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Dynamex Operations West Supreme Court Case May Alter The Test For Independent Contractor Status

The California Supreme Court recently heard oral argument in a case—Dynamex Operations West, Inc. v. Superior Court of Los Angeles County—that may alter the long-standing test in California for independent contractor status and bring big changes to how the state defines independent contractors, who make up a growing body of workers in the gig-economy era. Companies like Uber, Grubhub and Amazon have faced suits over allegedly misclassifying workers as independent contractors instead of employees.

Why Is Missclassification of Employees An Important Issue?

Misclassification of employees as independent contractors has enormous implications for both workers and the economy. Misclassified employees often are denied access to critical benefits and protections they are entitled to by law, such as the minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces.

The Borello Test

California courts currently analyze misclassification cases under a multifactor test the state Supreme Court laid out in 1989 in S.G. Borello & Sons Inc. v. Department of Industrial Relations. The Borello test emphasizes an employer’s control over workers claiming employee status, and considers several secondary factors, including whether the work is part of the company’s regular business, the skill required, payment method and whether the work is done under supervision of a manager.

The issue in Dynamex is whether, in wage and hour cases in California, the Supreme Court should continue to apply the Borello test or whether state law should embody a test similar to the “ABC” test.

The ABC Test

The “ABC” test, as formulated by the Supreme Court of New Jersey in Hargrove v. Sleepy’s LLC, presumes an individual in question is an employee UNLESS and UNTIL the employer is able to demonstrate that all three prongs of the “ABC” test are met.

  1. Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact;
  2. Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. Such individual is customarily engaged in an independently established trade, occupation, profession or business.

Should the California Supreme Court adopt the “ABC” test, as it appears to be considering, this would make it significantly harder for Uber, Grubhub, Amazon and other employers to prove that its workers have been properly classified as independent contractors.

Grubhub’s Win in California Wage Lawsuit May Embolden Gig Economy Companies to Violate Labor Laws

Employee or independent contractor? That is the question for many around the country who work in the “gig economy” for companies like Uber, Handy, HelloTech, and Zeel. This is an issue the lawyers at the Wage Authority Group must frequently assess, as most federal and state wage-and-hour laws only apply to employees, not independent contractors.

On February 8, 2018, a California court issued one of the first decisions addressing whether a worker in the gig economy—in this case a GrubHub driver–was an employee or independent contractor.

Applying California law, the court found the GrubHub driver to be an independent contractor, based on a variety of factors including:

  • Grubhub did not control how he made the deliveries — whether by car, motorcycle, scooter or bicycle;
  • Grubhub also did not control the driver’s appearance while he was making Grubhub deliveries;
  • The driver was not required to have any Grubhub signage on his car and in fact did not have any such signage;
  • Grubhub did not require the driver to undergo any particular training or orientation;
  • The driver also worked for other gig economy companies, including Lyft, Uber and another meal delivery service, Postmates.
  • The driver drove for these companies, including Grubhub, because the flexible scheduling allowed him to pursue his acting career.

The court noted that some factors weighed in favor of the driver being an employee, including the fact that the job required no special skills and that the delivery service was part of GrubHub’s regular business.

Nonetheless, the judge concluded that “While some factors weigh in favor of an employment relationship, Grubhub’s lack of all necessary control over [the driver’s] work, including how he performed deliveries and even whether or for how long, along with other factors persuade the Court that the contractor classification was appropriate.”

The court’s ruling does not apply to the gig economy as a whole, but some company’s may take it that way, and attempt to classify workers as independent contractors even when they exert far more control over them than Grubhub does over its drivers.

The legal landscape is evolving. The California Supreme Court is considering adopting a more protective test for employee status. One test the court may adopt is New Jersey’s so-called ABC test, which presumes workers are employees unless a business can show a worker is free from its supervision, works outside the usual course or place of business, and works “in an independently established trade, occupation, profession or business.”

Unfortunately, there is no app that tells gig economy workers whether they are protected under applicable labor laws. If you are interested in learning more, stay tuned for continuing coverage of these issues here at OwedUnpaidWages, and always feel free to contact the attorneys at the Wage Authority Group.

Compensatory Time Off is Illegal for Private Owned Businesses

Under the Fair Standards Labor Act, employees of State or local government agencies may receive compensatory time off or Comp time, at a rate of not less than one and one-half hours for each overtime hour worked, instead of cash overtime pay. Comp time is not offered to all employees at public agencies. Usually any comp time arrangement must be established pursuant to a written agreement, mutual understanding, or any other agreement between the public agency and the employee.

Who Can Receive Comp Time?

Comp time can only be given to nonexempt employees in the public sector and cannot be given to nonexempt employees at a private, non-governmental business. When employees work extra hours, Employers of a private own business might want to give them extra time off instead of paying them any wages. This is known as comp time and it is illegal in many situations in which private own businesses use it as a compensation method to give time off to their employees for working overtime hours instead of paying time-and-a-half overtime wages. Overtime hours are typically any hours an employee works beyond 40 hours in a week.

Illegal Use Of Comp Time

For example, let’s say a private business have a nonexempt employee who works 56 hours in a workweek. Instead of paying 16 hours’ worth of overtime wages to the employee, they are given comp time the week after. In this case, the Employer violated FLSA comp time laws. The employee should have been paid overtime wages for the extra 16 hours worked to remain in compliance with FLSA compensatory time off rules.

In most cases, Employers have to pay overtime wages to their employees when they work overtime hours. Let’s say an employee whose regular hourly rate of pay is $10. For overtime wages, the hourly overtime rate is $15 ($10 X 1.5). If that employee works 10 hours of overtime in a workweek, you would owe the employee $150 for the extra time worked.

Comp time is mostly illegal to prevent private owned businesses from overworking their employees. Comp time laws ensure employees are fairly compensated for the work they do. Comp time cannot even be given if it is mutually agreed to. The use of comp time instead of overtime is limited by Section 7(o) of the FLSA to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency.

An employment lawyer can assist you further with a claim if you believe your employer has illegal used comp time to compensate you instead of paying you proper overtime compensation for hours worked above 40 in one week.

Are Employees Entitled to Overtime Pay if They Work From Home?

The federal overtime provisions contained in the Fair Labor Standards Act (FLSA) provide that non-exempt employees covered under the Act must receive overtime pay for any hours worked over 40 in a workweek. The FLSA doesn’t place limitations on the number of hours an employee can work in any week, and nothing in the FLSA requires any employee to work any particular schedule in a workweek. However, employees must be paid at a rate not less than time and one-half their regular rates of pay for hours worked over 40 in a workweek regardless of whether the employee works at the office or at home.

Employees Must Be Paid…No Matter Where the Office

If an employer learns that an employee is working from home on work-related activities, the employer must ensure that the employee is getting paid for it. In a society that’s increasingly dependent on technology, it’s important to consider some of the problems that could arise for technologically savvy employees who are allowed to work from home. One frequent area of confusion stems from situations where an employee performs work during his or her commute.  As a general rule, any principle work which an employee is required to perform while commuting must be counted as hours worked and compensated accordingly. For example, time spent by an employee writing a report is work time, even if it happens to occur while the employee is riding on a bus or other mode of transportation to or from work.

Some courts have rules that employers do not have to compensate employees for the time they spend checking email or voicemail from offsite locations for incidental work-related activities, like picking up the employee’s daily assignments or work schedule. In contrast, the court’s holding indicated that an employer is obligated to compensate an employee for off-site activities that are directly related to the employee’s job duties, such as performing or completing a work assignment, unless the time spent is de minimus.

Employees Must Keep Track of Home Office Work

The time spent working away from the office may be considered work depending on your state laws and many factors. An employee should take notice in logging in the time and hours spent performing work-related activities away from the office. Additionally, whether or not an employee works from home has no effect on the overtime requirements of your employer. Under the FLSA, employers must pay employees overtime for any hours worked over 40 in a workweek, even if the employee does the work from home.

The U.S. Bureau of Labor Statistics estimates 3.3 million people work from home full-time, and this number continues to rise due to the attractive flexible work schedule and the convenience of working from home. There are varieties of companies that hire full-time and part-time employees to work remotely from home. Companies such as SYKES Home, TeleTech, iGor and Covergys hire work-from-home employees for customer service jobs.

An employment lawyer can help you determine whether you are an employee entitled to overtime pay while working at home under the Fair Labor Standards Act. A lawyer can also assist you with a claim if you believe your employer has not paid you proper overtime compensation for hours worked above 40 in one week and for any dispute regarding pay.

 

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Calculations of Salary Deductions for Exempt Employees

On January 5, 2018, the United States Department of Labor reissued its Opinion Letter as an official statement of its Wage and Hour Division (WHD) policy and ruling towards calculations of salary deductions for compliance of the federal Fair Labor Standards Act (FLSA) by employers.

Under the FLSA, certain “white collar” employees who are employed in a bona-fide executive, administrative, or professional capacity and are paid on a salary basis at no less than $455 per week are exempt from overtime requirements. The appendant regulations further provide that to satisfy the salary basis test, it must show that an employee “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.602(a).

What Does this Mean for Employers?

This does not mean exempt employees must be paid for days on which they do not come to work. Rather, “deductions may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.” 29 C.F.R. § 541.602(b)(1). That is, if an exempt employee is absent for two full days for personal reasons, the employer may deduct the employee’s salary for the two full-day absences. If the employee is absent for one and a half days, the employer can deduct only for the one-full day absence. Further, an exempt employee’s salary may be deducted “for absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability,” in which case “deductions for such full-day absences also may be made before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder.” 29 C.F.R. § 541.602(b)(2).

Deductions for Exempt Employees

While such deductions for FLSA exempt employees may be allowed, the Opinion Letter emphasizes that the regulations do not permit salary deductions for partial day absences. In other words, the regulations prohibit deductions from an employee’s guaranteed salary for absences that are less than one full day in duration. Conversely, if the absence is for one full day, the regulations do not prohibit a deduction equivalent to a partial day salary. Thus, if the absence is one full day in duration, the employer may deduct one full day’s pay or less.

Finally, the Opinion Letter explains that when taking a permissible deduction, an “employer may use the hourly or daily equivalent of the employee’s full weekly salary or any other amount proportional to the time actually missed by the employee.” 29 C.F.R. § 541.602(c).  Therefore, if an employee is absent from a shift scheduled to be shorter or longer than the employee’s regular shift, the employer may take a deduction in proportion to the number of hours missed, provided that the employee is absent for less than one full day of work, no deductions are allowed.

 

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