The new administration’s efforts to reverse course on many of the gains that gig economy businesses achieved under previous White House leadership took another step today as the Department of Labor (DOL) withdrew a guidance letter that indicated typical gig workers are independent contractors. By scrapping the April 29, 2019 letter, the Biden DOL sent yet another signal to businesses that they will have an uphill battle in classifying workers as contractors for at least the next four years. What do businesses need to know about today’s activity?
As we predicted, the Biden administration signed an order immediately after taking charge of the White House halting the advancement of the Department of Labor’s new independent contractor rule. Now for the next step: the Assistant to the President and Chief of Staff just published a memorandum titled, “Regulatory Freeze Pending Review,” proposing to postpone the rule by 60 days to allow the new administration to review it. The effective date of the proposed rule, which would make it far easier to classify workers as independent contractors if it ever takes effect, should now be pushed from March 8, 2021 to May 7, 2021 – and the new Department of Labor would solicit public comments through February 24. What do gig economy companies and other businesses using contractor labor need to know about the February 3 action?
The California Supreme Court just declined to take up the petition filed by a group of app-based rideshare and delivery drivers to hold as unconstitutional the voter-approved ballot measure that ensured that app-based rideshare and delivery drivers could be classified as independent contractors rather than employees. On February 3, the California Supreme Court denied the petition filed by the Service Employees International Union (SEIU) and a group of rideshare drivers seeking to strike down Proposition 22. The SEIU and the group of drivers argued the ballot measure was unconstitutional by putting illegal constraints on the ability of state lawmakers to empower drivers to organize, in violation of the California Constitution. About a month after the petition was filed, the state Supreme Court rejected their challenge in a short docket entry and without much explanation.
A federal appeals court just resurrected a pivotal gig economy battle that at one time seemed to be the center of the legal universe – but for a variety of reasons seems much less important these days. The 9th Circuit Court of Appeals issued a brief administrative order on January 28 that took the landmark Lawson v. Grubhub case out of suspended animation and placed it back on its active docket, ready to be argued and eventually decided. But thanks to a recent California Supreme Court decision and a critical ballot measure outcome, the outcome seems fairly predictable while the overall stakes seem much lower. What do gig economy employers need to know about this recent activity?
Joe Biden made no secret about his position on the gig economy when he was in campaign mode. “Employer misclassification of ‘gig economy’ workers as independent contractors deprives these workers of legally mandated benefits and protections,” his campaign website said. “This epidemic of misclassification is made possible by ambiguous legal tests that give too much discretion to employers, too little protection to workers, and too little direction to government agencies and courts.” And the first few steps he has taken since assuming office have demonstrated that he’s serious about taking on gig businesses: mere hours after being sworn in, he froze the Labor Department rule that was about to make it easier to classify workers as contractors. Not to mention that he nominated Marty Walsh to the top position at the Labor Department, a staunch union advocate who will no doubt take up Biden’s charge to render it even harder for gig economy companies and other businesses to retain independent contractors. But when it comes to Biden’s loftiest ambition in this arena – passage of federal legislation to ensure as many gig economy workers as possible are classified as employees – he may run into an expected roadblock: his own party.
The California Supreme Court held yesterday that the ABC test announced in its landmark Dynamex decision – which makes it infinitely harder for businesses to classify workers as independent contractors – applies on a retroactive basis. This decision ended more than a year-and-a-half of waiting after the 9th Circuit Court of Appeals first held in May 2019 that the Dynamex test applied retroactively and then, a little less than three months later, withdrew its opinion and asked the California Supreme Court to decide the matter.
Just two months after 58% of Californians voted it into effect and not even one month after it became law of the state, a group of workers and a major union have filed suit to overturn the results of Proposition 22, the ballot measure that ensured that app-based rideshare and delivery drivers could be classified as independent contractors. The Service Employees International Union (SEIU) joined with a group of rideshare drivers to go straight to the California Supreme Court on January 12 and ask it to invalidate the new law as being unconstitutional and otherwise unenforceable.
If it had been released at some other point in time and under different circumstances, perhaps gig economy businesses would be celebrating the release of a federal rule that makes it easier to classify workers as independent contractors. But the fact that it wasn’t formalized until the waning days of the current administration means that the rule faces long odds of ever taking effect. We wrote about the rule in our Legal Alert that can be found here – feel free to check it out if you want the particulars of what the rule could bring to the table when it comes to establishing a worker classification standard. The Alert also provides details regarding the roadblocks the rule faces: the impending “midnight” memo to be released on January 20 that will temporarily freeze this rule and prevent it from taking effect on March 8 as planned; the probable litigation that will be filed to block the rule from taking effect on a permanent basis; an incoming administration that will almost certainly take additional steps to shelve the rule; and a possible replacement rule that would almost certainly be worker-centric. Add to that the recent news that Marty Walsh will soon head the Labor Department – his labor background makes it all but certain that he will oppose this rule – and you can see why it seems unlikely that the rule will ever become the law of the land.
A federal district court in Illinois just ruled that a proposed class of gig economy delivery drivers and paid shoppers must individually arbitrate their claims that they were misclassified as independent contractors, rejecting an attempt to escape arbitration that has been successful in other parts of the country. This December 21 decision means that Instacart will be able to litigate claims over minimum wages, overtime compensation, and other benefits in its preferred forum – and is another piece in an increasingly fractured national puzzle over a critical issue, which could lead to Supreme Court intervention in 2021. Why is this decision important and how might it work in your favor?
It’s typical as the year winds down to turn our attention to the upcoming new year to try to figure out what’s in store for us. And like no other time in most of our lives, we’re looking forward to putting the past year in the rearview mirror and flipping our calendars to start anew. As we begin to ponder what 2021 might look like for us, we’re particularly interested on this blog to forecast what the new year will bring for the gig economy industry. Here are our top three predictions for the new year.