Workplace Prof Blog

Prince on the Current State of Employee Classification Laws

Samantha Prince now has the final version of her new article, The Shoe Is about to Drop for the Platform Economy: Understanding the Current Worker Classification Landscape in Preparation for a Changed World, up on SSRN and it looks very informative. The abstract:

Whether a worker is an independent contractor or employee is of great significance in many countries, including the United States. This label drives whether a worker is entitled to many protections and benefits, including, minimum wage, overtime, workers’ compensation, unemployment compensation, anti-discrimination protection, NLRA protection, etc. The difficulty inherent in accurately classifying workers as either independent contractors or employees cannot be overstated. First, there are so many tests spanning all levels of our government. Second, there are so many ways that people work and with the increased popularity of app-based work, classification becomes even more difficult. Simply, some of the tests have not been working well when applied to precarious app-based work. As a result, policymakers are forced to finally bring these issues to the forefront.

Worldwide policymakers and leaders are implementing changes to protect app-based workers. In the United States, the federal government is evaluating whether these changes in the workforce require changes in national labor and tax laws. While campaigning, President Biden pledged to establish a uniform worker classification test for purposes of all federal labor, employment, and tax laws. Subnational governments – states and cities – are also evaluating and making changes in their policies and laws.

In order to make these decisions, policymakers will need to be familiar with the current landscape of tests and statutes. Policymakers should evaluate the approaches that currently are being used and how they have fared so that they can decide whether to strike out with a novel test or adopt one already in use. Although prior articles have considered worker classification laws, and the benefits associated with various classification approaches, things have evolved so quickly that in some respects most of those articles are at least partially out of date. And, having all of this information in one place is critical for ease in policymaking research and deliberations.

This Article fills the current knowledge gap by providing an up-to-date compendium of the current state of worker classification laws. The Article starts with a segment on instabilities and health issues experienced by app-based workers. Then it covers the latest on worker classification laws around the world including the EU Commission's Proposed Directive. It then turns to tests that the U.S. is using, which include traditional tests and new tests from both the state and city levels. The Article explains how these tests are used and summarizes commentary about the strengths and weaknesses of each of these tests. As national, state, and local policymakers consider how best to move forward in regulating the app-based economy and its workers, they are likely to find the information in this Article useful to their deliberations.

Check it out!

Jeff Hirsch

New Ed.: Employment Law in a Nutshell

Congratulations to Joe Seiner (South Carolina) on the publication of the 5th edition of Employment Law in a Nutshell (with the late Robert Covington). Here's the publisher's description:

This Nutshell provides an overview of individual employee rights and responsibilities. It addresses a number of areas, including establishing and ending the employment relationship, protection of employee privacy and reputation, discrimination, regulation of wages and hours, employee physical safety, fringe benefits, and employee duties of loyalty. This edition includes a discussion of the many changes in harassment law and the impact of the #MeToo movement, a look at the recent Supreme Court case law extending employment discrimination protections to sexual orientation and transgender status, an examination of the trend toward a more virtual economy and platform-based work, and a description of the changes in how employees work, and the terms of that work, in the face of an ongoing health pandemic.

Here's what's new for the 5th edition:

The fifth edition takes on a number of transformative changes that have occurred in the last several years in the area of workplace law, including: (1) The impact of the #MeToo moment on claims of gender discrimination and harassment; (2) The changing ways employment status is considered in the face of an ongoing health pandemic; (3) The move toward a more virtual workplace and employment that relies more heavily on technology; and (4) The recent Supreme Court case law extending employment discrimination protections to sexual orientation and transgender status.

Congrats, Joe!

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[Un]Vaccinated Workers in the Labor Market

Chris Albertyn (Albertyn Arbitration, Toronto) has sent the position paper Vaccinated and Unvaccinated Workers in the Labor Market, drafted by labor law academics in Israel. Here's the introduction:

Covid-19 poses numerous challenges to the labour market. The most recent are dilemmas concerning the appropriate regulation of access to work for unvaccinated workers, and the possible infringement of labour rights that may ensue. Being the first country in which large scale vaccination took place, there is a heated debate within Israel on this topic. As part of the public discourse, 17 labour law experts from academic institutions around Israel have written the position paper presented below:

We, a group of leading labour law scholars from Israeli law faculties, have been closely monitoring the public and legal discourse around the access of unvaccinated workers into workplaces. We are concerned that at this time, when a large share of the adult population in Israel is being vaccinated, there are calls to terminate the employment of workers who are not. To this end, we wish to emphasize a few basic principles of labour law and human rights that lie at the heart of Israeli law and international labour law. These principles should guide regulation on this issue, whether it is negotiated by the parties to collective labour law, the legislature, or in the labour courts' judgements.

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Sullivan on Noncompetes & Laid-Off Workers

Our own Charlie Sullivan (Seton Hall) has just posted on SSRN his timely article Noncompetes in a Downsizing World. Here's the abstract:

As the nation confronts multiple federal and state attacks on employee noncompetition agreements (NCAs), one issue has remained relatively obscure: may an employer that terminates a worker for reasons not related to performance nevertheless enforce an NCA? A scattering of cases mostly holds no, and the recent Restatement of Employment Law’s agreement with those decisions is likely to be very influential for the great majority of jurisdictions that have not yet addressed the question but may be forced to in light of massive COVID-related layoffs.

This Article supports the Restatement’s proposed rule, while exploring the fascinating doctrinal and policy issues implicated in the question. Ultimately, it sees the rule as rooted in concerns about fairness to employee that are typically given short shrift in current doctrine. This is true even for a Restatement that otherwise seems decided to opt for an economic approach that would validate NCAs that are “reasonably tailored” to defined legitimate employer interests.

Adoption of a rule denying enforcement in such situations also poses some interesting second-order questions, such as how to determine when a termination is performance-related and probable employer responses to a new dispensation. All are explored in the pages that follow.

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Acevedo & others on Regulating the Gig Economy

Congratulations to Deepa Das Acevedo (Alabama) on the publication of her edited volume Beyond the Algorithm: Qualitative Insights for Gig Work Regulation (Cambridge University Press, 2020). Here's the publisher's description:

In Beyond the Algorithm: Qualitative Insights for Gig Work Regulation, Deepa Das Acevedo and a collection of scholars and experts show why government actors must go beyond mass surveys and data-scrubbing in order to truly understand the realities of gig work. The contributors draw on qualitative empirical research to reveal the narratives and real-life experiences that define gig work, and they connect these insights to policy debates being fought out in courts, town halls, and even in Congress itself. The book also bridges academic and non-academic worlds by drawing on the experiences of drivers, journalists, and workers' advocates who were among the first people to study gig work from the bottom up. This book is a must-read for anyone interested in gig work, the legal infrastructure surrounding it, and how that infrastructure can and must be improved.

Look for a paperback edition to be published in about six months, priced at about $35-40.

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Arnow-Richman on Remote Work & Temporary Termination

Rachel Arnow-Richman (Florida) has just posted on SSRN a pair of timely articles related to the pandemic: Temporary Termination: A Layoff Law Blueprint for the COVID Era (forthcoming ABA JLEL) , and Is There An Individual Right to Remote Work? A Private Law Analysis (forthcoming Wash. U. J. L. & Pub. Policy). Here are the abstracts:

Remote Work: One of the gnawing legal questions of the COVID-19 pandemic is the status of remote work. Since the expiration of the first round of government shut-down orders in the summer of 2020, companies have been calling workers back to the job, prompting serious concerns about the risk of workplace transmission. As a consequence, many workers have asked to continue the remote arrangements their employers adopted when forced to close under executive orders. Some employers are acceding to these requests; others are not. This brief essay, prepared for the ABA Journal on Labor & Employment Law, considers this problem from a private law perspective. It concludes that public law offers little protection to individual employees other than those with qualifying disabilities. Companies, however, may be in breach of contract if they terminate employees who have enforceable job security rights for refusing to return to in- person work. Rather than rely on guesswork, the prudent and compassionate choice for employers is to continue temporary remote arrangements to the extent feasible. 

Temporary Termination: This paper, prepared for a forthcoming Washington University of Saint Louis symposium on COVID-19, responds to the pandemic-induced unemployment crisis with a strategy for addressing temporary, economic-based terminations. Workplace regulation has long neglected workers separated for economic reasons, leaving the problem to the social welfare system, which is now overwhelmed by record numbers of unemployment applicants. In prior articles, I have drawn on comparative law models to argue for laws requiring employers to provide mandatory advance notice of termination or commensurate severance pay to laid off workers. Building on that work, and drawing specifically on Canadian law, this paper argues for recognizing “temporary separation” as a distinct legal status that confers individual rights to affected employees within the context of a comprehensive law of layoffs. Under this system, all employees terminated for economic reasons would be entitled to advance notice or its equivalent in severance pay. However, employers could suspend such obligations by classifying workers as temporarily separated. Affected individuals would retain their status as employees, obtain fast-track access to unemployment benefits, and enjoy a right to reinstatement when their jobs resume. Should the employer choose not to recall a temporarily separated worker, or if the lack of work becomes permanent, the employer would be required to fulfill its deferred severance obligation. 

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Harkavy's SCOTUS Employment Review

Jon Harkavy (Patterson Harkavy) has just posted on SSRN his annual review of Supreme Court employment cases. Here's the abstract:

This article offers a review of and commentary on every opinion of the Supreme Court of the United States in each case relating to employment and labor law during the Court's 2019-2020 Term. The article also briefly summarizes the Court's grants of certiorari for its 2020-2021 Term relating to employment in the American workplace. In addition to the author's commentary on each case, the article includes a broader look at how the Court is dealing with workplace jurisprudence, including references to its "shadow docket" and the assignment of majority opinions.

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9th ed. of Rothstein et al.'s Employment Law casebook published

Congratulations to Mark Rothstein, Lance Liebman, Kimberly Yuracko, & Charlotte Garden on the publication of Employment Law, Cases and Materials (9th ed. 2020). Here's the publisher's description:

This popular casebook provides a comprehensive overview of the constitutional, statutory, regulatory, and common law principles of employment law. The doctrinal development of the law is assessed in light of contemporary economic, technological, social, and political conditions. The 9th edition includes a more detailed treatment of independent contractors and gig workers, sexual orientation and gender identity discrimination under Title VII, updates on employee health coverage, and the Secure Act of 2019 dealing with small employer retirement plans. Among the statutes covered by the casebook are Title VII of the Civil Rights Act of 1964, Age Discrimination in Employment Act, Americans with Disabilities Act, Family and Medical Leave Act, Employee Retirement Income Security Act, and Worker Adjustment and Retraining Notification Act.

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Gough: New Empirical Work on Employment Arbitration

Mark Gough (Penn St. School of Labor & Employment Relations) has posted on the ILR Review website his article A Tale of Two Forums: Employment Discrimination Outcomes in Arbitration and Litigation, Industrial & Labor Relations Rev. (forthcoming 2020). Rather than just posting his abstract, I'll post instead a summary I asked Mark to draft for me, which helps situate this empirical work among other empirical work on similar topics:

Most of the empirical literature comparing outcomes between forums uses relatively crude descriptive statistics to show stark differences in employee win rates and monetary award amounts within the populations cases disposed of in arbitration and litigation. Indeed, scholars have provided robust evidence on the resolution of employment disputes within individual forums such as:

• The American Arbitration Association (AAA) – see, e.g., Alexander J.S. Colvin, An Empirical Study of Employment Arbitration: Case Outcomes and Processes, 8 J. Empirical Legal Studies 1 (2011); Lisa B. Bingham, On Repeat Players, Adhesive Contracts, and the Use of Statistics in Judicial Review of Employment Arbitration Awards, 29 McGeorge L. Rev. 223 (1998).
• The Financial Industry Regulatory Authority (FINRA) – see, e.g., J. Ryan Lamare & David B. Lipsky, Employment Arbitration in the Securities Industry: Lessons Drawn from Recent Empirical Research, 35 Berkeley J. Employ. & Labor L. 113 (2014); J. R. Lamare, & D. B. Lipsky, Resolving Discrimination Complaints in Employment Arbitration: An Analysis of the Experience in the Securities Industry, Industrial & Labor Relations Rev. (2018).
• Federal court – see, e.g., Kevin M. Clermont & Stewart J. Schwab, How Employment Discrimination Plaintiffs Fare in Federal Court, 1 J. Empirical Legal Studies 429 (2004).
• State court – see, e.g., Theodore Eisenberg & Elizabeth Hill, Arbitration and Litigation of Employment Claims: An Empirical Comparison, 58 Dispute Resolution J. 44 (2003).

These studies often are used to support the perceptions of arbitration as an employee-unfriendly forum. See, e.g., Mark Gough, How Do Organizational Environments and Mandatory Arbitration Shape Employment Case Selection? Evidence From an Experimental Vignette, 57 Industrial Relations 541 (2018); Mark Gough, Employment Lawyers and Mandatory Employment Arbitration: Facilitating or Forestalling Access to Justice, 16 Advances in Industrial Relations 133 (2016). And while informative, a limitation of this literature is it provides minimal controls to account for systematic variation between forums. It is clear that the average monetary award and employee success rates at trial are lower in arbitration than litigation, but are employee claimants genuinely at a disadvantage in arbitration? Or does systematic variation exist within the underlying merits of cases, presence or quality of counsel, party resources, or other case characteristics which account for differences in outcomes between arbitration and litigation? In short, one must be careful to compare “apples to apples” when drawing evaluative conclusions about arbitration’s effect(s) on access to justice.

In a 2020 empirical study, Mark Gough attempts such apples-to-apples comparisons by surveying 1,256 employment plaintiff attorneys about their most recent cases adjudicated in arbitration, state court, or federal court. Even while accounting for claim, plaintiff, defendant, and attorney characteristics, Gough finds employment discrimination plaintiffs in arbitration are less likely to receive a judgment in their favor and smaller awards compared to similar cases disposed in state and federal court. Specifically, he reports, “compared to arbitration, employees' odds of winning increase by 70.7 percent in a federal jury trial, 183.7 percent in a state judge-only bench trial, and 146.0 percent in a state jury trial…[and] relative to arbitration, monetary damages awarded to success

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Zelinsky on A.B.5

Edward A. Zelinsky (Cardozo) has just posted on SSRN his article (forthcoming 70 Catholic U. L. Rev.) Defining Who Is An Employee After A.B.5: Trading Uniformity and Simplicity for Expanded Coverage. Here's an excerpt from the abstract of his thoughtful and nuanced article:

My assessment of California’s A.B.5 differs from the evaluation advanced by the advocates and opponents of that legislation: I conclude that A.B.5 made a significant but limited expansion of the coverage of California labor law but at a notable cost. ...

A review of A.B.5 and the background from which it emerged leads to a more nuanced story than either of the[] simple pro/con narratives. For those who assert that current law is uncertain and too complex, A.B.5 makes matters worse. A.B.5 is replete with exceptions, exemptions and interpretive challenges which make the law of employee status even more complicated and unclear than it was before. For those who seek expanded employment-based protection for workers in the modern economy, the myriad exceptions and exemptions of A.B.5 are a sobering warning of the practical and political realities standing in the way of such expansion. For those defending the status quo, A.B.5 is an equally sober warning of considerable dissatisfaction with that status quo.

A.B.5 is thus an important data point which indicates that those who seek to reform the law of employee status face a trade-off: Efforts to expand the coverage of employment-based protection laws will make the law more complex and less uniform – as did A.B.5. Given the relevant political forces and policy considerations, legislators can broaden the reach of employment-based regulatory laws to cover more workers in the modern economy or they can simplify and unify the legal definition of employee status. They cannot do both.

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Doorey's New Blog: Canadian Law of Work Forum

David Doorey (York University) has launched a new collaborative law blog called Canadian Law of Work Forum. The blog accepts contributions from scholars, practitioners, and students on topics related to work law and labour policy and will be a great resources for U.S. scholars interested in keeping an eye on Canadian developments. David is also encouraging posts from non-Canadian scholars on comparative law issues. Please visit the blog and consider submitting pieces to David ([email protected]). Great move, David!

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Clean Slate Project Issues Report

Thanks to Jon Harkavy for word that the Clean Slate for Worker Power project has issued its final report A Clean Slate for Worker Power: Building a Just Economy and Democracy. Here's a brief excerpted description from Kelsey Griffin:

An initiative of Harvard Law School’s Labor and Worklife Program — called Clean Slate for Worker Power — released its final report Thursday calling to overhaul American labor laws and increase workers’ collective bargaining power. Law School Faculty members Sharon Block and Benjamin I. Sachs led the project. The initiative brought together leading activists and scholars to recommend policies aimed at empowering working people.

The report claims that an extreme concentration of wealth in the hands of few people has created economic and political inequality in the United States. It argues that current labor laws have fostered systematic racial and gender oppression. It also asserts that labor laws exclude vulnerable workers from vital labor protections and devalue the work performed by these workers.

Block and Sachs said they believe addressing this economic and political inequality would require a completely new system of labor law, rather than simply adjusting current policies. The report recommends that labor laws better enable working people to build collective organizations to increase their leverage with employers and in the political system. The policy recommendations aim to increase worker representation and inclusion by expanding the coverage of labor laws for independent contractors, as well as undocumented, incarcerated, and disabled workers. The report lays out an array of options for alternative worker representation in addition to labor unions, such as work monitors — employees who would ensure compliance with federal labor regulations.

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Report: European Corporate Investment and Workers' Rights in the American South

The AFL-CIO released today the above-titled report, authored by Lance Compa (retired Cornell ILR; currently visiting at San Diego Law):

Multinational corporations based in Europe have accelerated their foreign direct investment in the Southern states of the United States in the past quarter-century. Some companies honor workers’ freedom of association, respect workers’ organizing rights and engage in good-faith collective bargaining when workers choose trade union representation. Other firms have interfered with freedom of association, launched aggressive campaigns against employees’ organizing attempts and failed to bargain in good faith when workers choose union representation.

Today, the AFL-CIO is releasing a report by international labor law expert Lance Compa. The report examines European companies’ choices on workers’ rights with documented case studies in several American Southern states. In their home countries, European companies investing in the American South generally respect workers’ organizing and bargaining rights. They commit themselves to International Labor Organization core labor standards, Organization for Economic Co-operation and Development Guidelines, UN Guiding Principles, the UN Global Compact, and other international norms on freedom of association and collective bargaining. But they do not always live up to these global standards in their Southern U.S. operations.

Case studies on well-known companies like VW, Airbus, IKEA and large but lesser known ones like Fresenius and Skanska provide examples of companies that have followed a lower standard in their operations in the southern states where the region’s legacy of racial injustice and social inequality open the door to a low-road way of doing business. The report also makes clear that companies always have a choice and could choose to respect workers human rights.

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Drafting that Nondisparagement Clause

Although employers are more resistant to agreeing to mutual nondisparagement obligations after employment than they used to be, such agreements remain important in one situation: where ending the relationship is conditioned on a good reference and no bad mouthing of the soon-to-be-ex-employee.

But there are complications when it is the corporate employer who is being gagged as compared to the more common situation where an individual employee agrees not to disparage her former employer. The problem arose in Bissette v. University of Mississippi Medical Center, where Garth Bissette, a professor at the Medical Center, ran into difficulties leading to possible detenuring. Before UMMC’s review process was completed, Bissette entered into a settlement agreement providing for his departure but containing a clause requiring UMMC to give Bissette a favorable recommendation and also requiring mutual non-disparagement and confidentiality.

As you might guess, Bissette was later bad mouthed by one Woolverton, a UMMC employee (who hadn’t been told about the agreement). There wasn’t much doubt that Woolverton’s comments were disparaging: he allegedly attended a NIH conference at which he told participants from other universities that, among other things, Bissette had no professional accomplishments during his tenure, did nothing with his scholarship or professional service, and was often intoxicated after returning from lunch.

Although Bissette brought several claims, the most interesting was the breach of contract cause of action. The Mississippi Court of Appeals first found that the individual defendants were not bound because of the wording of the clause in question, which  provided that “This agreement is being entered into …. between [....UMMC] for the benefit of itself, all related corporate entities, its and their officers, directors, employees, agents, successors, and assigns . . . . and Dr. Garth Bissette.” According to the court, “employees” such as Woolverton were not individually bound by the agreement since they were merely its third-party beneficiaries. Under this construction, UMCC had not made any promises as to them not disparaging Bissette. Had the University agreed “on behalf of” such persons, the result might have been different. But the court also indicated that reading the commitment so broadly would lead to odd results, such as embracing “even a receptionist” at a UMMC clinic.

This is all pretty odd.  How could an agreement between A and B bind C contractually? There’s no indication that UMCC was acting as its employees’ agent.  Plus, of course, Woolverton didn’t even know about the settlement! The more sensible reading of the clause is that UMCC is promising that none of its employees, etc. will bad mouth Bissette. And the confidentiality clause seemed to confirm this: it permitted UMMC to disclose to those “necessary to carry out the terms and conditions of this Agreement.”

No matter: the court also rejected the argument that UMCC was vicariously liable by virtue of Woolverton’s acting as its agent (even if he were not personally liable). “Employee” is not synonymous with “agent,” and there was no evidence that Woolverton was furthering UMMC goals at the conference, so the university wasn’t responsible for what he said. That may be true (although the court’s stress on the fact that NIH (not UMMC) paid for the conference seems dubious given how often university work is grant -funded), but if UMCC had committed that none of the named persons would disparage Bissette, it’s not clear that such a promise should be read to be limited to actions taken on the employer’s dime and time.  

The net effect was that Bissette walked away with considerably less than he had thought he’d gotten for not continuing to fight his detenuring. Even the “good recommendation” Bissette bargained for seems of doubtful value in light of this story. The lesson for plaintiffs’ attorneys looking for this kind of protection is to work through more carefully exactly what it means for an organization not to disparage or at least the steps the organization will take to inform its employees about what is expected of them.

And there are broader issues this scenario raises. Practically speaking, anyone familiar with academia might doubt both the efficacy of a promise that no one will tell tales out of school at scholarly conferences and the ability of a plaintiff to prove damages should such a breach occur. More theoretically, there’s the question of whether gag clauses really are a societally good idea: what if Bissette really was frequently intoxicated after lunch?  Finally, there’s a not insignificant policy question of whether employers, especially public ones., should be free to constrain their employees’ speech, especially when not acting within the scope of their employment.

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Thanks to Kamille Perry, Seton Hall class of 2021.

Moberly on Whistleblowing & Confidentiality

Richard Moberly (Nebraska) has somehow found time from his decanal duties to write and post to SSRN his new article (North Carolina L. Rev.) Confidentiality and Whistleblowing. Here's an excerpt from the abstract:

... [T]the federal government has aggressively courted employees to become whistleblowers. In response, corporations have tried to mitigate potential damage by relying on broad confidentiality provisions to discourage employees from revealing insider information. As a result, uncertainty abounds when the corporate desire for confidentiality clashes with the government’s desire for employees to blow the whistle.

This Article is about the increasing tension between these countervailing trends. Ultimately, the Article concludes that the government’s ability to rely on insiders to monitor organizational behavior by blowing the whistle will depend on its willingness to regulate the ability of an organization to protect its secrets through contract.

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New Book: Learning Employment Law

Congratulations to Francis Mootz (Pacific-McGeorge), Leticia Saucedo (Cal.-Davis), and Mike Maslanka (North Texas) on the publication of their book Learning Employment Law (West 2019). Here's the publisher's description:

Learning Employment Law provides concise and clear text, examples, and case excerpts that empower students to engage in sophisticated problem-solving regarding the most pressing issues in contemporary workplace law. The book succinctly reviews the historical backdrop of each issue to ensure that students gain the wider understanding necessary to effectively address contemporary problems. The book is comprised of 44 independent Lessons that can be structured by the professor to highlight different themes. Students will be exposed to common law and regulatory regimes, with a focus on the new workplace challenges of the platform economy, outsourced labor, and immigrant labor. Students will gain a sophisticated understanding of the challenges facing lawyers in this rapidly developing area of the law.

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Noncompetes as Unfair Competition: Sign Up!

Thanks to Orly Lobel (San Diego) for alerting us that the Open Markets Institute is petitioning the Federal Trade Commission to write a rule banning employee non-competes as an unfair method of competition. To add your name to the petition as a signatory, email OMI Legal Director Sandeep Vaheesan.

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Noncompete Clauses as Tax Code Violations

Rebecca Morrow (Wake Forest) has posted on SSRN an interesting approach to challenging noncompete violations -- as tax code violations. Her article is Noncompetes as Tax Evasion, 96 Wash. U. L. Rev. ___ (2018), and it caught my attention over at Tax Prof Blog. Here's an excerpt from the abstract:

Policymakers should use a [tax-violation] approach to curtail the excessive, exploitative, and anticompetitive use of employment noncompete agreements. Currently, nearly one in five (or thirty million) American workers is bound by an employment noncompete. Employers claim that they adequately compensate employees for noncompete restrictions with higher wages, bigger raises, and/or more generous bonuses. Policymakers scoff at this claim and use contract law to attack them. Unfortunately, employment noncompetes are like Al Capone in that they have flourished despite the law’s efforts to restrain them. Recently, the largest study of noncompetes in U.S. history paradoxically found that their prevalence is unaffected by their enforceability. In states like California that refuse to enforce employment noncompetes, they are as common as in states that uphold them. Contract law has proved ill-equipped to respond to the pervasive, expanding, and damaging use of noncompetes.

This Article is the first to shift the focus and to argue that employment noncompetes, as employers currently use them, constitute tax evasion and should be attacked as such. If employers pay employees for noncompetes through compensation, then by employers’ own account, this compensation is not purely an expense associated with immediate benefits; rather, it is an expenditure associated with future benefits — benefits that the employer will enjoy years after payment. Thus, the IRS should stop allowing employers to fully immediately deduct the compensation they pay to employees subject to noncompetes and instead should require that an adequate portion of total compensation be allocated to the noncompete and amortized over the restricted period, beginning when employment ends.

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Independent Contractors = Employees in FAA "Transportation Industry" Exclusion

Two increasingly rare events occurred today in the same case: [a subset of] workers got a win, and the Supreme Court narrowed (yes, you read that correctly) the scope of the Federal Arbitration Act. Though the case at first blush appears narrow, it may have much broader implications in the Uber litigation.

The case is New Prime Inc. v. Oliveira. Dominic Oliveira was a truck driver for Prime under a contract calling him an independent contractor and containing an arbitration clause. Oliveira filed a class action alleging underpayment of wages. Prime moved to dismiss and send the case to arbitration, on two grounds: (1) the arbitration clause gave the arbitrator the authority to decide arbitrability issues -- so Prime argued the case should go straight to arbitration for the arbitrator to decide first the arbitrability issue and then, presumably, the merits; and (2) because Oliveira was an independent contractor, he was not covered by the FAA Section 1 exclusion of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Because, Prime argued, Oliveira wasn't excluded by Section 1, he was covered by the FAA, and his dispute should be subject to the same nearly irrebuttable presumption of arbitrability applied to all other contracts covered by the FAA.

The Supreme Court ruled 8-0 (Kavanaugh did not participate) for Oliveira on both counts. On the arbitrability issue, the Court characterized the "arbitrator decides arbitrability" clause as merely a specialized form of an arbitration clause. Like any other arbitration clause, the Court reasoned, this type of arbitration clause is not enforceable under the FAA if it's excluded by Section 1. And courts -- not arbitrators -- decide "substantive" arbitrability questions such as the scope of the Section 1 exclusion.

As noted above, Prime argued that the Court should interpret the FAA Section 1 exclusion as applying only to "employees", not to independent contractors. The Court, however, rejected that argument as inconsistent with the common understanding of those terms in the 1920s when the FAA was drafted and enacted. At the time, the Court said, "employment" was more-or-less a synonym for "work" -- and "work" is what Oliveira was doing regardless of whether he is today classified as an "employee" or an "independent contractor".

This is a rare win for workers under the FAA, but it's a narrow one. The Court already has restricted the Section 1 exclusion to transportation workers (Circuit City v. Adams). But Uber drivers are transportation workers, and there's a ton of pending litigation over whether they are employees or independent contractors. After New Prime, Uber drivers may be excluded by the FAA regardless of their legal designation.

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New Book on the Sharing Economy

Congratulations to Nestor Davidson (Fordham), Michèle Finck (Oxford), and John Infranca (Suffolk) on the publication of their book The Cambridge Handbook of the Law of the Sharing Economy (Cambridge U. Press). I had the pleasure of serving as a peer reviewer on the original proposal, and can verify that the book takes a comprehensive look at the sharing economy -- not just the employment stuff that readers of this blog mostly focus on. Here's the publisher's description:

This Handbook grapples conceptually and practically with what the sharing economy - which includes entities ranging from large for-profit firms like Airbnb, Uber, Lyft, Taskrabbit, and Upwork to smaller, non-profit collaborative initiatives - means for law, and how law, in turn, is shaping critical aspects of the sharing economy. Featuring a diverse set of contributors from many academic disciplines and countries, the book compiles the most important, up-to-date research on the regulation of the sharing economy. The first part surveys the nature of the sharing economy, explores the central challenge of balancing innovation and regulatory concerns, and examines the institutions confronting these regulatory challenges, and the second part turns to a series of specific regulatory domains, including labor and employment law, consumer protection, tax, and civil rights. This groundbreaking work should be read by anyone interested in the dynamic relationship between law and the sharing economy.

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