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By Chris Opfer
The Labor Department is looking at changing regulations governing gig workers and other independent contractors, issues that have embroiled companies including Amazon.com Inc. and Uber Technologies Inc. in legal battles, Labor Secretary Alexander Acosta said in an interview.
“The workforce is changing. How we approach work is changing, and we need to start looking at our rules and recognize that what fit 20 or 30 years ago is not going to fit for the modern workplace,” Acosta told Bloomberg Law.
That starts with two key issues: how workers are classified and who’s considered their boss. The DOL is expected to take a more business-friendly approach to both questions than it did during the Obama administration.
“We’ve already said that we’re strongly considering looking at the joint employment issue, looking at a rule on that,” Acosta said. “Right now we’re focusing on that and then we’ll look at the classification issue as well.”
Courts have been flooded with questions about whether various workers are employees or independent contractors. Gig workers and other independent contractors aren’t covered by minimum wage and overtime pay laws; don’t get workers’ compensation benefits and unemployment insurance; and usually aren’t offered retirement, health-care, and other benefits available to many employees.
“Businesses have been increasingly cavalier about classifying workers as nonemployees in many different contexts,” Justin Swartz, an attorney in New York who has represented workers in wage-and-hour cases against Chipotle, Wells Fargo, and other businesses, told Bloomberg Law. “For laws to do what they’re supposed to do—ensure fair pay—it’s important that the Department of Labor take an expansive view.”
Amazon, Uber, Lyft Inc., FedEx Corp., Shell Oil Co., and a slew of exotic dancing establishments have been involved in legal battles over allegations that they wrongly classified workers as contractors. A patchwork of court decisions and varying standards set by different federal agencies have left the line between employee and independent contractor increasingly muddled.
“Right now, companies can have legitimate independent contractors under some laws that would be considered employees under others,” Todd Lebowitz, a management attorney in Cleveland, told Bloomberg Law.
The worker classification debate took a turn in April, when the California Supreme Court adopted an expansive test that attorneys say is likely to require most gig and other businesses in the Golden State to classify their workers as employees.
The court in a case involving Dynamex Operations West Inc. delivery drivers said it would look at three factors—instead of the 12-step test used by many other courts—to determine whether a worker is properly classified. To classify workers as contractors in California, a business has to prove that the worker controls how the job is done, that the work is not within the usual course of the company’s business, and that the worker is “customarily engaged” in an independent trade or occupation.
“If the worker is performing the kind of work that the company is in the business of doing the worker is an employee, end of story,” plaintiffs attorney Shannon Liss-Riordan told Bloomberg Law. She represents Uber drivers who say they were misclassified as independent contractors.
A new Labor Department rule would have limited reach. The department can clarify how workers should be classified under federal wage-and-hour law, but it can’t overturn the Dynamex decision or revise state and local laws.
“I would not be surprised to see more states go the way of California,” Lebowitz said.
Meanwhile, the DOL is already at work on a rule to revise when businesses in franchise, staffing, and other relationships are “joint employers” of each other’s workers. Joint employers are legally liable if one of the businesses doesn’t pay workers required minimum wages and overtime.
The issue has been highlighted by cases alleging that McDonald’s Corp. is a joint employer of franchise restaurant workers and that Microsoft Corp. is a joint employer of software testers hired by a staffing firm.
Since Acosta’s swearing-in last year, the department has focused largely on trimming Obama-era regulations and rolling out new programs to help employers comply with the law. The DOL also scrapped a pair of interpretive guidance documents taking an expansive approach to joint employment and stating that the vast majority of workers should be considered traditional employees for minimum wage and overtime purposes.
Congressional gridlock may force department’s hand on issues Acosta said he’d rather leave to lawmakers.
“Long term, Congress does need to look at these issues and tell the American people, ‘This is what we as your representatives are going to do.’ They are the ultimate solution,” he said.
The House last year passed a mostly Republican-backed bill that would have limited joint employer liability under federal law, but that measure stalled in the Senate. Lawmakers in that chamber, where Republicans hold a razor-thin majority, have yet to come up with a measure on joint employment or worker classification that could get the 60 votes necessary to move.
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