Bosses Reclassify Workers to Cut Costs-Super Shuttle Drivers Classified As Independent Contractors
Scrutiny into relationships with contractors leads to new strategies
Harjinder Dubb of Norwalk, Calif., drove a SuperShuttle from 2003 to 2008 and says he was labeled an independent contractor. PHOTO: JONATHAN HANSON FOR THE WALL STREET JOURNAL
By LAUREN WEBER
June 30, 2015 5:36 p.m. ET
As courts and regulators increase their scrutiny of the relationship between businesses and independent contractors, employers are turning to a range of tactics to classify workers, taking them off the formal payroll and lowering costs.
Employers have long shifted work from employees to independent contractors, often relabeling the workers and slightly altering the conditions of their work, court documents and settlements indicate. Now, businesses are turning to other kinds of employment relationships, such as setting up workers as franchisees or owners of limited liability companies, which helps to shield businesses from tax and labor statutes.
In response, some state and federal agencies are aggressively clamping down on such arrangements, passing local legislation, filing briefs in workers’ own lawsuits, and closely tracking the spread of what they see as questionable employment models.
All this is happening against the backdrop of a broader shifting of risk from employers to workers, who shoulder an increasing share of responsibility for everything from health-insurance premiums to retirement income to job security. Alleged misclassification of workers has been one of the primary battlegrounds of this shift, leading to high-profile lawsuits against Uber Technologies Inc. and FedEx Corp., among others. Both have recently lost or settled big cases. Uber is appealing one decision, and FedEx settled in California for $228 million but is continuing to challenge classification lawsuits in other states.
“We’re seeing more creative ways to misclassify workers,” Patricia Smith, chief litigator at the U.S. Labor Department, said at a legal conference in the spring, referring to a recent victory by the agency over construction companies in Arizona and Utah using phony LLCs.
Former SuperShuttle driver Harjinder Dubb. Drivers for SuperShuttle purchase their own vans.
“LLCs are generally small businesses that are trying to get back to business and are facing an increasingly difficult time because of this kind of enforcement,” said Jerry Howard, chief executive of the National Association of Home Builders. “We educate our members on a very regular basis and teach them how to comply” with labor statutes, he added. He declined to comment on the findings of the Arizona and Utah investigation.
In that investigation, the department and its state counterparts found that more than 1,000 construction workers were building houses as employees one day and then a day later had begun performing the same work on the same job sites as so-called owners of LLCs, but without any wage or safety protection. In April, the construction firms that had put the plan in place—and had avoided paying hundreds of thousands of dollars in payroll taxes—were ordered to pay $700,000 in back wages, damages and penalties.
In the coming days, David Weil, the administrator of the Labor Department’s Wage and Hour Division, is expected to release a detailed memo on worker classification, the first such guidance since President Barack Obama took office.
A particular focus for Mr. Weil and for plaintiffs’ lawyers is brands that sell franchises not to a traditional small-business owner—say, a person who owns six outlets of a national fast-food chain and hires dozens of employees—but to low-wage workers such as janitors and delivery drivers who essentially pay franchise fees in exchange for work.
“There are a lot of legitimate franchise forms,” but companies that abuse the franchise model deny workers access to overtime and minimum-wage pay requirements as well as health and safety protections, and they lower the standards at rival firms, which can’t compete unless they follow the lead of unscrupulous firms, Mr. Weil said in an interview. “They can undermine responsible employers and take root in an industry,” he added.
In 2012, Maria Jacobo sold many of her personal belongings to buy a franchise from CleanNet USA, a janitorial service. In exchange for paying the $10,000 franchise fee, she said she was told she would receive accounts valued at several thousand dollars a month to clean offices and other commercial buildings. Ms. Jacobo had been a solo housecleaner before she seized the opportunity to become a small-business owner through CleanNet, according to court documents.
But last year, Ms. Jacobo joined a lawsuit against the company, charging that it controls all aspects of the cleaners’ work, including their fees and communications with clients, making them essentially employees of the firm even as it uses the franchise model to avoid the obligations of an employer, such as minimum-wage and overtime payments.
Janitorial services were among the first to use the franchise model to designate individual workers, often low-skilled immigrants, as independent owners. CleanNet alone has faced claims from workers in California, Maryland, Texas, Pennsylvania and Illinois in the past two years. Those claims are in settlement discussions or have moved to arbitration due to a clause in the company’s contracts.. Another franchise cleaning service, Coverall North America Inc., agreed to pay $5.5 million and stop operating in Massachusetts as part of a pending settlement with franchisees there and has faced other franchisee lawsuits in at least two other states. A case in Tennessee was settled in 2007, and a case in California in 2014. Ms. Jacobo’s case is currently in arbitration; she declined to comment.
“CleanNet has no reason to believe that its California franchisees are misclassified,” said its outside general counsel, Benjamin Hahn, who added that aside from Massachusetts, states have upheld the janitorial franchise model. Norman Leon, an attorney with DLA Piper who has represented Coverall and whose firm is general counsel to the International Franchise Association, said, “The premise that some of the smaller janitorial companies abuse the franchise model or that all of those franchises are operated as sole proprietorships—both of those assertions are incorrect.”
The model isn’t limited to cleaning companies. Last year, SuperShuttle agreed to pay $12 million to drivers in California who had argued that they weren’t true franchisees—independent owners operating businesses and controlling their own destinies—but in practice were employees who should be reimbursed for business expenses like fuel and maintenance and paid for the overtime hours they worked.
Harjinder Dubb drove for SuperShuttle from 2003 to 2008 and says he was labeled an independent contractor. He quit after SuperShuttle tried to convert him to a franchisee, which would have required him to pay fees to “rent” the SuperShuttle brand—essentially paying to do the same work he had done before.
As part of the settlement, SuperShuttle maintained its franchise model but changed its contract terms to reduce its control over drivers and give them more opportunities to earn other income with their vans, which the drivers purchase themselves for as much as $35,000. SuperShuttle had settled similar suits in Minnesota, New York and Florida, but the California settlement is the largest to date.
“We felt it was in our best interest to settle the case because we wanted to move on with running our business,” said Tom Lavoy, deputy chief operating officer of SuperShuttle’s parent, Transdev On Demand. He added that the franchise system has reduced turnover and improved safety among drivers. “We still believe it’s the right model because independent business owners are more efficient than what we can generate from an employee business,” he said.
Write to Lauren Weber at firstname.lastname@example.orgTags: Super ShuttleDriversindependent contractors
July 1, 2015: The UPS Package Division has launched a public campaign to call on UPS to drop its support for the American Legislative Exchange Council (ALEC), because of ALEC’s extreme anti-union and anti-worker lobbying.
In documents sent to all locals today, the IBT asks locals to post the leaflet on union bulletin boards.
ALEC is notorious for not only supporting, but actually writing, anti-union laws such as “Right to Work,” along with laws attacking the rights of teachers to join unions, and laws attacking worker safety. Then ALEC uses its money to get laws passed in state legislatures. It is funded by a number of major corporations, including UPS and FedEx.
UPS Among Many Teamster Employers
SourceWatch lists corporations which fund and support ALEC. Major Teamster employers listed include Anheuser Busch, Burlington Northern Santa Fe, CN Railroad, Crown Cork and Seal, CSX, Honeywell, J.R. Simplot, Marathon Oil, Norfolk Southern, and Waste Management, among others.
It is not clear if the IBT intends to take the campaign to these companies, or if Ken Hall is using the UPS campaign to bolster his sagging fortunes among UPS Teamsters.
The IBT notes that some Teamster employers have joined the many companies which have dumped support for ALEC in recent years, including PepsiCo and Coca Cola.Issues: UPS
Former LA Metrolink auditor alleges she was bullied and fired for disclosing railroad's problems
Metrolink rider looks out window as train pulls into the Santa Ana Transportation Center. (Mark Boster / Los Angeles Times)
By DAN WEIKELcontact the reporter
Allegations in a new lawsuit by a former top watchdog at Southern California's Metrolink commuter railroad paint an alarming picture of the operation's management problems and internal politics.
Chief auditor Barbara Manning, 64, who was fired late last year, asserts that contracts were mishandled, accounting irregularities were rampant, ticket revenue was poorly tracked and that she was defamed and terminated for bringing some of the problems to light.
Scott Johnson, a Metrolink spokesman, said railroad officials do not comment on pending litigation as a matter of policy.
In her lawsuit filed Monday in Los Angeles County Superior Court, Manning names the Southern California Regional Rail Authority--Metrolink's operator--and singles out three high-profile board members. They are former state legislator Richard Katz of Los Angeles, Moorpark City Councilman Keith Millhouse and Larry McCallon, mayor of Highland in San Bernardino County.
Katz declined to discuss the lawsuit, and McCallon could not be reached for comment.
Millhouse said the lawsuit is "completely baseless" and predicted that any allegations against him will be promptly dismissed. "At that point," he added, "I will seek my redress for malicious prosecution."
The lawsuit comes amid an ongoing effort by Metrolink to assess and correct a variety of management and accounting irregularities, which one internal agency report described as "a morass."
That scathing report found poor management, inadequate cash reserves and shoddy record-keeping and concluded it was difficult for officials to assess the railroad's financial standing. Metrolink's chief financial officer at the time resigned in light of the findings.
Manning was hired by Metrolink in June 2013 to help correct the problems. The lawsuit states that she was fired by the board for allegedly lying to investigators and trying to impede an investigation into her conduct.
Her attorney, William M. Crosby, said Manning was a "consummate professional" and has worked in a variety of high-level positions. "It has never been suggested that she had performance issues," he said. "It's outrageous what they did to her."
According to the lawsuit, Manning and her audit team discovered financial irregularities, possible fraud and a failure by Metrolink officials to respond properly to negative federal audit findings. At the time, the Federal Transit Administration was threatening to withhold funding from Metrolink, her court papers state.
Manning's legal complaint asserts her reviews found a lack of accountability and transparency, unapproved wire transfers of funds and bank records that were inaccessible because no one on staff, including the chief executive officer, had signature authority to access them.
Accounts that contained fare revenue weren't properly reconciled and short of funds, she alleged. Manning also claims she found discrepancies between cash collected and reported, as well as ticket sales that could not be accounted for--both matters she described in the lawsuit as "high fraud indicators."
Her lawsuit also claims Manning's difficulties began after she uncovered irregularities in a security guard contract. She purportedly found unauthorized salary increases for security guards and an over-extended budget that resulted in job cutbacks and reduced safety for passengers. The lawsuit claims the cutbacks coincided with an increase in assaults on riders.
The lawsuit states that after Manning disclosed the findings of her work to board members over McCallon's objections, she was falsely accused by the defendants of causing safety problems for the railroad, not following audit procedures and intending to issue an inaccurate report.
She alleges that Katz accused her of "creating an atmosphere of hostility and fear" and spearheaded the effort to fire her.
The lawsuit claims Manning experienced depression, extreme anxiety and insomnia due to her treatment by agency officials and that she will have difficulty finding comparable future employment due to the stigma of her firing. She is seeking punitive and compensatory damages.
Uber's numbers seem ugly either way you look at them
• ALEXEI ORESKOVIC
• Jun. 29, 2015, 10:01 PM
Chris Ratcliffe/Bloomberg via Getty ImagesTravis Kalanick, chief executive officer of Uber Technologies Inc., speaks during the Institute of Directors (IOD) annual convention at the Royal Albert Hall in London, U.K., on Friday, Oct. 3, 2014.
Uber’s financial performance is shakier than previous reports suggested, based on the leaked numbers reported by Bloomberg on Tuesday.
The numbers, which Bloomberg said were part of a term sheet for a bond offering that Uber is planning, provide a rare glimpse into the popular ride-hailing business’ money-making machine.
According to Bloomberg, Uber had revenue of $415 million (we assume net revenue after payments to drivers, not gross revenue) and an operating loss of $470 million.
It’s an incomplete glimpse into Uber, as the numbers are missing one major piece of context: the time period that the financial results correspond to. It’s unclear whether these are financial results for a single quarter, for a whole year, or for some other period of time.
Nor do we know how fresh the numbers are — an Uber spokesperson told Bloomberg they are “substantially old,” which suggests they come from 2014.
It's also not clear where the numbers originated — Uber told Fortune that the prospectus in question was not distributed by Uber, but didn't comment further on their accuracy.
Still, the numbers present some worrying signs whether they are viewed as quarterly or annual results.
If one assumes that the numbers correspond to one single quarter’s financial results, then Uber appears to be losing some serious money. That’s because if you create an annualized run-rate based on those numbers (multiply by four), Uber’s annual operating loss is nearly $2 billion.
Of course, there are plenty of caveats to assuming that Uber is actually losing that much money on an annual basis given how little we know. The one-quarter snapshot may have been an anomaly; perhaps Uber ramped up its spending that quarter and sustained a much greater than normal operating loss.
Still, it’s reasonable to at least consider the possibility that Uber is operating at that kind of run rate based on the reported numbers.
But perhaps the Bloomberg numbers represented an entire year’s worth of financial results? In other words, Uber’s $470 million operating loss could be for the 2014 year. The problem with looking at it that way is that it means Uber’s revenue for all of 2014 was only $415 million.
That’s a pretty small number for a company with Uber’s valuation — it was $18 billion at the end of 2014, and is over $40 billion approaching $50 billion now. It also suggests that the company will fall short of the $2 billion net revenue run rate that earlier reports expected it to attain this year, even at a reported 300% growth rate.
Uber has not responded to requests from Business Insider. We'll update this story if we hear back.Uber
June 29, 2015: Teamsters and retirees across the union are battling to save our earned pension credits. If Hoffa's on our side, here's how he can show it.
On June 18, 150 retirees converged on Washington to support the introduction of the Keep Our Pension Promises Act.
Hoffa serves on the board of the NCMMP, which drafted and lobbied for the pension cut legislation. But he sent International VP John Murphy to the Capitol on June 18 to support its repeal.
If Hoffa is serious about protecting our pensions, he needs to show it with action, not just words.
Three Simple Steps Hoffa can Take Right Now
- Post an Open Letter to the Central States Trustees and Director, asking them to temporarily hold off initiating pension cuts, and back our work on the Promises Act.
- Send a letter to all U.S. Local Unions and retiree clubs, asking them to voice support to all US Senators and Congressional Reps in their respective areas. And ask them to call on Central States Trustees to do the right thing.
- Send a blast email calling on all Teamsters and retirees to join this fight.
So far, we have not seen these minimal, low-cost steps taken. We call upon the Hoffa administration to take action now. And then go on to help mobilize for a mass mobilization in Washington D.C.
Teamsters and retirees are working together with allies to save our pensions. We expect our International union to be on our side – with actions, as well as press releases.
Sysco Corp. pulled out of a $3.5 billion acquisition of US Foods after a federal judge blocked the takeover. Sysco now faces a $300 million breakup fee payment to US Foods as well as $12.5 million fee to Performance Food Group, which had agreed to buy some US Foods facilities.
Sysco intends to buy back $3 billion in shares over the next two years.
The Federal Trade Commission in February said it would seek a court order to prevent a merger because it would “eliminate significant competition in the marketplace.”
Last week, U.S. Judge Amit Mehta issued the order blocking the deal. Sysco said earlier it likely would pull out of a deal if such an order was issued.
Sysco and US Foods together operate more than 13,000 trucks, which ranks them among the largest private fleets in the United States. Sysco ranks No. 2 and US Foods ranks No. 5 on the Transport Topics Top 100 list of the largest private carriers in the United States, Canada and Mexico.
A combined Sysco-US Foods would have created a national broadline food-service distributor with an estimated 75% share of the market for goods supplied to such large customers as restaurant and hotel chains, hospitals and schools, FTC said. The FTC said the deal would result in higher prices due to reduced competition.
Sysco had fought for more than a year to gain government approval for the transaction, arguing that the deal would bring $1 billion in savings, letting it offer lower prices to customers.
You can also complete a survey. Here is a link to the survey and more info
Port Authority is also asking for input on potential changes to the system, including zones, how and when we pay, etc.
Here is Pittsburghers for Public Transit's current position on Port Authority fares:
June 26, 2015
PPT asserts that riders should not have to pay any more than they already do for transit service. We have one of the most expensive base fares in the country at $2.50, and the cost of using our system is a burden on many families. We are very pleased to know that Port Authority will not be raising fares this fiscal year, but we have been told that PennDot expects Port Authority to increase its fares starting July 2016. We all need to come together (riders, workers, residents, Port Authority staff and board, and elected officials) to prevent a fare increase in July 2016.
In 1975, our base fare was 40 cents. Adjusted for inflation the equivalent today would be $1.77. In 2001, the base fare was $1.60. Adjusted for inflation that is equivalent to $2.15. Since 2001, our base fare has gone up by 56% percent, and we cannot let them be raised next year. When you factor in cost of living, asking a Pittsburgher to pay $2.50 for a one-way ride is the equivalent of asking a New Yorker to pay $5.43! New York currently has a base fare of 2.75 and is the only city in the country that charges more than Pittsburgh.
When workers make $7.25/hour, how can they be expected to get to their jobs when getting there and back with a transfer is equivalent to the money they earn in one whole hour at work?
We do support simplifying the system to make it easier for riders to use, but we want to ensure this does not involve raising the base fare. Expecting transit dependent riders to pay more is unfair and disproportionately hurts them. We commend that senior citizens ride for free (mainly through subsidies from the lottery), and we commend that people with disabilities get a reduced fare. But we think that these riders should also get reduced weekly, monthly, and annual passes. We also assert that low-income residents should get a reduced fare.
Raising the fare runs a huge risk of decreasing ridership. If residents begin to feel as if it is less expensive to drive and park, what incentive is there to take public transit? Keeping fares where they are (or lowering them) and simplifying the system will increase ridership, which ultimately increases revenue from passengers and from the state.
We assert that Port Authority should get rid of Zone 2, stop charging for transfers, and maintain the free fare zone downtown (which includes 2.5% of daily trips or 4500 rides). We assert that riders should always pay getting on for inbound trips, and pay getting off for outbound trips, including past 7 pm.
With respect to Connect Cards, we are concerned that charging a fee for them will de-incentivize their use, when we know the system overall benefits from more people using the cards. Can the Port Authority consider other ways to cover the costs of the card, through sponsorship, for example? If a fee for the Connect Card is imposed, we insist that low income riders and riders with disabilities get the cards for free.
Uber claims it’s operating legally in China, calls its service ‘carpooling’
By Liu Sha Source:Global Times Published: 2015-6-27 1:08:01
A mock coffin is displayed by striking taxi drivers as they block access to the Marignane airport near Marseille, southern France on Friday. Hundreds of taxi drivers converged to demonstrate against UberPOP, a popular taxi app. Photo: AFP
Uber China claimed on Friday that it is operating legally in the country by providing carpooling services with private cars, after the US-based company was accused of using "black cabs" by its local competitor on Thursday.Huang Xue, a communication officer at Uber China, told the Global Times Friday that their "People's Uber" service is actually a carpooling service, which is different from car-booking, and it lets drivers pick up people nearby with their own cars. The driver and passengers then share the cost of the ride.
Huang said if the Chinese government issues regulations on "carpooling" services, they would operate accordingly.
But Zhang Xu, a market analyst with Analysys International in Beijing, said that judging from the operations of "People's Uber," this "carpooling service" should also be placed in the same category as car-hailing apps.
Like CAR Inc and Didi Dache, consumers can book a car through their mobile apps.
The growing popularity of car and taxi-hailing apps prompted the Chinese Ministry of Transport in January to order app developers to exclude private cars from their platforms and make sure that all vehicles used are owned by taxi or car rental companies to ensure passenger safety.
Huang added that their platforms only use private cars for carpooling services, as for other car-book services they provide on their app, like Uber-X, will only use cars from rental companies.
The number of Uber users in China is increasing primarily because of its heavily subsidized rides.
An online survey on news portal sina.com conducted after CAR Inc released an ad against Uber showed that 53 percent of over 31,000 netizens supported Uber while 33 percent said they agree with the CAR Inc ad's message, which said that the 'black cars' used by Uber are dangerous.
Many said that it's easier to get a car with Uber during peak hours while other taxis prefer not to operate in traffic jams. Uber said that they will do a thorough background check on drivers to ensure they have no criminal record.
One Uber driver surnamed Wang said that it took him two weeks to complete his registration on Uber, which requires drivers to have at least one-year's driving experience.
Uber, like other car-hailing apps, provides a way to connect market needs to providers and it's an inevitable trend, so the government should release policies and regulations to ensure their legal operations rather than cut them off, Zhang said.
Huai Jinpeng, vice minister of the Ministry of Industry and Information Technology, admitted on Friday that car-hailing apps have a positive effect but the market lacks regulations and there are safety problems.
Some local governments have started to regulate car-hailing apps. Uber's offices in Chengdu and Guangzhou were visited by local police, who have started probing the private car service since May.
Other car-hailing services are also being closely watched by the government for using private cars. On June 3, Beijing police questioned Didi Zhuanche for its suspected use of private cars and drivers.
Huang did not reveal the market share of Uber in China. Uber founder Travis Kalanick told investors earlier that Uber has close to a 50 percent share in the non-taxi market in China, the Wall Street Journal reported.Tags: UberChinaCarpooling
Over the past year, Pittsburghers for Public Transit has supported community campaigns for service to the transit deserts in Baldwin, Groveton, and Moon. Up to 2000 residents have conducted surveys, canvassed their communities, attended meetings, made phone calls, written letters, signed petitions, met with Port Authority board and staff members and elected officials, spoken at Port Authority board meetings, and participated in demonstrations. They brought awareness to the plight of transit deserts and called for adequate transit service in their communities. Their hard work paid off today as these service extensions were approved.
Chris Kuznicki, Baldwin resident, said “We commend all the residents who worked so hard on this campaign and appreciate all the support that PPT, transit workers, and residents throughout the region have provided. We will continue to push for everyone in our county to have the transit service they need and deserve.”
“The families in Groveton appreciate that Port Authority has listened to the word of the people,” said Darnell Jones, resident of Groveton. “We’ve worked hard for this service, and now people will be able to find jobs and get to the supermarket, other stores, and doctor’s appointments.”
The service changes will take effect Sept 6, 2015.
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