Hunton Employment & Labor Perspectives

Update: On March 8, 2024, the Eastern District of Texas granted summary judgment in favor of the Chamber of Commerce and struck down the NLRB’s new final joint employer rule. The opinion conducts a thorough review of the history of the joint employer standard and ultimately concludes that the Final Rule is contrary to the common law. The opinion critiques the Board’s rulemaking stating they failed to adequately address the disruptive effects of the new rule, resolve ambiguities, or explain how it will not cause piece-meal bargaining.  The opinion then leaves the previous rule from ...

The NRLB has hit another roadblock in its implementation of a new final joint employer rule (the “Final Rule”) as a Texas federal judge delayed its implementation until March 11. The Final Rule, which was supposed to take effect on February 26, would have made organizations liable for violations of the NLRA if they had direct or indirect control over the terms and conditions of employment of another firm’s employees. This change increases the potential of liability from franchising or contracting with third parties. To see more information on the implications of the Final Rule, see our previous articles here and here.

On October 27, 2023, the National Labor Relations Board (“NLRB”) published its anticipated Final Rule modifying the standard for determining joint-employer status under the National Labor Relations Act (“NLRA”).  See Standard for Determining Joint Employer Status, 88 Fed. Reg. 73946 (October 27, 2023) (to be codified at 29 C.F.R. pt. 103).  The Final Rule overrules the NLRB’s 2020 joint-employer rule and broadly expands the definition of joint-employer.   

The Department of Labor’s Wage and Hour Division is expected to propose new rules on independent contractor classification and overtime entitlement requirements in the coming weeks.  The proposals would alter the qualifications for certain employees to receive overtime payments under the Fair Labor Standards Act when they work in excess of 40 hours in one week.

Last Thursday, the U.S. Department of Labor (“DOL”) published in the Federal Register its newly-proposed rule regarding independent contractor vs. employee classification under the Fair Labor Standards Act (“FLSA” or the “Act”).  Businesses have anticipated the release of this proposed rule from the Biden administration’s DOL since the DOL withdrew a more employer-friendly, Trump-era independent contractor rule in May 2021 that had not yet gone into effect.

On September 7, 2022, the NLRB released a Notice of Proposed Rulemaking (“NPRM”) and request for public comment regarding its latest iteration of the joint employer rule.  The NPRM proposes to rescind and replace the current final rule, entitled “Joint Employer Status Under the National Labor Relations Act,” which took effect on April 27, 2020.

The National Labor Relations Board (“NLRB” or “Board”) recently indicated an openness to revisiting the independent contractor standard employed by the Board when assessing whether individuals are covered under the National Labor Relations Act (“Act”).

On December 13, 2021, the Massachusetts Supreme Judicial Court (“SJC”) issued its long-awaited decision determining that the Massachusetts Independent Contractor Statute, G.L. c. 149, § 148B (“Independent Contractor Statute”), which establishes the three-pronged “ABC” test used to classify workers as independent contractors or employees – and provides for a rebuttable presumption that workers are employees unless the purported employer proves otherwise – is not the applicable standard to determine whether an entity is a joint employer.

The legal landscape for defining “employers,” “employees,” and “independent contractors” can be quite dynamic, as this past year has illustrated. In January 2021, the Department of Labor issued an employer-friendly independent contractor rule that would have departed from the agency’s typical balancing test, but it formally withdrew this rule in early May with the change in administration. The DOL’s independent contractor rule is intended to provide guidance to employers when determining whether a worker is an employee or an independent contractor. For employers, this is an important distinction because the FLSA’s overtime and minimum wage protections apply only to employees, not independent contractors. Because courts and employers sometimes struggle to find this line using the economic realities test and its iterations, the Trump-era independent contractor rule aimed to provide a clearer definition of “employee,” as opposed to “contractor.” The DOL has not yet proposed a new independent contractor test, but employers should be mindful that the Biden administration may potentially announce a new rule on this topic.

In an April 28, 2021 decision, the Ninth Circuit determined that the application of California’s ABC test (also known as AB-5) to motor carriers is not preempted by the Federal Aviation Administration Authorization Act of 1994 (“F4A”). The ABC test is a judicially-created independent contractor test that was ultimately codified via AB-5. For a more in-depth discussion of AB 5, visit our previous blog post here.

In a recent post, we wrote about a final rule issued by the Department of Labor (DOL) during the last days of the Trump administration addressing the appropriate test for classifying independent contractors under the FLSA. In the post, we noted that the future of the rule was in question because it was not set to go into effect until March 8, 2021. This delayed implementation provided an opportunity for the incoming Biden administration to freeze or withdraw the rule.

In the last weeks of the Trump Administration, the Department of Labor (DOL) published its final rule for determining whether an individual is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The distinction between an employee and independent contractor is of critical importance because independent contractors are not entitled to the benefits of the FLSA, namely minimum wage and overtime.

The U.S. Department of Labor (“DOL”) recently released a proposed rule seeking to clarify independent contractor vs. employee status under the Fair Labor Standards Act (“FLSA”).   The proposed rule seeks to simplify the “economic realities” test currently applied by federal courts in various forms.  “The Department’s proposal aims to bring clarity and consistency to the determination of who’s an independent contractor under the Fair Labor Standards Act,” Secretary of Labor Eugene Scalia explained in the DOL's news release.  “Once finalized, it will make it easier to identify employees covered by the Act, while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor.”

California Governor Gavin Newsom recently signed legislation, AB 2257, that provides a carve out to the state’s independent contractor law. Under Assembly Bill 5, all independent contractors are presumed to be employees unless the hiring business can meet the stringent requirements (known as the ABC test) that are set forth in the California Supreme Court’s Dynamex decision. AB 5 also provided for certain exemptions for certain categories of workers. For a more in depth discussion of AB 5, visit our previous blog post here.

On September 10, 2020, the United States District Court for the District of Massachusetts issued a Memorandum and Order granting summary judgment in favor of a franchisor in response to claims by a purported class of franchisees that they were not truly independent contractors, but employees of the franchisor.

The main issue addressed in the case was whether specific federal legal requirements that are imposed upon franchisors trump the general Massachusetts independent contractor classification statute. The federal court reasoned that applying the Massachusetts independent contractor classification statute to the franchise business model would render franchisors regulated by the Federal Trade Commission (“FTC”) criminally liable under state law for employee misclassification simply by virtue of their compliance with the FTC’s requirements.

As anticipated and previously reported, the Republican-controlled Board is overturning Obama-era rulings. For example, in a recent decision, SuperShuttle Inc. DFW, Inc. (16-RC-010963), the National Labor Relations Board affirmed the Board’s adherence to the traditional common-law agency test.  This decision overrules the NLRB’s 2014 Decision, FedEx Home Delivery, 361 NLRB No. 65, which had modified the NLRB’s long-standing test for independent contractor status.

As we wrote about last month, on May 21, 2018, the Supreme Court rendered its decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1632 (2018), rejecting perhaps the largest remaining obstacles to the enforcement of class action waivers in arbitration agreements in the employment context.  The Court concluded that the class action waivers did not violate the National Labor Relations Act (“NLRA”).  Although the Court’s opinion also seemed dispositive of whether such agreements could be avoided under the Fair Labor Standards Act (“FLSA”), at least one claimant tried to continue to litigate the issue, which was disposed of last week in Gaffers v. Kelly Servs., Inc., No. 16-2210 (6th Cir. 2018).  And now the Sixth Circuit has addressed whether Epic Systems would apply to arbitration agreements with putative independent contractors who contended that they should have been treated as employees.

The California Supreme Court has adopted a new three-part test to determine whether a worker is an independent contractor or an employee under California’s wage orders, which regulate wages, hours, and working conditions.  The highly anticipated ruling could have wide ranging effects for businesses operating in California and beyond, as companies try to navigate the new gig economy.

Recently the National Labor Relations Board invited interested parties and amici to submit briefs in Velox Express, Inc. (15-CA-184006) to address under what circumstances, if any, the Board should deem an employer’s misclassifying statutory employees as independent contractors constitutes a violation of Section 8(a)(1) of the National Labor Relations Act (“the Act”).  Briefs from parties and interested amici must be submitted on or before April 16, 2018.

In a highly anticipated opinion, a Federal Judge in California ruled in favor of GrubHub, an internet food ordering service, finding it properly classified a delivery driver as an independent contractor.

In Lawson v. GrubHub, the plaintiff, a delivery driver, alleged that GrubHub violated California’s minimum wage, overtime and employee expense reimbursement laws by misclassifying him as an independent contractor when he was really an employee.  He brought the case on behalf of himself and as a representative action pursuant to the California Private Attorney General Act (PAGA).