H&L Quarterly – May 2024

01 May H&L Quarterly – May 2024

Everything Old is New Again

Independent workers make up about 45% of the U.S. workforce (equal to about 72 million Americans) and half of them are working independently full-time. This figure will likely fall however, given a new rule change by the Department of Labor (“DOL”) issued under the Fair Labor Standards Act. Up until 2021, the DOL used an “economic realities test” to determine whether a worker should be classified as an independent contractor or an employee. After less than three years of utilizing a different standard, the DOL has reversed course and will once again use the economic realities test that was previously in place. This new test uses six metrics to analyze the potential employment relationship, which are listed below, and is likely to have an immediate impact on employment litigation:

Opportunity for profit or loss depending on managerial skill: If a worker can negotiate the price of their services or make decisions about marketing, they are more likely to be classified as an independent contractor.

Investments by the worker and the employer: A worker buying their own equipment is more likely an independent contractor, as opposed to a worker who is provided equipment by the employer.

Degree of permanence of the work relationship: An employee is more likely to have a relationship that lacks a scheduled end date.

Nature and degree of control: When an employer has a high degree of control over a worker’s schedule, whether their work will be supervised, or whether they can also work for other employers, an employer-employee relationship is more likely.

Whether the work performed is an integral part of the employer’s business: Common examples of employees who performed integral parts of a business are tomato pickers working for a farm and drivers working for food delivery companies.

Skill and initiative: If a worker’s responsibilities require special skills, and those skills also help the worker exercise initiative, they are more likely to be an independent contractor.

Sources:
https://www.cnbc.com/2024/01/23/how-a-new-labor-department-rule-will-affect-independent-contractor-misclassification.html#:~:text=Rule%20applies%20to%20those%20paid%20less%20than%20%247.25%20per%20hour&text=In%20order%20to%20benefit%20from,%2C%22%20says%20Dworak%2DFisher.

https://www.haynesboone.com/news/alerts/dol-returns-to-longstanding-approach-to-economic-reality-test-in-final-independent-contractor-rule#:~:text=The%20final%20rule%20restores%20the,given%20to%20any%20one%20factor.

I’ve a Feeling We’re Not in Kansas Anymore!
Kansas’ governor Laura Kelly signed a bill updating that state’s workers’ compensation system on April 11, 2024. In addition to creating “a more just and efficient workers compensation system that increases the benefits for injured workers”, plaintiffs in the Kansas system will receive an increase in their maximum benefits and a cost-of-living adjustment as of July 2027. Further, the bill will limit the use of independent medical exams, require the timely exchange of medical records, and create the ability to settle workers compensation cases without the need for a settlement hearing.

The possibility of similar changes to the Michigan workers’ compensation system have been rumored since last year. Such changes seems more likely now, given that power in the Michigan House of Representatives is no longer evenly split. Representatives for the 13th and 25th Districts, both Democrats, vacated their seats in late 2023 after winning mayoral elections, which slowed the introduction of legislation by Democrats, who no longer held a majority. Special elections held on April 16, 2024 saw those two seats  filled by Democrats Mai Xiong and Peter Herzberg respectively, returning majority control of the House to Democrats. Both of the newly-elected representatives will serve out a term lasting only until the November 2024 elections, so there is time pressure on Democrats who support change to the workers’ compensation system to act now.

Sources:https://www.ksnt.com/capitol-bureau/a-win-for-our-workforce-kelly-signs-workers-compensation-bill/
https://www.freep.com/story/news/politics/elections/2024/04/16/michigan‐house‐special‐elections‐democrats‐couldregain‐majority/73327294007/

https://www.freep.com/elections/results/2024-04-16/michigan/00000/metro-detroit