ABC Test vs. franchise arrangements

A Ninth Circuit case has applied the California Dynamex case retroactively. Vazquez v. Jan-Pro Franchising (9th Cir 05/02/2019) [PDF].

Jan-Pro - an international janitorial firm - had franchisors called Master Franchisors. And then under them were Unit Franchisees who were the only people actually doing janitorial work.

And those franchisees sued Jan-Pro seeking to be classified as employees rather than independent contractors.

So the question under the California Dynamex case is

  • whether these workers were free from control,

  • whether their work was outside Jan-Pro’s customary business, and

  • whether these workers themselves customarily had an established business.

I don't think Jan-Pro can win this case. But we'll see. And I think this is the end of these complex franchising arrangements in California.

Cosmetology student was not an employee when working at the school's training salon

Patrick Velarde sued The Salon Professional Academy of Buffalo and its owners (Academy) for wages he claimed were owed under the Fair Labor Standards Act (FLSA) and New York Labor Law §§ 190, 650 et seq. for work he performed during his cosmetology vocational training at the Academy. The district court held Velarde was not an employee of the Academy and granted it judgment on the pleadings. The 2nd Circuit affirmed. Velarde v. GW GJ Inc (2nd Cir 02/05/2019) [PDF].

Velarde enrolled with the Academy, a for-profit cosmetology training school, for a 1,000 hour course of study designed to satisfy the coursework requirement for state licensure. Part of his coursework included working under supervision in the Academy salon. The Academy charged customers reduced rates for services performed by students. Velarde and the other students were not paid for their work but received modest tips from customers. After graduation, Velarde became a licensed cosmetologist and sued the Academy for unpaid minimum wage and overtime on the theory he was an employee when he worked at the Academy salon.

In affirming the dismissal of Velarde's lawsuit, the 2nd Circuit held the "primary beneficiary test" announced in Glatt v. Fox Searchlight Pictures, Inc. (2015) for determining when interns are employees in the commercial setting applied to determine whether a trainee in the for-profit vocational training context is an employee. The court concluded the applicable Glatt factors demonstrated Velarde was the primary beneficiary of the relationship given that the 1,000 hours of instruction from the Academy satisfied the coursework requirement for state licensure. The court concluded the fact the Academy charged customers for student work was immaterial because it was entitled to generate a profit on its operations.

This decision is in accord with decisions of the 6th, 7th, and 10th Circuits addressing the same issue.

Is Uber next? US Supreme Court case could be a game changer.

Is Uber next? US Supreme Court case could be a game changer.

Part of a series - Employment Law Case of the Week - by Ross Runkel.

New Prime v. Oliveira (US Supreme Ct 01/15/2019) [PDF] held that an interstate truck driver does not have to arbitrate his wage and hour claim – even though he signed an arbitration agreement.

This could have a big effect on lawsuits between Uber and their drivers. It probably turns on whether the drivers are IN interstate commerce.

Some pundits were surprised that the Court would issue a "pro-worker," "anti-arbitration" decision, failing to understand that the Justices all do their best to be faithful to the words Congress puts into its statutes.

Dominic Oliveira is an interstate truck driver whose contract with New Prime designates him as an independent contractor. The contract contains a mandatory arbitration provision and contains a "delegation clause," giving the arbitrator authority to decide threshold questions of arbitrability. Oliveira filed a class action claiming that New Prime failed to pay statutory minimum wage. The trial court denied New Prime's motion to compel arbitration; the 1st Circuit affirmed. The US Supreme Court affirmed unanimously. New Prime v. Oliveira (US Supreme Ct 01/15/2019) http://case.lawmemo.com/us/Oliveira.pdf

The Federal Arbitration Act (FAA) directs courts to compel arbitration, but §1 says that "nothing" in the Act "shall apply" to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

The Supreme Court held that the trial court – not the arbitrator – must first decide whether FAA §1 excludes Oliveira. This is because the contract's delegation clause (which is merely a specialized type of arbitration agreement) can be enforced only if the FAA applies in the first place.

The Supreme Court also held that FAA §1 excludes Oliveira. The FAA's term "contract of employment" refers to any agreement to perform work. At the time of the FAA's adoption in 1925, the phrase "contract of employment" was not a term of art, and dictionaries tended to treat "employment" more or less as a synonym for "work." Contemporaneous legal authorities provide no evidence that a "contract of employment" necessarily signaled a formal employer-employee relationship.