Punching In: DOL’s Pipeline of Worker Classification Lawsuits

May 10, 2021, 9:43 AM

Monday morning musings for workplace watchers

Pending Misclassification Suits | H-4 Case Heats Up | Will Unions Go Electric?

Ben Penn: If Labor Secretary Marty Walsh shies away from an epic worker-classification clash with a gig-economy power, a handful of pending cases offer a shot at advancing case law to achieve a broader interpretation of employee status.

In at least six longstanding suits that have quietly made their way through federal courts, the U.S. Labor Department is accusing companies of misclassifying employees as independent contractors. Most were filed by the Obama administration or stemmed from investigations it initiated.

The prosecutions proceeded under former President Donald Trump, despite the Republican administration’s regulatory effort to make it easier for businesses to legally consider workers as independent contractors, who aren’t eligible for minimum wage and overtime protections. Walsh’s Wage and Hour Division withdrew the Trump rule last week.

None of the complaints involve a gig corporation or even a widely recognized brand, and favorable decisions for DOL are by no means assured. But if courts determine that the companies are in fact misclassifying workers under the Fair Labor Standards Act, it would have implications for all ride-share and delivery app giants, which are lobbying the White House to preserve their 1099-based workforce model.

Five of the cases are in U.S. District Court, while one is on appeal:

At least one of the cases was spearheaded by career attorneys who felt pressure to soften legal arguments during the Trump era. Now that political leaders in Washington are again zeroing in on misclassification, DOL attorneys are likely to be empowered to take a more aggressive stance.

WHD Principal Deputy Administrator Jessica Looman, in a blog post last week, previewed potential next steps, saying the department “is committed to combating misclassification and is focused on sectors where we know workers are vulnerable and violations are rampant, including construction, nursing and home care, janitorial, landscaping and restaurants, among others.”

Note that some of those industries are targeted in the ongoing suits, and that Looman didn’t mention the gig economy.

Customers wait for ride-share services outside Los Angeles International Airport in October 2019.
Photographer: Patrick T. Fallon/Bloomberg

The Biden administration is casting this as a forward-looking pursuit, and new investigations into construction and home-care companies appear likely. That doesn’t mean Walsh will ignore the gig sector.

The pending cases show that when it comes to creating new case law in a fact-intensive area of law, litigation can stretch across three presidential administrations.

The litigation already in the pipeline could yield faster returns for Walsh, avoid the hassle of taking on Uber, and potentially establish a widely applicable precedent that plaintiff attorneys could use in claims against gig companies.

Genevieve Douglas: Long-running litigation over whether the Department of Homeland Security was within its authority to give certain spouses of H-1B visa holders work authorization through the H-4 program has restarted after a Trump administration rulemaking failed to materialize.

The legal proceedings are picking up just as the H-4 visa program is in crisis. U.S. Citizenship and Immigration Services is processing backlogs for employment authorization documents for at least 57,500 applicants, leading to delayed approvals and, in some cases, lost employment.

The lawsuit was filed in 2015 by a group of technology workers who were laid off by Southern California Edison and replaced with workers on H-1B specialty occupation visas.

The U.S. workers argued the additional work permits for H-4 visa holders awaiting green cards created unfair competition from foreign workers by encouraging more H-1B workers to come to the U.S. and seek green cards.

The case made its way to the U.S. Court of Appeals for the District of Columbia. The Trump administration in 2017 told the appellate court it planned to undo the H-4 program via regulation. But its proposed rule sat at the White House Office of Information and Regulatory Affairs for nearly two years before the Biden administration withdrew it Jan. 25.

The Biden administration is now defending the Obama-era program, whose participants are mostly women from India.

U.S. Justice Department attorneys last week filed a cross-motion for summary judgment at the U.S. District Court for the District of Columbia. The case was kicked back to the lower court after the appellate court ruled in November 2019 that the former Southern California Edison workers had standing to bring their challenge.

The latest briefing schedule extends to mid-June, and then it’s possible there could finally be a decision about whether the H-4 work permit program is here to stay.

Also Read: Specialty Occupation Visa Demand at Record High Despite Pandemic

Ian Kullgren: President Joe Biden’s jobs plan is putting pressure on unions to help accelerate a retreat from fossil fuels, but organized labor isn’t all-in just yet.

Biden has promised to spend $174 billion to jumpstart electric-car manufacturing, an attempt to take a bite out of one of the most pollution-heavy industries in America. He wants to create good-paying union jobs in the process.

But there’s a catch for Democrats: The auto industry is heavily unionized, not to mention an economic lifeline in Midwestern swing states.

Unions are skeptical that jobs won’t be lost, given that it takes fewer workers to assemble an electric car compared with one powered by an internal combustion engine, and that other parts of the process, such as battery and charging-port manufacturing, will be made using strictly union labor.

Tesla Inc. vehicles juice up at a Tesla Supercharger station in San Diego last month.
Photographer: Bing Guan/Bloomberg

Last week, the United Auto Workers told members of the House Energy and Commerce Committee that the switch to electric vehicles, while laudable, could harm union workers if government policy doesn’t aim to create new union jobs.

UAW legislative director Josh Nassar noted that hourly wages for auto workers have fallen by more than 20% over the past 15 years.

“The transition to EVs could either further exacerbate these problems or protect and create good-paying union jobs,” Nassar said in prepared remarks. “Federal and state policies will play a significant role in determining which path we take.”

Some Democrats want to act to ensure unions’ concerns are addressed. Last week, Reps. Andy Levin (D-Mich.) and Alexandria Ocasio-Cortez (D-N.Y.) re-introduced a bill to build a national network of charging stations in five years using union labor.

“We are not going to allow the transition from a fossil fuel industry to an electric industry to be un-unionized,” Ocasio-Cortez told reporters. “We have to make sure that our transition to electric is better for workers.”

Ocasio-Cortez also took a veiled shot at Tesla Inc. CEO Elon Musk, saying that she and Levin might need to start “standing up to some of these companies that are trying to produce EVs but trying to de-unionize their workforces.”

The NLRB in March dinged Musk and ordered him to delete a tweet in which he suggested workers would lose out on stock options if they unionized. Tesla media reps didn’t respond to requests for comment.

While the United Steelworkers and the Utility Workers Union have endorsed the AOC-Levin bill, the UAW and the International Brotherhood of Electrical Workers have not.

Levin said the UAW has had “a lot going on,” and said he believes both unions will come on board. There hasn’t been similar legislation introduced in the Senate.

“We can’t fear technological change, but I think workers are justified in their fear of it,” Levin said. “Because they’ve gotten the short end of the stick every single time.”

We’re punching out. Daily Labor Report subscribers, please check in for updates during the week, and feel free to reach out to us.

To contact the reporters on this story: Ben Penn in Washington at bpenn@bloomberglaw.com; Genevieve Douglas in Washington at gdouglas@bloomberglaw.com; Ian Kullgren in Washington at ikullgren@bloombergindustry.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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