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California Senate to Consider Sweeping Changes to Rules for Independent Subcontractors (CA)

by Scott Braddock | July 10, 2019

After it passed the California Assembly earlier this year, that state’s Senate is set to begin hearings this week on a sweeping reform to the way employers classify their workers as either employees or contractors. Assembly Bill 5 would codify a landmark state supreme court ruling that raised the bar for when companies can legally classify folks as independent contractors.

Among other things, the court’s ruling says the scope of work being done must be outside the core of a company’s business for the workers to be classified as independent contractors. This is perhaps one of the most aggressive efforts in the country to crack down on what critics call employee misclassification or “payroll fraud.”

As Construction Citizen readers who have followed the issue are well aware, misclassification happens when employers pretend their workers are subcontractors when, by law, they meet the definition of employees and should be compensated as such including benefits. There are of course many legitimate uses of contract labor. The problem arises when unethical employers use the subcontractor designation to skirt the law and avoid payroll taxes, health benefits, retirement plans, and more. This allows those companies to underbid law-abiding firms by significant amounts. It is especially rampant in construction but other industries are not immune.

Explaining the California Supreme Court’s ruling in what has become known as the “Dynamex Decision,” attorney Timothy Kim wrote on Labor & Employment Blog: “In particular, the Court embraced a standard presuming that all workers are employees instead of contractors, and placed the burden on any entity classifying an individual as an independent contractor of establishing that such classification is proper under the newly adopted ‘ABC test.'”

In other words, this greatly narrows the conditions under which a worker can be classified as a contractor. And it is worth the attention of employers and workers in other parts of the country because large states like Texas and California often lead the way on policies that will eventually be adopted elsewhere.

The legislation under consideration mirrors the court’s ruling. Under the bill, the answer must be “yes” to each of the following for a worker to be legally classified as an independent contractor:

– The worker is free from the control and direction of the hirer in relation to the performance of the work, both under the contract and in fact;

– The worker performs work that is outside the usual course of the hirer’s business; and

– The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hirer

If the bill is passed by the Senate and signed by Gov. Gavin Newsom, hundreds of thousands of Californians stand to gain access to benefits they don’t currently enjoy. The proposal puts Gov. Newsom in a tough spot politically, though, because he would like to appear to be on the side of both the labor unions supporting the bill and the tech giants like Uber and others which do not.

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Democrat Senators Come Out Against DOL ‘Joint Employer’ Rule

Hassan A. Kanu
Posted June 26, 2019, 10:31 AM

  • Presidential contenders oppose rulemaking
  • Blue state attorneys general join opposition; franchise group in support

Six of the seven senators running for the Democratic presidential nomination in 2020 voiced their “strong opposition” to the Labor Department’s proposal to narrow liability for franchised businesses and companies that rely on temps and other contractors. “The proposed interpretation would violate the language and intent of the Fair Labor Standards Act (FLSA) and weaken the enforcement of wage-and-hour protections on behalf of many of the most vulnerable workers in the country, directly contradicting DOL’s mission,” Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Cory Booker (D-N.J.), Kamala Harris (D-Calif.), Kirsten Gillibrand (D-N.Y.), Amy Klobuchar (D-Minn.), and several other Democratic heavyweights said in a June 25 letter to Labor Secretary Alexander Acosta.

The DOL proposed a new joint employer regulation-or interpretive rule-in April, seeking to narrow the circumstances when multiple companies can be considered “joint employers” of a group of workers. The Obama administration had looked to expand the scope of joint employer liability. The DOL said in April that its new proposal would reduce uncertainty about which businesses are responsible for workers’ employment protections and any associated liability for violating labor laws.

“As the prevalence of contracting, temporary staffing, and franchising arrangements has ballooned throughout the American economy, it is increasingly important that companies that share responsibility for workers are held liable for wage theft, child labor abuses, and other violations of federal wage-and-hour law that too often devastate the financial security of working families,” the senators wrote, noting that the 3-million temp-worker contingent across the country is “disproportionately made up of African American and Latino workers earning significantly less than other groups.

The joint employer issue is a flashpoint for franchised and gig economy companies and worker advocates. The comment period on the joint employer proposal ended June 25. The DOL’s proposal also drew attention from a group of Democratic attorneys general and the largest business association in the franchise sector, the International Franchise Association. The IFA argues that long-accepted practices in franchising shouldn’t be considered evidence of joint liability.

“The Department of Labor has put forward a rule that can add much-needed clarity for franchise businesses,” IFA Senior Vice President of Government Relations Matt Haller said in a June 25 announcement. “An expanded joint employer standard has cost the economy billions and slowed down hiring and job growth-this rule is a major step toward righting that wrong.”

Officials from 18 states including New York, California, North Carolina, Wisconsin, Pennsylvania, and the District of Columbia wrote to Acosta to oppose the rulemaking. “The experiences of many of the undersigned state Attorneys General (“State AGs”) in enforcing labor laws and protecting workers argue strongly against adopting the Proposed Rule,” the prosecutors wrote. “Based on our collective experience, we believe that the Proposed Rule does not adequately reflect today’s workplace relationships, in which growing numbers of businesses are changing organizational and staffing models by outsourcing functions to third” parties.”

The DOL regulation is considered an interpretive rule because Congress hasn’t directly authorized the agency to define joint employment. Critics have suggested the eventual policy will be subject to legal challenges.

The letter from Congress also was signed by Sherrod Brown (D-Ohio); Patty Murray (D-Wash.); Maggie Hassan (D-N.H.); Dick Durbin (D-Ill.); Ben Cardin (D-Md.); Chris Van Hollen (D-Md.); Tammy Baldwin (D-Wis.); and Ron Wyden (D-Ore.).

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Senate gives initial approval to legislation allowing the use of public labor agreements in public works projects (ME)

Pres. Jackson: “This bill marks a step forward for workplace safety, assurance and reliability.”

FOR IMMEDIATE RELEASE
May 29, 2019

AUGUSTA- The Maine Senate approved a bill from Senate President Troy Jackson, D-Allagash, to allow public authorities to commit to Project Labor Agreements in public works projects an initial vote of 21-13 on Wednesday. The bill – LD 1564, “An Act To Authorize Project Labor Agreements for Public Works Projects” – gives public authorities complete discretion to determine when to enter a Project Labor Agreement on a project-by-project basis.

“Project Labor Agreements represent a win-win for the workers on state projects and the state itself. Not only do PLAs provide uniform wages, benefits, and working conditions, but they also ensure the project will be completed on time and on budget,” said President Jackson. “This bill marks a step forward for workplace safety, assurance and reliability. I’m hopeful the House will join the Senate in passing this bill.”

Pre-agreements help ensure that public works projects are finished in a timely manner, remain on a budget, improve safety and reduce risks of worker misclassification. A pre-agreement can be constructed with a union or private entity. Project Labor Agreements can also include provisions to secure much-needed apprenticeships in the trades. These agreements often include training programs for women, minorities and veterans.

Due to the benefits of Project Labor Agreements, many private sector companies also choose to enter into them. Two high-profile examples include Toyota and Wal-Mart, which have used these agreements for multiple projects.

LD 1564 is supported by the Maine State Building and Construction Trades Council and the Maine AFL-CIO. It will now go before the House for additional votes before returning to the Senate for enactment.

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Senate unanimously OKs wage theft bill (MA)

UPDATED: 06/22/2018 06:35:35 AM EDT

By Katie Lannan
State House News Service

BOSTON — The Massachusetts Senate voted unanimously Thursday to approve legislation offering new protections to combat what senators characterized as a $700 million problem.

The bill (S 2327) targets the practice of wage theft, through which workers are denied the compensation owed to them by employers.

Despite the Senate’s support for the bill, Minority Leader Bruce Tarr warned it contained a “poison pill” that would make it “legally indefensible” and could keep it from becoming law.

Types of wage theft include failure to pay overtime, minimum wage violations, illegal deductions and working off-the clock, said Sen. Jason Lewis, who co-chairs the Labor and Workforce Development Committee.

“The practice of wage theft comes in many different forms, but they all have the common denominator of hurting workers, their families, and our communities,” said Sen. Sal DiDomenico, the bill’s lead sponsor.

Lewis told of one man, the father of an infant, who worked more than 50 hours a week for a construction subcontractor and was not receiving a paycheck. When the man approached his employer about the lack of pay, he was fired.

According to DiDomenico’s office, 350,000 Massachusetts workers lose an estimated $700 million annually to wage theft.

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