The SJC, Massachusetts’ highest court, issued its long awaited decision in Sullivan v. Sleepy’s LLC, SJC-12542 on May 8, 2019. The case should be of concern to businesses which pay individuals fully or primarily by commission, especially in the retail context or in automobile sales where the ruling departs sharply from federal law.
In an opinion letter dated April 29, 2019, the U.S. Department of Labor (DOL) explained that some service providers working for a virtual marketplace company (VMC) are independent contractors under the Fair Labor Standards Act (FLSA). This opinion letter identifies the test the DOL is expected to use when considering the classification of workers in this growing gig-economy under federal law.
Service provider workers are also referred to as “gig,” “on-demand,” or “sharing-economy” workers. A gig economy is a marketplace where these workers take temporary positions for short-term engagements. Often using an App-based platform, the market involves these on-demand workers, the consumers who need a specific good or service, and technology platform companies or VCMs that connect the workers to the consumers. Examples of some VCMs are Etsy, Airbnb, eBay, and TaskRabbit.
The FLSA applies to “employees.” While the definition of employee — any individual whom an employer suffers, permits, or otherwise employs to work — is very broad, not all workers are employees. Some workers may be independent contractors and therefore outside of any FLSA requirements. In other words, the legal protections of minimum wage and overtime pay are not afforded to independent contractors. The recent growth in popularity of individuals entering into the gig-economy has put center-stage the question as to whether these new gig workers are employees or independent contractors. The DOL addressed this question through its renewed opinion letter process.
In its opinion letter FLSA 2019-6, the DOL redacted the identify of the VCM seeking the guidance. And the DOL was noticeably careful to point out that it was considering the facts specific to the situation at hand. What we do know is that the VMC here helps consumers connect with service providers through a software platform. “The platform also allows its service providers to communicate with consumers—including through mobile app messaging or masked telephone calls—to exchange details about the requested service, including adjustments to the scope, price, or time.” Opportunity for repeat business is also provided. There is no interview of service providers or required training by the VCM. Onboarding is online and service providers can provide work to customers once the account is activated without any requirement for reviewing materials or physically reporting to any office. The VCM receives no services from the service providers.
In determining the classification of these particular workers, the DOL used its Economic-Realities Test. The six factors under that test include:
- The nature and degree of the potential employer’s control;
- The permanency of the worker’s relationship with the hiring business;
- The amount of the worker’s investment in the facilities, equipment or helpers;
- The amount of skill, initiative, judgment, or foresight required for the worker’s services;
- The worker’s opportunities for profit or loss; and
- The extent of integration of the worker’s services into the potential employer’s business.
The DOL went through and analyzed each of the factors above. Prior to doing so, it noted that other factors may also be relevant to the analysis and that “appropriate weight” for the listed factors would depend on the circumstances. The key factor came down to how much “control” the VCM had over the service provider worker in doing the job. In the end, the DOL found that the service providers who use this VCM are independent contractors.
With a growing on-demand market of workers, getting some direction from the DOL as to the legal standard it will use in reviewing these classification issues is helpful. These opinion letters, however, are not precedent for courts, although courts may defer to the DOL’s interpretation. More importantly, this is limited to federal law. Many states have their own tests for determining independent contractor status and under those state tests the same facts may lead to a different result. For example, Massachusetts follows a more stringent test, making it difficult to classify workers other than as employees. In New Hampshire, the NHDOL’s test for classification changed in 2012 to a seven-part test. Employers wanting to engage workers as independent contractors should be careful of this classification minefield and seek legal assistance.
The US Supreme Court recently announced it accepted three cases that will determine the scope of “sex” discrimination under federal law. Title VII of the Civil Rights Act of 1964, as amended, makes it unlawful for employers to discriminate against employees on the terms and conditions of employment because of such individual’s “race, color, religion, sex, or national origin.” The Equal Employment Opportunity Commission (EEOC) which is the agency that enforces Title VII takes the position that “sex” discrimination under federal law prohibits treating someone unfavorably because of that person’s sex and this includes treatment because of someone’s gender identity, including transgender status, and someone’s sexual orientation. Many states and localities with anti-discrimination laws have specifically added the protected categories of sexual orientation or gender identity or both to their discrimination laws.
The Supreme Court has consolidated two of the three accepted cases for briefing and oral argument. Bostock v. Clayton concerns whether discrimination against an employee because of sexual orientation constitutes prohibited employment discrimination “because of . . . sex” within the meaning of Title VII. Altitude v. Zarda also involves whether the prohibition in Title VII against employment discrimination “because of . . . sex” encompasses discrimination based on an individual’s sexual orientation.
The third case is R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission. In that case, the Supreme Court will determine whether Title VII prohibits discrimination against transgender persons based on (1) their status as transgender or (2) sex stereotyping under the Court’s earlier decision in Price Waterhouse v. Hopkins.
After about 13 conferences, the Supreme Court finally accepted these three cases and will decide the scope of the term “sex” as used under federal Title VII. The Circuit Courts are split on the interpretation of this protected category so these decisions will impact federal law as it applies to the workplace. Because New Hampshire and Massachusetts already include sexual orientation and gender identity in their anti-discrimination laws, this case may not result in significant changes for employers to policies and practices currently in place in these states. However, damages employees may recover differ under federal and some state laws so a decision including these categories in the term “sex” under Title VII could impact employers later found in violation.
The cases will be heard by the Supreme Court during its next term that starts in October 2019.
For several decades the Massachusetts overtime statute, G.L. c. 151, §1A, required generally that an employee working in excess of forty hours per week be paid “at a rate not less than one and one-half times the regular rate at which he is employed.” The statute included twenty categories of exceptions from this overtime pay requirement. One such exemption applied to laborers “engaged in agriculture and farming on a farm.” G.L. c. 151 §1A(19). The SJC has recently held, however, that farm growing and harvesting “does not include post-harvesting activities.” The case is Arias – Villano v. Chang & Sons Enterprises, Inc., 481 Mass. 625 (2019). Thus, the laborers in Arias-Villano were entitled to time and a half for the type of work they performed beyond “agricultural and farm” work is excess of forty hours per week. That is, growing and harvesting does not include “cleaning, sorting, and packaging” of or related to the agricultural product itself. The workers were entitled to overtime pay for such ancillary duties.
The Supreme Judicial Court has just recently made it abundantly clear that for liability to hold under the Massachusetts Wage Act, G.L. c. 149, §148, “[t]he work must have been actually performed and wage payments must be presently due to trigger the precise requirements and severe penalties” available under the Act. The case is Calixto v. Coughlin, 481 Mass. 157 (2018).
As published in NEHRA News (3/21/2019)
The Massachusetts Wage Act provides that an employee who “prevails” in an action to recover unpaid wages “shall … be awarded the costs of the litigation and reasonable attorneys’ fees.” This “fee-shifting” provision is an exception to well-established “American Rule” under which each party bears his or her own attorney’s fees, win or lose. In cases where the employee wins at trial, the application of the Wage Act’s fee-shifting provision is clear: the employee will recover his or her attorney’s fees. But what happens when the case doesn’t go to trial, and instead, the parties resolve the matter through a negotiated settlement in which both sides compromise? Has the employee “prevailed” in that situation? Is he or she entitled to recover attorney’s fees?
Last week, the U.S. Department of Labor’s Wage and Hour Division issued an Opinion Letter in which it stated that an employer may not delay the designation of leave qualifying under the Family and Medical Leave Act, even if the affected employee would prefer not to take FMLA leave, and employers may not designate more than 12 weeks of leave as FMLA leave. Continue Reading Department Of Labor Says That FMLA Leave Cannot Be Deferred
Yesterday, President Trump unveiled his new budget plan. Along with controversial plans to fund construction of a wall on the southern border and to cut funding for Medicare and Medicaid, the budget also includes a proposal for paid parental leave.
President Trump’s daughter Ivanka has been advocating for federal paid parental leave since the beginning of the administration in 2017. And the president touted the idea during his State of the Union address in February.
President Trump’s plan would provide six weeks of paid leave to new mothers and fathers, including adoptive parents, to recover from childbirth and to bond with a new child. The plan would be administered at the state level, and is anticipated to be offered through programs based on unemployment insurance.
On March 7, 2019 the NH Supreme Court ruled that an employee’s worker’s compensation carrier was wrong to deny reimbursement for the cost of medical marijuana to an employee recovering from a work related injury. The employee, Andrew Panaggio, suffered a lower back injury in 1991. He received a lump sum settlement for permanent impairment in 1997 and continued to experience pain as a result of the injury. He experienced negative side effects from prescribed opioids and was issued a NH cannabis registration card approving him for the use of medical marijuana in 2016. He purchased the marijuana and then sought reimbursement from the worker’s compensation carrier which denied payment stating that “medical marijuana is not reasonable/necessary or causally related” to the injury.
Yesterday, the U.S. Department of Labor released its long-awaited updated overtime rule proposal. Under the proposed rule, the minimum salary level at which an employee can be exempted from federal overtime and minimum wage requirements (assuming other criteria are met) would increase from $455 per week ($23,660 annually) to $679 per week ($35,308 annually). If enacted, more than a million more workers would become eligible for overtime under the proposed rule.