As most readers of this website know, the USDOL issued a Notice of Proposed Rulemaking indicating its intent to issue new interpretive guidance regarding the classification of workers as non-employee independent contractors under the FLSA. You can read the Federal Register materials addressing the proposed rulemaking HERE.
Anyway, individuals wishing to make comments were required to do so by October 26, 2020. Our firm opposes the proposed guidance on many grounds, including the fact that the guidance ignores U.S. Supreme Court precedent and contradicts precedential decisions from various U.S. Circuit Courts.
Our firm, working pro bono, helped out with h the comments submitted by the National Employment Law Project (NELP). NELP’s extensive comments are worth reading and can be found HERE.
In addition, I filed my own comments on behalf of Winebrake & Santillo and our clients. The pdf image of our comment is available HERE. However, the following is what I wrote:
Dear Secretary Scalia and Ms. DeBisschop:
I write on behalf of myself and my law firm, Winebrake & Santillo, LLC (“W&S”), to urge the Department to withdraw the above-referenced proposed rule. My comments are based on extensive experience litigating hundreds of FLSA actions – including many actions in which workers contend that they have been misclassified as “independent contractors” – in federal courts within the Third Circuit, which covers Delaware, New Jersey, and Pennsylvania.
As discussed below, the proposed rule: (i) is premised on the incorrect notion that the current independent contractor test “has proven to be unclear and unwieldy,” 85 F.R. 60605, and (ii) will not be entitled to deference within the Third Circuit.
A. Our firm’s FLSA experience.
Since its founding in January 2007, W&S has exclusively represented employees in employment rights litigation. W&S is a pure contingency fee law firm and is “at risk” in every matter it handles. W&S never requires a client to pay an hourly fee or retainer.
At the federal district courts, W&S has resolved collective and individual FLSA lawsuits that have benefitted thousands of workers. At the Third Circuit Court of Appeals, we have argued cases resulting in precedential FLSA opinions: See Mazzarella v. Fast Rig Support, LLC, 823 F.3d 786 (3d Cir. 2016); Resch v. Krapf’s Coaches, Inc., 780 F.3d 869 (3d Cir. 2015); McMaster v. Eastern Armored Services, 780 F.3d 167 (3d Cir. 2015); Knepper v. Rite Aid Corp., 675 F.3d 249 (3d Cir. 2012).
B. The Third Circuit test for determining whether a worker is an employee or an independent contractor is not “unclear.”
In the NPRM, the Department asserts that the “multifactor test, as currently applied, has proven to be unclear and unwieldy.” 85 F.R. 60605. This is incorrect. As discussed below, the pertinent multi-factor test is abundantly clear throughout the Third Circuit.
In 1985, our Court of Appeals adopted a six-factor “economic realities” test. See Donovan v. DialAmerica Marketing, Inc., 757 F.2d 1376, 1382-83 (3d Cir. 1985). The six factor include: “(1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; (4) whether the service rendered required a special skill; (5) the degree of permanence of the working relationship; [and] (6) whether the service rendered is an integral part of the alleged employer’s business.” Id. at 1382.
In the ensuing 35 years, DialAmerica’s six-factor test has been reaffirmed in at least three precedential opinions, see Razak v. Uber Technologies, Inc., 951 F.3d 137, 142-43 (3d Cir. 2020); Verma v. 3001 Castor, Inc., 937 F.3d 221, 229-30 (3d Cir. 2019); Martin v. Selker Brothers, Inc., 949 F.2d 1286, 1293 (3d Cir. 1991), and in various non-precedential opinions, see, e.g., Safarian v. American DG Energy, Inc., 729 Fed. Appx. 168, 173 (3d Cir. 2018); Yu v. McGrath, 597 Fed. Appx. 62, 66 (3d Cir. 2014).
Importantly, our Court of Appeals has repeatedly explained that the six-factor DialAmerica test stems directly from the FLSA’s statutory text and Supreme Court decisions – such as Rutherford Foods Corp. v. McComb, 331 U.S. 722 (1947) – interpreting such text. See Razak, 951 F.3d at 142; Selker Brothers, 949 F.2d at 1293; DialAmerica, 757 F.2d at 1382.
In addition, in discussing the six-factor DialAmerica test, our Court of Appeals has repeatedly instructed that no particular factor is entitled to special weight. This principle has been in place for 35 years, see DialAmerica, 757 F.2d at 1382 (“neither the presence nor absence of any particular factor is dispositive and that courts should examine the circumstances of the whole activity”) (internal quotation omitted), and was reiterated as recently as March 2020, Razak, 951 F.3d at 142 (same).
In sum, DialAmerica’s six-factor economic reality test is not “unclear” within the Third Circuit. On the contrary, the test is firmly rooted in Third Circuit jurisprudence and has been consistently utilized by the Court of Appeals, district court judges, lawyers, workers, and businesses for 35 years.
C. The Third Circuit test for determining whether a worker is an employee or an independent contractor is not “unwieldy.”
Nor is DialAmerica’s six-factor test “unwieldy.” At the Circuit Court level, the test has been efficiently and successfully applied to a wide variety of jobs ranging from homeworkers who research telephone numbers, see DialAmerica, supra, to gas station operators, see Selker Brothers, supra, to topless dancers, see Verma, supra, to Uber drivers, see Razak, supra.
Meanwhile, district courts within the Third Circuit have successfully applied the six-factor test to hundreds of different fact patterns. See, e.g., Pendleton v. JEVS Human Services, Inc., 2020 WL 2793131, 2020 U.S. Dist. LEXIS 93911 (E.D. Pa. May 29, 2020); Jimenez v. Best Behavioral Healthcare, Inc., 391 F. Supp. 3d 380 (E.D. Pa. 2019); Acosta v. Heart II Heart, LLC, 2019 WL 5197329, 2019 U.S. Dist. LEXIS 178260 (W.D. Pa. Oct. 15 2019); Cherichetti v. PJ Endicott Co., 906 F. Supp. 2d 312 (D. Del. 2012). Moreover, the Secretary has litigated some of these cases without any apparent difficulty. See, e.g., Heart II Heart, supra.
To my knowledge, no one has ever suggested that DialAmerica’s six-factor test is “unwieldy” or especially difficult to apply or understand. So it really does appear that the Department’s proposed rule is a solution in search of a problem. Here in the Third Circuit, its implementation will cause – rather than mitigate – uncertainty.
D. The proposed rule will not be entitled to deference within the Third Circuit.
The Third Circuit has recognized that the Department’s interpretive regulations are merely entitled to Skidmore deference. See Secretary U.S. Dept. of Labor v. American Future Systems, Inc., 873 F.3d 420, 426-28 (3d Cir. 2017). As such, the proposed independent contractor rule will be followed only to the extent it has the “power to persuade.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).
Here in the Third Circuit, the proposed rule is likely to fail any Skidmore analysis. This is so for at least three independent reasons.
First, the five-factors described in Proposed § 795.105(c) simply do not match up with the six DialAmerica factors. In essence, the Department is trying to “re-write” existing and binding Third Circuit precedent through an interpretive regulation. This is especially troubling where, as here, the Third Circuit precedent stems directly from an interpretation of the statutory text.
Second, as discussed in Section B, our Court of Appeals has repeatedly explained that, in applying the six-factor DialAmerica test, “neither the presence nor absence of any particular factor is dispositive and that courts should examine the circumstances of the whole activity.” DialAmerica, 757 F.2d at 1382 (internal quotations omitted); accord Razak, 951 F.3d at 142 (same). The proposed rule violates this principle by focusing on two “core factors” – the “nature and degree of the [worker’s] control over the work” and the worker’s “opportunity for profit and loss” – that are purportedly “the most probative” and entitled to “greater weight in the analysis.” Proposed § 795.105(c). None of this can be squared with Third Circuit precedent.
Third, Proposed § 795.110 – entitled “Primacy of actual practice” – conflicts with binding Third Circuit authority with respect to the “control” factor. Specifically, under Third Circuit law, we focus on “the alleged employer’s right to control the manner in which the work is to be performed.” DialAmerica, 757 F.2d at 1382 (emphasis supplied). As the Court of Appeals recently instructed: “Actual control of the manner of work is not essential; rather, it is the right to control which is determinative.” Razak, 951 F.3d at 145. Proposed § 795.110 cannot be squared with this clear instruction.
Thank you for your consideration of the above comments. -PW