Tag Archives: employee classification

California Court Re-Classifies Independent Drivers as Employees Pursuant to AB5

Contributed by Carlos Arévalo, August 11, 2020

close up of hand with transparent smartphone and virtual car sharing icons over black background,

On Monday August 10, 2020, Judge Ethan Schulman of the California Superior Court issued an injunction against Uber and Lyft ordering them to classify drivers as employees and not as independent contractors. The order follows a preliminary injunction lawsuit filed this spring by the State of California, along with a number of large cities in the state, where it was alleged that Uber and Lyft were in violation of California’s Assembly Bill 5 (“AB5”). A new state law that went into effect on January 1, 2020, AB5 codified what is known as the “ABC” test, which is commonly used to determine whether a worker is an employee as opposed to an independent contractor.

Specifically, under AB5, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  2. The person performs work that is outside the usual course of the hiring entity’s business.
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

In his order, Judge Schulman found that neither Uber nor Lyft would be able to establish the B prong of the ABC test and as a result, the likelihood that California will ultimately prevail in its action against Uber and Lyft is “overwhelming.”  Judge Schulman also found that any costs to Uber and Lyft related to restructuring and proper worker classification to come into compliance with AB5 are outweighed by the harm to the drivers, businesses and the public associated with workers being deprived of “the panoply of basic rights and protections to which employees are entitled under California law.”  The court’s opinion is not surprising in light of AB5’s prohibition of engaging anyone as an independent contractor who is critical to and part of a company’s business operations.  In short, prong B creates a burden that is very difficult for any business to meet.

The order represents the latest development in an ongoing battle regarding the classification of drivers. After the enactment of AB5, Uber filed a federal lawsuit challenging the law’s constitutionality. Uber, Lyft and others have also championed Proposition 22, a ballot initiative in the November 2020 election to define app-based transportation (rideshare) and delivery drivers as independent contractors.  Just last week, California’s Labor Commissioner Lilia García-Brower alleged in separate lawsuits against Uber and Lyft that they are “committing wage theft by misclassifying drivers as independent contractors” and that “freelance workers [are being] deprived of a host of legal protections in violation of California labor law.”  The lawsuit is in response to nearly 5,000 claims from drivers for lost wages.

While pending in California, these actions illustrate how critical it is to ensure workers are properly classified under applicable state law. Employers should be mindful to ascertain what test is used in their state for various laws, and how workers are evaluated against such standards. Counsel should also be utilized to analyze and craft independent contractor agreements that do more than simply label the relationship as independent contractor, but also incorporate elements necessary to demonstrate that the contractor truly meets the applicable standards.

The Impact of Local Minimum Wage and Paid Sick Leave Ordinances on the Transportation Industry

Contributed by Michael Wong, January 5, 2018

Over the past few years, cities, counties and local municipalities have been enacting laws and ordinances increasing the minimum wage and requiring paid sick leave for employees. While there have been growing pains with how these apply to normal hourly non-exempt employees and tipped servers, do these apply to motor carriers and employees who are truck drivers?  This can be the most frustrating legal response of all, “it depends.”

In most cases, minimum wage laws enacted by states follow the Fair Labor Standard Act (“FLSA”) and provide exemptions for motor carriers.  Indeed, under Section 12(b)(1) of the FLSA, employees whose duties, wholly or in part, affect the safety of operation of a motor vehicle and are involved in interstate commerce are exempt from being paid overtime. Whether a municipality’s minimum wage ordinance applies, depends on the language and rules of the ordinance. For example, the rules of the Cook County, Illinois minimum wage specifically state that a regulated motor carrier subject to subsection 3(d)(7) of the Illinois Minimum Wage Law is not a “Covered Employer” that would be required to pay covered employees the Chicago or Cook County minimum wage. Similarly, the rules of the City of Chicago minimum wage states that individuals employed for a motor carrier who are subject to the Department of Transportation regulation are not subject to the Chicago minimum wage.

However, paid sick leave laws and ordinances are different.  Neither the Cook County, Illinois earned sick leave ordinance or City of Chicago earned sick leave ordinance have the same exclusion for motor carriers or truck drivers.  While neither expressly states that motor carriers are required to provide paid sick leave to employees who are truck drivers, they also do not state that motor carriers or truck drivers are exempt.  Due to the plain language exempting motor carriers and truck drivers from the minimum wage ordinances, there is a very strong argument that motor carriers are required to provide their employees who are truck drivers with paid sick leave.

Indeed, this interpretation is not unusual within the growing trend of states, cities and local municipalities expanding employee rights – including those of truck drivers. Currently there are 8 states and 30 cities and municipalities that have paid sick leave laws which include:  Illinois (local), Washington (state and local), California (state and local), Arizona (state and local), Oregon (state and local), Minnesota (local), Vermont (state), Massachusetts (state and local), Pennsylvania (local), New Jersey (local), New York (local), Connecticut (state) and Washington, D.C. (local).

Bottom line, the different paid sick leave laws do not address or expressly exempt motor carriers or truck drivers from being subject to the law or ordinance. By not addressing or expressly exempting motor carriers and their employees, these laws are creating significant exposure for motor carriers that fail to make changes by providing employees who are truck drivers with the ability to earn paid sick leave or considering how those employees are being compensated. Certainly, with the patchwork of laws and nuances in each jurisdiction, it can be extremely frustrating and difficult to try and implement a globally compliant policy.  Thus, special attention must be taken when crafting such policies and review by experienced counsel should be part of the process.  Moreover, motor carriers utilizing truck drivers who are independent contractors or owner/operators should take particular pause to consider the increased liability from misclassification claims and the potential damages under the paid sick leave laws, in addition to any applicable minimum wage law or ordinance.