890, A5892, A5891, and A1171.
These laws build upon…
In a split 2-1 decision, the Ninth Circuit Court of Appeals reversed the district court’s order preliminarily enjoining enforcement of California’s Assembly Bill (AB) 5 in California Trucking Association et al. v. Bonta (CTA). If this ruling is not appealed, AB 5, which is chaptered in the California Labor Code under 2750.3, will no longer be enjoined from applying to companies in the trucking industry.
In 2019, the California legislature enacted AB 5 to codify the California Supreme Court’s decision in Dynamex West Operations, Inc. v. Superior Court (2018). In Dynamex, the Court judicially adopted the “ABC test” for employers to pass before classifying a worker as an independent contractor. Prior to the Dynamex ruling, courts applied the multi-factor Borello balancing test to determine the status of a worker.
Over 30 states now apply the ABC test. Subject to some statutory exemptions, in California, the law provides that a worker is presumed to be an employee unless: (a) the worker is free from control and direction of the hiring entity under both in practice and under contract; and (b) the worker performs work outside of the usual course of the hiring entity’s business; and (c) the worker is customarily engaged in an independently established trade, occupation or business of the same nature of the work performed.Continue Reading Ninth Circuit reverses preliminary injunction: California’s independent contractor law applies to motor carriers
As we previously reported here and here, in January 2021 the U.S. Department of Labor (DOL) proposed a business-friendly final rule concerning the classification of workers as independent contractors under the Fair Labor Standards Act (FLSA). The final rule, which was scheduled to take effect in March 2021 (but never did), reaffirmed the use of the so-called “economic reality test” to distinguish between independent contractors and employees under the federal wage/hour law. In essence, the rule was intended to provide a more uniform approach to worker classification.
Shortly after taking office, however, President Biden postponed the effective date of the final rule and suggested it should be repealed. The Biden administration has now followed through on that plan, with the DOL blocking the rule entirely earlier today. In a press release announcing the rule’s withdrawal, the DOL stated: “Upon further review and consideration of the rule and having considered the public comments, the [DOL] does not believe that the Independent Contractor Rule is fully aligned with the FLSA’s text or purpose, or with decades of case law describing and applying the multifactor economic realities test.”Continue Reading Department of Labor withdraws pro-business independent contractor final rule
As we previously reported, this past September the U.S. Department of Labor (DOL) proposed a new rule that would create a uniform approach to the way companies classify workers as independent contractors or employees under the Fair Labor Standards Act (FLSA). More specifically, in the proposed rule, the DOL adopted the “economic reality” test,…
This week, the U.S. Department of Labor (DOL) proposed a new rule that would create a uniform approach to the way companies classify workers as independent contractors or employees under the Fair Labor Standards Act (FLSA). The notion of classifying workers as independent contractors versus employees has continued to gain importance in recent years, given the growing gig economy, which makes independent contractors central to the business models of many major companies.
The DOL’s newly proposed rule would greatly benefit companies, by making it easier to classify workers as independent contractors and thereby remove a company’s obligation to provide typical employee benefits and workplace protections, such as paid leave, overtime pay and other fringe benefits. This marks a large shift from the standard proposed under the Obama administration, which would have broadened the scope of employee status, but was ultimately nixed by the Trump administration in 2017.
Continue Reading U.S. Department of Labor proposes new “reality” for classifying independent contractors
The start of 2020 has already proven to be a busy year for employers in New Jersey. In addition to becoming the first state in the nation to mandate severance payments for mass layoffs, New Jersey has enacted some sweeping changes to its independent contractor laws.
Governor Phil Murphy recently signed five bills aimed at addressing misclassification of workers. These bills impose new requirements on companies, expand the scope of liability, and give the New Jersey Department of Labor and Workforce Development significant new authority.Continue Reading New Jersey enacts major changes on the independent contractor front
In April 2018, the California Supreme Court turned worker classification on its head when it decided Dynamex Operations West Inc v. Superior Court (Dynamex). In Dynamex, the court adopted a three-factor “ABC” test for analyzing misclassification claims under the California Wage Orders. Under the ABC test, for an employer to show that workers were properly classified as independent contractors, they must demonstrate that: the worker (A) was not under the company’s direct control and direction; (B) performed work that was outside the usual course of the hiring entity’s business; and (C) was customarily engaged in an independent business. Because of, in particular, the second element of the test, this standard makes it very difficult for businesses to prove that workers are independent contractors.
Since last year’s ruling in Dymanex, there has been much speculation about the application of the decision, specifically whether it applies retroactively and the scope of any application of the “ABC” test.
To the shock of employers, on May 2, 2019, a unanimous three-judge panel of the Ninth Circuit of the United States Court of Appeals (the Panel), in Vasquez v. Jan-Pro Franchising International, Inc. (Jan-Pro), held that the Dynamex rule should be applied retroactively.Continue Reading Dynamex in retrograde – misclassification test and its retroactive reach may open the flood gates for misclassification cases in California