Ian Pike

I’m Working as a Retail Merchandiser — Am I an Independent Contractor or an Employee

Retail merchandisers work in almost every industry one can think of throughout California. Their work may vary based on the details of a particular industry, but the core of the work generally involves setting up and managing product displays at a variety of retail outlets in a given geographical area. Some merchandisers work “in-house,” managing inventory and floor displays for a particular retail outlet. Other merchandisers work for a non-retail company, and their work revolves around displaying that company’s product at a variety of different retail outlets. 

Merchandisers, particularly those in the second category, may sometimes be classified as independent contractors by the company hiring the merchandiser. When companies hire workers as independent contractors, they avoid guaranteeing minimum wage, paying overtime, or providing other important benefits to workers. But this classification can be erroneous as a matter of California law if the company hiring the merchandiser cannot pass the so-called “ABC” test, which determines whether a worker is properly classified as an independent contractor.

A company can fail the ABC test if it exercises too much control over the manner and means of how the merchandiser performs their job. The test also requires that merchandising the products falls within the usual course of the hiring company’s business. Finally, the merchandiser must be set up in an independent trade or business. 

Importantly, it does not matter whether a worker agrees to be an independent contractor rather than employee, and it does not matter if the worker signs a contract that refers the worker as an independent contractor. What matters is the nature of the actual work performed.

If you are working as a merchandiser, ask yourself some of these questions:

Does my employer tell me when to work? Does my employer tell me what to do, or otherwise give me specific instructions on how to do my job? Does my employer tell me what to wear? Does my employer require me to check in frequently? Are the products I am merchandising the kinds of products my employer produces for sale? Am I working for any other companies? Have I set up a business for myself as a merchandiser with independent business finances, an entity structure (such as an LLC or a corporation), and/or separate efforts to promote and market merchandising services? 

These is just a few examples of the facts an experienced labor attorney could consider to determine whether you are properly classified as an independent contractor. If you answered “NO” to the last question, or “YES” to any of the others, you might be misclassified. 

Deliberate misclassification can be a tactic for employers to dodge paying minimum wage or overtime to their workers, and to avoid their responsibilities to contribute to the Medicare and social security safety nets on which many workers rely when they reach retirement age. Misclassified employees can file claims with the California Labor Commissioner, or private lawsuits to recover unpaid wages and benefits. If you have any doubts about your status, you should consult with an attorney for advice.

California Workers Will Suffer if the US Supreme Court Invalidates the Private Attorneys General Act

The United States Supreme Court’s impending decision in Viking River Cruises, Inc. v. Moriana has the potential to reshape California labor law in a way that will harm workers in this state. In California, the state Department of Industrial Relations (itself a part of the Labor & Workforce Development Agency) is the government branch that prosecutes violations of state laws regulating minimum wage and working hours. The state has long had the power to enforce California labor law by collecting unpaid wages on behalf of workers and by collecting penalties that an employer in violation of the law would pay to the state. However, the state government has never had the manpower or resources to combat every Labor Code violation that occurs within the state. 

The Private Attorneys General Act of 2004 (“PAGA”) increased the state’s power to enforce labor laws by empowering California workers to prosecute civil lawsuits on behalf of the state government. Under the PAGA, workers can sue when their employers violate California labor law, and an employer in violation of state labor law can be forced to pay a penalty to the state, with a portion going directly to the workers as an incentive to bring cases on behalf of the state. Most importantly, the PAGA permits workers to sue not only on their own behalf, but on behalf of all other similarly aggrieved employees. Thus, a single worker can protect the rights of all workers by collecting penalties for a large group of workers in a single lawsuit. 

Since its inception, the PAGA has proven to be an effective tool for protecting workers’ rights. Not only does it help bring in millions of dollars in penalties that benefit the state, the PAGA has provided individual workers with a powerful tool to advocate on their own behalf by filing representative actions on behalf of the state when the state does not have the resources to fight its own battles. 

This has been most acutely felt in California as a check against the rise of class action waivers imposed on employees as a condition of employment. From an economic perspective, many lawsuits to recover unpaid wages do not make financial sense because the amount of money at issue, although usually significant to the aggrieved worker, is often dwarfed by the time and expense of litigating a civil case to recover an individual workers’ unpaid wages. For many years, class action procedures offered a solution to this problem by giving workers a chance to aggregate their claims, which permitted courts to resolve disputes much more efficiently. As a means of avoiding liability, many employers have begun requiring their employees enter into so-called “class action waivers” as a condition of employment, which essentially nullify the class action procedure. By removing the possibility of a class action, employers are able to create a system where individual workers have no economic incentive to protect their rights, and they cannot count on the government to do it for them because the government lacks adequate resources.

As a consequence of class action waivers, many labor code violations might go unpunished because of the economic disincentives to litigating individual cases. The PAGA helped ameliorate this problem for workers because California courts have consistently ruled that, unlike the right to bring a class action, which can be waived by an individual litigant, the right to prosecute labor code violations on the behalf of the state government cannot be waived as a matter of fundamental public policy. Thus, even if an employer could deprive workers of class action procedures, the workers could still band together under the PAGA and obtain some relief for themselves (and some for the state) with efficiency similar to a class action.

Of course, the PAGA is not a 1:1 replacement for true class action procedures. In a traditional class action, all wages recovered would be paid directly to the workers. The PAGA recovers civil penalties, and 75% of the penalties recovered are paid directly to the state while the workers share the remaining quartile. But compared to the alternative—not filing a case at all because of the economic disincentive—the workers’ option with the PAGA is clearly superior.

Now, corporations are asking the United States Supreme Court to invalidate the rule that employers may not force workers to waive their right to bring representative actions under the PAGA. Their argument relies on the Federal Arbitration Act (9 U.S.C. §§1-16), a body of law that was originally enacted during the Roaring Twenties to facilitate resolution of private commercial disputes, but which has received a series of ever more expansive interpretations in the US Supreme Court. 

Over the years, corporations have convinced the Supreme Court to interpret the Act expansively, so employers can force workers to arbitrate legal claims against their employers (as opposed to bringing those claims in court) even when forced arbitration would violate California law, and also to prevent workers from joining together in class actions. Now, corporations have asked the Supreme Court to issue a rule that, under the Act, employers can force employees to waive their right to bring representative actions, including actions under the PAGA. 

As a matter of doctrine, federal courts have thus far agreed with California courts that (a) parties may not waive the right to bring a PAGA action because such waivers violate public policy; and (b) claims under the PAGA are not subject to arbitration agreements because a PAGA claim concerns a dispute between the employer and the state of California, and the state is not a party to any contract with the employer. 

But the Viking River Cruises case has the potential to upend this rule because businesses are urging the Supreme Court to expand the rule permitting class action waivers to the point where it would also encompass waivers to bring representative actions. Although a representative or qui tam action is fundamentally different from a conventional class action, businesses hope the Court will rule the two devices are fundamentally interchangeable for purposes of federal arbitration law. 

A favorable ruling on this case will substantially impede the rights of workers not only in California, but also in other states that have enacted, or are thinking about enacting, laws like the PAGA. Deprived of the ability to aggregate their claims in a representative action, workers will lose a powerful tool to combat wage theft, and businesses will continue to evade justice by using a 100-year-old law to make substantive legal rights procedurally impossible to assert. 

Is Your Employer Failing to Take Your Per Diem Wages Into Account For the Purpose of Calculating Your Overtime Pay?

Per diem payments, sometimes also called a “daily allowance,” are made to workers in many industries. Per diem payments are supposed to cover for expenses incurred in furtherance of the employer’s business that would otherwise be reimbursable to the employee, and when used properly they can save workers the hassle of preparing expense reports for their employers. 

However, some employers may want to use “per diem” payments as a means of paying wages, which could lead to violations of state and federal overtime laws. Labor laws that set forth minimum wages require all eligible employers to pay employees overtime at “not less than one and one-half times” the employees’ regular rates of pay. True per diem payments are excluded from the regular rate of pay. But if a per diem benefit functions as compensation for work performed rather than as genuine reimbursement for expenses incurred, the per diem payments need to be calculated in the employees’ regular rate of pay because they are functionally “wages” for the purpose of overtime laws. 

If an employer wrongly treats wages as per diem payments, the employees’ overtime rate of pay would be unlawfully reduced. The employee might also be undercompensated for PTO under certain circumstances, such as where the employer’s policy provides for payment at the “regular rate of pay,” or when an employee receives a payout of earned-but-unused vacation pay at the end of employment.  

The question of whether a per diem payment is functionally a “wage” or truly a reimbursement for expenses can be difficult to answer. An accurate assessment ultimately depends on the facts and circumstances of the particular case, but courts resolving the issue have looked at some of the following factors:

  • The amount of per diem payments in relation to other compensation;
  • How the employer treats the per diem payments;
  • Whether the employer requires substantiation of any expenses incurred by the employee;
  • Whether employees receive per diem payments regardless of their working location and any need to cover expenses;
  • Whether the per diem payments do not reasonably approximate actual expenses; and
  • Whether the per diem payments vary with the hours worked.

If you are being paid per diem or a daily allowance and you suspect your employer may be using “per diem” payments to reduce your regular rate of pay for labor pay purposes, contact an experienced labor lawyer immediately because you could recover the unpaid wages in a civil lawsuit against your employer. 

California Workers: You May Be Able to Say “No” to Forced Arbitration

On September 15, 2021, the United States Court of Appeals for the Ninth Circuit lifted an injunction that had prevented enforcement of two California statutes: Labor Code section 432.6 and Government Code section 12953. The Labor Code statute prevents employers from requiring their employees, as a condition of employment, to give up their right to sue in court for violations of the Fair Employment and Housing Act (“FEHA”) or the Labor Code. The Government Code section makes it an “unlawful employment practice” for purposes of the FEHA if an employer violates the Labor Code section. 

Although the statutes are broadly written to protect the workers’ access to the courts, one common application would be in the context of forced arbitration agreements. Such agreements have become a fixture of the modern workplace, and employers frequently require employees, as a condition of employment, to waive their right to a court trial in the event of a legal dispute with the employer. Labor Code section 432.6 and Government Code section 12953 work together to protect a worker’s right to say “no” when an employer asks the employee to waive their right to a court trial as part of a forced arbitration agreement, at least for claims under the FEHA or the California Labor Code. If an employer discharges or refuses to hire a worker who properly exercise his or her right to say “no,” the anti-retaliation provision of the FEHA create an independent basis for a lawsuit against the employer. This gives the new statutes some “teeth” by empowering workers not only to assert their rights, but to hold companies accountable when those rights are denied.

Together, the FEHA and the Labor Code contain the majority of protections available to California workers. For example, the FEHA contains the principle anti-discrimination, anti-harassment, and anti-retaliation laws that protect California workers’ right to equal opportunity in the workplace. The Labor Code protects the rights to a minimum wage, and to overtime for many workers in California. Now, California workers have a right to say “no” when their employers want to force employees to give up their rights to have those claims heard in court. 

Businesses may yet appeal this issue to the United States Supreme Court, which would then have the final say on whether to invalidate these statutes as a matter of federal law. For now, California workers are free to protect their access to the courts. Workers should say “no” if current or prospective employers try to make them sign forced arbitration agreements, and they should contact an experienced labor and employment attorney if they experience any discrimination or retaliation for asserting their rights. 

California Lenders May Not Require Excess Homeowners Insurance Coverage as a Condition of Lending

If you are among the many Californians who purchased or refinanced a home recently to take advantage of low mortgage interest rates, your lender may have violated California law by requiring you to purchase excess hazard insurance as a condition of receiving a loan.

In California, lenders may require homeowners have hazard insurance (also called homeowners insurance or fire insurance) as a condition of extending credit. However, the lender may not require a borrower to purchase insurance over and above the cost of replacing the buildings on the property. In other words, you cannot be required to purchase more insurance than would cover the cost of constructing a new home if yours burned down. 

Unfortunately, some lenders in California may be violating that law by adopting unlawful policies, such as requiring a borrower have hazard insurance that covers 80% of the property’s total value, as opposed to the replacement value. A policy like this could lead to unlawfully high insurance requirements because the total value of real property can be much higher than the cost of the buildings on that property. For example, a small home on a piece of prime real estate might only cost $300,000 to build; but the property itself might be worth substantially more than that because of the location, particularly in a hot real estate market. Thus, basing the insurance requirement on the property’s total value would force homeowners to borrow much more than the replacement cost of their homes, which would in turn violate California law.

If your lender required you to purchase homeowners insurance coverage that exceeds the replacement value of your home, you should contact an experienced consumer attorney. The attorneys at Haeggquist & Eck can determine if you might have a claim against the lender to recover for the damages caused by such an unlawful practice. 

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