How AB5 has Changed the Employment Landscape
March 16, 2020 —
Jason Morris – Newmeyer DillionAs a result of California's Assembly Bill 5, effective January 1, 2020, the California Supreme Court's ABC test is now the standard for evaluating independent contractor classifications for purposes of the Industrial Welfare Commission Wage Orders, California Labor Code, and the California Unemployment Insurance Code. That dramatically ups the ante for companies that rely on independent contractors, particularly those that have not re-evaluated such classifications under the ABC test.
Misclassification cases can be devastating, especially for misclassified non-exempt employees, and can result in minimum wage violations, missed meal and rest periods, unpaid overtime, unreimbursed business expenses, record-keeping violations, steep penalties, attorneys' fees, and even criminal liability, among other consequences. Misclassifying workers creates enormous risks for companies and is fertile ground for class actions and representative actions under the Private Attorneys General Act (PAGA).
The Costs Of Misclassification Are Expensive, And Hope Is Not A Strategy
Many business owners I speak to understand AB5 has caused the ground to shift beneath their feet and recognize the resulting risks of misclassifying workers. Despite these risks, companies often balk at taking the necessary steps to evaluate their classifications and mitigate the risk of an adverse classification finding.
The most common reason I hear from resistant companies is the worker does not want to be reclassified as an employee and the company trusts the worker ("I've worked with her for years; she won't sue me because she wants to be a contractor"). I get it. Making the change from contractor to employee results in less flexibility and greater administrative burden for everyone involved. While I'm sympathetic, the government is not. Reluctance to change while acknowledging the associated risks amounts to a strategy based on hope. As we say in the Marine Corps, however, "hope is not a strategy."
Aside from the sometimes foolhardy belief that a misclassified worker can be trusted to not file suit after a business breakup (when the deposits stop and mortgage bill comes due, guess who's a prime target), companies often fail to recognize the numerous ways in which their classification decisions can be challenged even when they are in agreement with their (misclassified) contractors. Here are just three examples of how your classifications can be scrutinized despite the lack of a challenge by the worker:
- Auto Accidents: Whether delivering products, making sales calls, or traveling between job sites, independent contractors often perform work that requires driving. Of course, sometimes drivers are involved in automobile accidents. When accidents happen, insurance companies step in and look for sources of money to fund claims, attorneys' fees, costs, and settlements. One potential source is your insurance. "But the driver isn't my employee!," you say. You better buckle up because the other motorist's insurance carrier is about to challenge your classification in an attempt to access your insurance policies.
- EDD Audits: During the course of the last several years, the California Employment Development Department (EDD) has increased the number of verification (random) audits it performs in search of additional tax revenue. One reason government agencies prefer hiring entities classifying workers as employees rather than independent contractors is it's a more efficient tax collection method; employers collect employees' taxes on the government's behalf, which increases collection rates and reduces government collection costs. The consequences of misclassification include pricey fines, penalties, and interest.
- Unemployment Insurance, Workers' Compensation, and Disability Claims: In addition to verification audits, the EDD performs request (targeted) audits. Targeted audits may result when a contractor files an unemployment insurance, workers' compensation, or disability claim because independent contractors are ineligible for such benefits. Request audits, like verification audits, can result in costly fines, penalties, and interest if the EDD concludes you have misclassified your workers. Even so, that may not be the worst of it: the EDD often shares its findings with the Internal Revenue Service.
Your Action Plan
AB5 has changed the measuring stick, misclassification costs are high, and you do not have complete control of when the government or others can challenge your classifications. So what can you do? Here are several steps all prudent companies should take if they are using independent contractors:
- Conduct an audit of current classification practices;
- Review written independent contractor agreements;
- Implement written independent contractor agreements;
- Update workplace policies;
- Update organizational charts;
- Reclassify independent contractors as employees if necessary.
Jason Morris is a partner in the Newport Beach office of Newmeyer Dillion. Jason's practice concentrates on the areas of labor and employment and business litigation. He advises employers and business owners in employment litigation, as well as advice and counsel related to employment policies and investigations. You can reach him at jason.morris@ndlf.com.
About Newmeyer Dillion
For 35 years, Newmeyer Dillion has delivered creative and outstanding legal solutions and trial results that achieve client objectives in diverse industries. With over 70 attorneys working as a cohesive team to represent clients in all aspects of business, employment, real estate, environmental/land use, privacy & data security and insurance law, Newmeyer Dillion delivers holistic and integrated legal services tailored to propel each client's success and bottom line. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California and Nevada, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949.854.7000 or visit www.newmeyerdillion.com.
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Congratulations to Partner Nicole Whyte on Receiving the Marcus M. Kaufman Jurisprudence Award
September 30, 2024 —
Dolores Montoya - Bremer Whyte Brown & O'Meara LLPOn Thursday, September 19th, BWB&O Partner Nicole Whyte and her fellow recipients Michael Ermer and Hon. Kirk Nakamura (Ret.) were honored at this year’s Jurisprudence Awards Dinner, a fundraiser benefitting the Anti-Defamation League! Thank you to BWB&O Co-Founder and Nicole’s longtime business partner and friend Keith Bremer for his thoughtful introduction and for presenting her with the award, and to BWB&O’s team who joined the event to support Nicole Whyte.
Since 1993, the Anti-Defamation League has presented the Marcus M. Kaufman Jurisprudence Award to attorneys who make exceptional contributions to the legal profession and community. ADL’s mission is to stop defamation and secure justice and fair treatment for all people. To learn more about ADL, please visit adl.org
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Dolores Montoya, Bremer Whyte Brown & O'Meara LLP
California MCLE Seminar at BHA Sacramento July 11th
June 11, 2014 —
Kimberly Albarq-CDJ STAFFThere are just three weeks remaining to sign up for Bert L. Howe & Associate’s next California MCLE seminar, UNDERSTANDING CONSTRUCTION DEFECT LITIGATION.
This activity will be presented on Friday, July 11th at noon, at BHA’s Sacramento office:
2520 Venture Oaks Way
Suite 435
Sacramento, CA 95833
There is no cost for attendance at this seminar and lunch will be provided.
This course has been approved for Minimum Continuing Legal Education credit by the State Bar of California Committee on MCLE in the amount of 1.0 credit hours, of which 0.0 credit hours will apply to legal ethics/professional responsibility credit. The seminar will be presented by Don MacGregor, general contractor and project manager.
Water intrusion through doors, windows and roofing systems, as well as soil and foundation-related movement, and the resultant damage associated therewith, are the triggering effects for the vast majority of homeowner complaints today and serve as the basis for most residential construction defect litigation. The graphic and animation-supported workshop/lecture activity will focus on the residential construction process from site preparation through occupancy, an examination of associated damages most often encountered when investigating construction defect claims, and the inter-relationships between the developer, general contractor, sub trades and design professionals. Typical plaintiff homeowner/HOA expert allegations will be examined in connection with those building components most frequently associated with construction defect and claims litigation.
The workshop will examine:
* Typical construction materials, and terminology associated with residential construction
* The installation process and sequencing of major construction elements, including interrelationship with other building assemblies
* The parties (subcontractors) typically associated with major construction assemblies and components
* An analysis of exposure/allocation to responsible parties.
Attendance at THE UNDERSTANDING CONSTRUCTION DEFECT LITIGATION seminar will provide the attendee with:
* A greater understanding of the terms and conditions encountered when dealing with common construction defect issues
* A greater understanding of contractual scopes of work encountered when reviewing construction contract documents
* The ability to identify, both quickly and accurately, potentially responsible parties
* An understanding of damages most often associated with construction defects, as well as a greater ability to identify conditions triggering coverage
To register for the event, please email Don MacGregor at dmac@berthowe.com. If you have any questions, please feel free to contact Don at (800) 482-1822 (office) or (714) 713-4956 (cell).
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Ritzy NYC Tower Developer Says Residents’ Lawsuit ‘Ill-Advised’
January 17, 2022 —
Chris Dolmetsch - BloombergThe developers of a Manhattan skyscraper that has become one of New York City’s toniest residences said the condo board is trying to squeeze money out of them with a lawsuit that claims bogus design flaws.
The board is seeking $250 million from builders of the 1,396-foot residential tower at 432 Park Avenue that opened in 2015 on the so-called Billionaire’s Row. Their suit alleges the company that developers CIM Group and Macklowe Properties formed to build the structure failed to take into account its unusual height, leading to flooding, noise, vibrations and elevators that are prone to malfunctions.
In a response to the suit filed Wednesday, the company called the building “a treasure” and the suit was “ill-advised.” While the structure needed to be “fine-tuned” when residents started to move in, the board stopped the builders from accessing the facilities and finishing the job “while manufacturing an ever-increasing list of demands,” most of which were not required, according to court filings.
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Chris Dolmetsch, Bloomberg
Creating a Custom Home Feature in the Great Outdoors
July 09, 2014 —
Beverley BevenFlorez-CDJ STAFFWhen a resort designer and a spa director join together to create a custom home, what do you get? An outdoor tub that resides on a balcony overlooking the San Francisco Bay.
According to Custom Home, Scott Lee, president of SB Architects, and his wife had the “custom cast concrete tub…craned into place on the third-story deck while avoiding an established oak tree.” A radiant heat lamp makes the outdoor bathing area practical, while the curved backrest, remote controlled dimmable lights, and music make the experience luxurious.
“Tubs are more about relaxing then getting clean,” Lee told Custom Home. “Being out here among the branches with views of San Francisco, it really is like a resort.”
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David A. Frenznick Awarded Multiple Accolades in the 2020 Edition of The Best Lawyers in America
September 23, 2019 —
David A. Frenznick - Wilke FleuryWilke Fleury congratulates attorney David A. Frenznick on his inclusion in the 26th Edition of The Best Lawyers in America© for his work in: Litigation – Real Estate!
In addition, David was also acknowledged as a 2020 “Lawyer of the Year” award recipient. He received this accolade for his work in Litigation – Real Estate in Sacramento. Only a single lawyer in each practice area and community is honored with a “Lawyer of the Year” award.
Since it was first published in 1983, Best Lawyers® has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. Almost 94,000 industry leading lawyers are eligible to vote (from around the world), and have received over 11 million evaluations on the legal abilities of other lawyers based on their specific practice areas around the world. For the 2020 Edition of The Best Lawyers in America©, 8.3 million votes were analyzed, which resulted in more than 62,000 leading lawyers being included in the new edition. Lawyers are not required or allowed to pay a fee to be listed; therefore inclusion in Best Lawyers is considered a singular honor. Corporate Counsel magazine has called Best Lawyers “the most respected referral list of attorneys in practice.”
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David A. Frenznick, Wilke FleuryMr. Frenznick may be contacted at
dfrenznick@wilkefleury.com
In Search of Cement Replacements
October 19, 2017 —
Aarni Heiskanen - AEC BusinessCould we replace cement as the vital element in concrete some day? We look at two alternative answers to this question.
The Problems with Cement
Portland cement dominates in the construction and road building industries. From an environmental point of view, cement is not the perfect solution. The cement industry accounts up to 7% of the world’s carbon dioxide emissions. For every 600 kg of cement, approximately 400 kg of CO2 is released into the atmosphere.
It is possible to recycle concrete by crushing it and using the gravel e.g. in road construction. However, the demand for new concrete is huge and increasing. According to The Washington Post, China used more cement between 2011 and 2013 than the U.S. used in the entire 20th Century. The worldwide production of cement has increased from 3.3 billion tons in 2010 to 4.2 in 2016. Even that is not enough; shortage of cement is a real problem in some countries.
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Aarni Heiskanen, AEC BusinessMr. Heiskanen may be contacted at
info@aepartners.fi
Wendel Rosen’s Construction Practice Group Receives First Tier Ranking by U.S. News and World Reports
December 02, 2015 —
Garret Murai – California Construction Law BlogOk, it may not be an Oscar, or even an Emmy, but we’re humbled and honoured just the same.
Wendel Rosen’s Construction Practice Group has received a first-tier ranking by the U.S. News and World Reports in its 2016 Best Law Firms rankings. This is the third year in a row that the firm’s Construction Practice Group has received this honor. Joining it on stage is the firm’s Real Estate, Bankruptcy, and Real Estate Litigation practices which also received first-tier rankings and the firm’s Land Use practice which received a second-tier ranking.
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Garret Murai, Wendel Rosen Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
