Fighting for this Lynchpin Issue that Matters Most to Direct Selling

Independent Contractor Update

June 7th, 2018 | Volume 1, Issue 1

DSA is pleased to provide this monthly report to membership on recently newsworthy topics affecting independent contractor status. We hope these serve as an important resource to protect the lynchpin of our business. For questions, please contact the DSA Public Affairs team. 

Legal Developments

Oregon Supreme Court Rules ACN IBOs Employees for Unemployment Compensation

On May 3, the Oregon Supreme Court issued their decision in ACN Opportunity, LLC v. Oregon Employment Department.  ACN was petitioning a June 2016 Oregon Court of Appeals ruling which found ACN was an employer required to pay unemployment insurance tax on earnings to ACN’s independent business owners (IBOs). The Court found that ACN failed to meet the general independent contractor statute and the specific direct seller exemption under state law.

In a concurring opinion, Chief Justice Balmer wrote “to urge the legislature to consider revising some of the many statutes that regulate the relationship between those who perform work and those individuals or businesses who pay them, in light of the far-reaching changes that have occurred in the workplace and in the economy over the last two decades.”  

This concurrence will be helpful in 2019 to update the current statute to more clearly cover all direct sellers. DSA held conversations in 2018 to update the statute, but no legislation was introduced. The Oregon legislature has adjourned until next year. 

For a copy of the ruling, go here.

Class Action Lawsuit Filed Against Nerium Claiming Brand Partners Misclassified

On May 16, a class action lawsuit was filed against Nerium International in the Northern District of California. A group of former brand partners claim they were denied proper classification as employees while selling for the company. The four main causes of action brought by the class are that Neirum 1) failed to pay wages owed 2) failed to provide itemized statements showing wages earned and hours worked 3) failed to reimburse business expenses 4) willfully misclassified the individuals as independent contractors when they were employees.

California Supreme Court Adopts More Stringent Independent Contractor Test

On April 30, the California Supreme Court moved to adopt a more stringent standard regarding the determination of independent contractor status with its decision in Dynamex Operations West, Inc. v. Superior Court. In the past, individual direct sellers have been found to be both employees and independent contractors using the ABC test. The move towards the new test is more employer-friendly. Direct sellers may still be more easily classified as independent contractors by relying on the outside salesman exemption which specifically applies to all California wage orders.  Direct sellers also have a specific exemption to unemployment compensation coverage under California Unemployment Insurance Code Section 650. 

Ninth Circuit Delays Seattle Law Allowing Uber and Lyft Drivers to Join Unions

On May 11, the United States Court of Appeals for the Ninth Circuit temporarily halted a 2015 Seattle law that requires the city to select a union as the exclusive bargaining representative of individuals in the city who work for Uber, Lyft and other services. The United States Chamber of Commerce filed a lawsuit arguing that the ordinance violates antitrust laws by allowing independent contractors to collude through collective bargaining to fix prices. The law has never gone into effect because of continued litigation.

Legislative Efforts

Task Force on Fair Labor Standards Act Formed and Working

Earlier this year, under a task force was formed under the Government Relations Committee to more clearly define direct sellers as independent contractors under the Fair Labor Standards Act. The group has met via teleconference to initially approve language that will be used as a starting point for potential federal legislation to amend the statute. DSA has been speaking with Members of Congress and hopes a bill will be introduced soon.

Legislation Introduced to Expand Definition of Employer

Members of the United States Senate and House of Representatives introduced S. 2810/ H.R. 5728 that would add the ABC test to determining if an individual is an independent contractor under the National Labor Relations Act. The legislation has 16 co-sponsors in the Senate and 47 co-sponsors in the House, all Democrats. It is unlikely the legislation will move, but this is an indication of the priorities Democrats will have if party control of Congress changes in November. DSA remains committed to protecting the independent contractor status of direct sellers.

North Carolina Bill Would Cleary Define Direct Sellers as Independent Contractors

H931, introduced in North Carolina by Representatives Howard, Arp, Bumgardner, Warren, and Clampitt is legislation that clarifies technical corrections under state law and incorporates by reference 26 USC Section 3508 to specifically define direct sellers as independent contractors under the unemployment compensation code. DSA has worked for years with legislators in Raleigh on previous versions of this language and believes this has a high likelihood of passage in 2018. The bill is current in the Finance Committee for consideration.

DSA Contacted by Lyft to Work on Independent Contractor Issues

Last week, DSA was contacted by Lyft attorneys to participate in a working group that will pursue a policy response to the Dynamex decision by the California Supreme Court (referenced above). DSA spoke with the Government Relations Committee who agreed that staff should participate in discussions with the California Chamber of Commerce, California Truckers Association and a variety of gig economy companies to formulate an appropriate response to this adverse ruling.