Posts Tagged ‘independent contractors’

The Tennessee Solution

Monday, November 2nd, 2009

It’s safe to say that no state has really solved the independent contractor/sole proprietor conundrum. Rather than require comp coverage for all workers, most states either exempt sole proprietors from coverage or make it optional. As a result, many small construction sites are full of “sole proprietors.” No one works for anyone. Thoeretically at least, no one is in charge. Nonetheless, the building goes up on schedule. And the final cost of construction is far less than similar job sites where all workers are protected by comp. If one of these sole proprietors is severely injured, the state will try to pin the cost on a general contractor, if they can find one. Otherwise, the state fund usually pays for the benefits.
Solving this problem creates new problems. In Massachusetts, the attorney general issued an advisory with a catch-all definition of “independent contractors” that is so broad, it includes virtually everyone. As a result, when general contractors cannot produce certificates of insurance for subcontractors, the cost of these subs is added to the payroll for calculating comp premiums. The cost of doing business goes up substantially.
In Delaware, they passed a law a few years ago requiring coverage for everyone, including sole proprietors. That is the cleanest and most comprehensive way to solve the problem. Alas, it’s also fraught with political risk. The subsequent uproar led legislators to back track and repeal the law.
Now, Tennessee is moving ahead with a new law that mirrors the one repealed in Delaware: limited to construction workers, the law requires coverage for everyone, including sole proporietors. Cost estimates for individual policies range from a few hundred to as much as $6,000. The latter figure is pretty daunting to a part-time, semi-retired craftsman who earns less than $25,000 a year.
The Tennessee legislature is considering some modifications to the law, which is scheduled to go into effect on December 31, 2009. They may allow for cheaper-than-usual policies that include high deductibles. Or they might let sole proporietors off the hook, if they can show that their own health insurance will cover workplace accidents. (Now there’s a cost-shifting measure that will create some interesting dialogue on the health care side!) The legislature has the right idea: find a way to make comp affordable to people who cannot afford much in the way of premiums.
With the legislature not scheduled to meet again until mid January, the law will go into effect as written on the last day of the year. Solve one problem, create another. Welcome, once again, to the ever-complicated world of workers comp.

FedEx Sued: Mooning in Moon Township?

Tuesday, October 27th, 2009

Labor officials of three states have written to FedEx, announcing their intention to file suit for “widespread, long-term, and unlawful employment practices.” We have blogged this employment law conundrum many times (search “independent contractors” in the box to the right). There are at least two mysteries in this action: why only three states are participating (FedEx has lost court cases in at least six states and doomed to lose in many others) and why the states chose to sue at this particular time.
FedEx has until today to file objections to the suit. The complaint was filed from the office of the attorney general in New York and included the signatures of officials from Montana and New Jersey (a somewhat odd triumvirate). Their letter is addressed to William Conley, Esq., managing director of the FedEx Legal Department. With an office in Moon Township PA, Conley may end up mooning the AGs in response – after all, FedEx thus far has shown little interest in conventional employment standards. Mr. Conley runs what must be a very busy office, as there have been numerous court challenges to the FedEx business model. FedEx calls their delivery drivers “independent contractors,” even though the drivers must wear FedEx uniforms (no white sox!), drive FedEx trucks, adhere to FedEx timetables, use FedEx scanners and meet detailed FedEx standards. Drivers they are; independent they are not.
The AGs are seeking restitution, damages, civil penalties and other unspecified types of relief.
Is It Legal, Or Is It FedEx?
In some instances, individuals take over FedEx routes and hire others to do the driving. Even though these subcontractor drivers must meet the explicit FedEx standards, the entrepreneurs managing the routes can run the businesses with at least some degree of independence. But where the driver has no employees and simply covers the route for FedEx, there is no credible case to be made for independence.
The FedEx business model has been languishing in state courts for years. Meanwhile, thousands of drivers have labored without a safety net. They work without benefits. If injured, they are completely on their own. It is not difficult to imagine the sense of frustration and outrage that led to this legal action. As for the timing, the three states are filing suit just a few days before Halloween, when ghosts and goblins will prowl dark streets in search of a candy fix. It’s as good a time as any to bury this bogus incarnation of the “independent contractor” concept once and for all.

Dying to Find Fault in Wyoming

Monday, August 24th, 2009

Wyoming might be a good place to work, but it’s also a good place to die at work. The mortality rate for occupational injuries is three times the national average, with 15.6 fatalities per 100,000 workers. Many of these fatalities occur in the oil fields, where “roughnecks” make pretty good wages in exchange for working in relatively dangerous conditions. As DeeDee Correll writes in the Los Angeles Times, everyone shares the goal of improving safety on the far-flung job sites, but there is a continental divide in how to achieve that goal.
Most oil workers are employed by independent contractors, who provide the bodies for the intense work in the fields. The fields are owned by big corporations. On one side of the fence you find workers and their advocates, who want to be able to hold the big corporations liable for what happens on the job. They want to be able to sue the big corporations when they suffer catastrophic injuries or deaths on the job.
The counter argument says that workers comp – carried by the employers of these field workers – should be the exclusive remedy for work-related injuries.
At issue here is the question of accountability and control: under current Wyoming case law, injured workers have to prove that the operator maintained “pervasive” control over the site. This is a very high standard, because the daily operations at these sites are primarily under the control of the independent contractors. By lowering the standard of control, worker advocates would make it easier for workers to sue the oil companies for damages.
Denim Versus Suits
The battleground for this dispute is the Wyoming legislature. As is so often the case, there is considerable theatricality on display. Many of the roughnecks lobbying for a change in the law show the scars of their chosen occupation. They are dressed in denim and baseball caps. Their opposition, lawyers for the oil companies, wear the indispensable dark suits.
The “suits” counter the compelling visual evidence of the roughnecks with some dubious arguments, maintaining, for example, that any change in the law would expose home owners to liability for injuries to contractors working on their houses. That’s a red herring, as homeowners rarely exercise significant control over the work environment of their contractors.
There should be enough middle ground in this dispute to fashion a meaningful compromise. Wide-open litigation is rarely the best way to go. The legislature should set specific standards for safe operating procedures in the oil fields. Oil companies should be held accountable for meeting these standards. Only if they are demonstrably negligent in maintaining and documenting these standards should the door be opened to law suits. At the same time, the state should bolster the benefits available to workers who are killed or severely injured on the job.
The “exclusive remedy” provision of workers comp is a standard well worth preserving. It’s tempting to carve out exceptions, but each exception becomes a fault line in the fundamental compromise that is workers comp. We are nearing the 100th anniversary of comp in America (New York 1911). For the most part, it is a remarkably successful experiment in public policy. The law makers of Wyoming would do well to keep this success in mind: by all means tinker with the statute to make it more responsive to 21st century working conditions, but don’t mess with the premise. This is not the time to find fault with “no fault.”

Independent Contractors: The Bare Essentials

Wednesday, August 12th, 2009

The King Arthur Lounge in Chelsea, MA does not exactly bring to mind the Knights of the Round Table. It’s a tough place in a tough town – a strip joint with a motel attached (don’t ask, don’t tell). The strippers had to work under some pretty difficult conditions. They were hired as independent contractors. They paid a $35 fee for every shift. There were no wages, just customer tips. They provided their own (easily removable) costumes. When they moved to the darker regions of the bar and provided “private shows” (please don’t ask, don’t tell!), they had to turn over one third of their earnings to management.
Jonathan Saltzman tells the story in the Boston Globe: About 70 strippers, led by Lucienne Chaves, a 32 year old former stripper, filed suit, alleging in a class action that they were not independent contractors, but employees entitled to minimum wages and benefits. Their lawyer, Shannon Liss-Riordan, compared the strippers to indentured servants: “They weren’t making any wage. Imagine a restaurant where a waiter has to pay to come to work and hand over a portion of the tips.”
Robert Berluti, King Arthur’s lawyer, countered that some strippers made hundreds of dollars a shift. He argued that the strippers were truly independent contractors, picking their own music, costumes, partners and routines.
Judge Frances McIntyre did not buy management’s argument. “A court would need to be blind to human instinct [indeed!] to decide that live nude entertainment was the equivalent to the wallpaper of routinely-televised matches, games…and sports talk in such a place. The dancing is an integral part of King Arthur’s business.” She went on to say that the club hired and fired strippers, determined their hours and made hiring decisions solely on looks. In other words, the strippers were employees.
Mr. Berluti lamented the burden of overcoming Massachusett’s strict standards for independent contractors. “This was a case where the judge was saddled with a MA law that makes it an outlier with respect to the rest of the country.” Does Berluti really think the outcome would have been different if the law had been more ambiguous?
Debt Collection
The strippers have been awarded thousands of dollars in damages. It will be interesting to see if they can collect. As noted above, King Arthur’s Lounge is a tough place. Back in 1982, there was an argument between Alfred Mattuchio and an off-duty Everett MA police officer named John McLeod. The cop left the lounge and returned with several fellow officers, armed with nightsticks, baseball bats and tire irons. They attacked a dozen patrons and employees, one of whom was beaten to death. Four cops were indicted and three were convicted. The Insider wonders which, if any, of the King Arthur employees injured in the fracas collected workers comp.
The chivalry of the original Round Table still lives in some places, but not, alas, in the dank recesses of King Arthur’s Lounge.

Cavalcade of Risk and other news notes

Wednesday, July 1st, 2009

Cavalcade of Risk #81 is posted at Jaan Sidorov’s Disease Management Care blog. Check it out, covered topics include health care, information technology, personal risk, market risk and more.
Confined spacethree sanitation workers died when they were overcome by hydrogen sulfide gas in an 18 foot hole at Regal Recycling Company in Queens. The deceased included a father and son. The three were draining waste from the hole when one fell in and was overcome. As is so often the case in confined space deaths and trench deaths, his would-be-rescuers also became victims. OSHA: Confined Space
Insurance industry – According to the ISO and the Property Casualty Insurers of America, the first quarter of 2009 was the worst on record for the property casualty industry. Of course, it should be noted that records only go back to 1986, but since then, this is the industry’s worst net loss – some $1.3 billion – and its worst net written premium growth. Net written premiums dropped $4 billion, or 3.6%, in the first three months of 2009 from $110.4 billion in the first three months of 2008.
Independent contractor vs employee – Roberto Ceniceros of Business Insurance tells us that 8 attorneys general — from Iowa, Kentucky, Missouri, Montana, New Jersey, Ohio, Rhode Island, and Vermont — have expressed their concern to FedEx about potential misclassification of workers. We’ve blogged on this issue numerous times – here are a few past posts related to the new administration , shareholders , NH, CA, CT, federal courts, and MA.
OSHA – Acting Assistant Secretary of Labor for OSHA and erstwhile blogger Jordan Barab recently outlined key challenges that OSHA is addressing and urged safety professionals to get involved when he spoke before a group from American Society of Safety Engineers (ASSE). He emphasized that workers will have a voice and that ” …unions and safety professionals like you will have a seat at the table.” Some of the priorities include developing a Severe Violators Program, addressing critical problems with construction fatalities and injuries, and developing a National Emphasis Program (NEP) for the chemical industry.
Hazmat – Training programs and tools developed by the Agency for Toxic Substances and Disease Registry (ATSDR) to help communities develop sound, evidence-based assumptions in preparing for hazardous materials (HazMat) emergencies and disasters: HazMat Emergency Preparedness Training and Tools for Responders
Arc FlashSafety Daily Advisor tells us that more than 2,000 workers a year are treated for severe burn injuries from arc flash, a short circuit through the air. In a follow-up post, they discuss arc flash prevention and related safe work practices.
DisabilityWhat’s your PDQ? Find out now.