Court Reinstates Independent Contractor Exception for Uber Drivers

May 2023 • Source: John H. Shaffery, Poole Shaffery

Proposition 22 was approved by voters in California in November 2020. It exempted app-based drivers from a 2019 state law known as AB5 that makes it difficult to classify workers as independent contractors rather than employees. It allows app-based transportation services to classify drivers as independent contractors as long as they are paid a minimum wage while transporting passengers and receive expense reimbursements and healthcare subsidies. For hundreds of thousands of drivers, Proposition 22 awarded independent contractor status but took away protections requiring gig workers across many industries to be classified as employees with stronger benefits such as a minimum wage, overtime and workers’ compensation in case of injury.

On March 13, 2023, the California Court of Appeals reversed a 2021 lower court ruling that struck down Proposition 22 on the basis that it violated the state constitution because it limited the legislature's power to include gig drivers within the scope of California workers' compensation law. The appeals court disagreed with that opinion and mostly upheld the provisions of Proposition 22, except for a provision enabling gig workers to join unions. The appeals court severed provisions of Proposition 22 restricting the California Legislature’s ability to authorize collective bargaining over drivers’ compensation, benefits, or working conditions and create rules singling out or otherwise putting unequal regulatory burdens upon app-based drivers.

Proposition 22 has remained in effect throughout the appeals process, and ride-sharing apps, including Uber and Lyft, can continue to treat their drivers as independent contractors. This represents a major victory for such companies because independent contractors do not receive the same legal protections as employees and can be up to 30% cheaper. Immediately after the Court of Appeals decision upholding Proposition 22, shares of Uber and Lyft rose by nearly 5%. However, the ruling is expected to be appealed to the California Supreme Court, so it remains to be seen how the ongoing Proposition 22 saga will develop.

Stand Tall – Don’t Fall: OSHA Launches New Program to Prevent Falls

May 2023 • Source: Stephanie Bendeck, Melick & Porter

The Department of Labor’s Occupational Safety and Health Administration (OSHA) announced a new program which took effect on May 1, 2023, to identify and reduce falls while working at heights. The National Emphasis Program (NEP) is designed to “reduce or eliminate injuries and fatalities associated with falls while working at heights in all industries.”

Why is OSHA so interested in fall protection? The “duty to have fall protection” standard is one of the most frequently violated OSHA standards. It should be no surprise that falls continue to be the leading cause of death for all workers. Across all industries in 2021 according to a comparison of the Bureau of Labor Statistics (BLS) and OSHA Information System data, there were 5,190 work fatalities, 850 of which were fatal falls (including slips and trips), and 680 of which were fatal falls to a lower level. In 2021 in the construction industry alone, there were 986 total fatalities, 390 of which were fatal falls (including slips and trips) and 378 of which were fatal falls to lower levels. The 3.6 fatal occupational injury rate in 2021 represented the highest annual rate since 2016. Work-related fatalities due to falls, slips, and trips increased 5.6% in 2021 according to the BLS.

What does this NEP mean for the construction industry? All construction inspections related to falls will be conducted pursuant to this NEP. OSHA announced that it will increase targeted enforcement and outreach activities because falls remain the leading cause of fatalities and serious injuries in all industries.

The construction industry is not the only industry affected by this NEP. The NEP affects all industries and will target the following activities: (1) roof top mechanical work/maintenance; (2) utility line work/maintenance; (3) arborist/tree trimming; (4) holiday light installation; (5) road sign maintenance/billboards; (6) power washing of buildings not connected to painting; (7) gutter cleaning; (8) chimney cleaning; (9) window cleaning; (10) communication towers. For other non-construction activities where a worker is observed working from a height, an inspection may be initiated upon approval by area office management. If an inspection is not warranted after entering the site and observing work activities, the Compliance Safety and Health Officer (CSHO) will conduct an outreach activity on fall protection and exit the site.

Given OSHA's increased focus on enforcement and the safety risks associated with falls from heights, it is critical that employers have an effective system in place to identify and protect their workers from potential hazards that could lead to fall-related injuries and fatalities.

A link to the OSHA Instruction, Directive Number CPL 03-00-025, can be found here:

https://www.osha.gov/sites/default/files/enforcement/directives/CPL_03-00-025.pdf

If you need assistance with an OSHA matter, please feel free to contact Stephanie Bendeck. She can be reached at [email protected], 617-502-9680.

Washington Supreme Court Forges New Path in Combating Implicit Racial Bias: Risks and Opportunities for Civil Defendants

May 2023  • Joseph Hogan, Scheer.Law PLLC

How can courts address racial bias when that bias is unintentional?  A white woman causes a car accident.  A Black woman is injured and sues.  The defendant admits liability but makes no offer to compensate the plaintiff before trial.  Her attorney argues the plaintiff’s lay witnesses were coached; her chiropractor is biased; and the plaintiff is financially motivated.  The plaintiff asks for $3,500,000.  The jury awards $10,000.  Did racial bias, implicit or express, affect the verdict?  If so, what should be done about it? 

In the groundbreaking opinion in Henderson v. Thompson, the Washington Supreme Court charted a new course in examining implicit bias in civil cases.  The Court outlined a new procedure for considering when to declare a mistrial due to implicit bias.  Under the new ruling, the trial court must decide whether an “objective observer” could view race as a factor in the verdict.  The objective observer is one “who is aware that implicit, institutional, and unconscious biases, in addition to purposeful discrimination, have influenced jury verdicts in Washington State.”  If a proponent of a new trial makes a prima facia showing, a hearing must be held.  The party seeking to preserve the verdict bears the burden to prove that race was not a factor.  If it cannot, a new trial must be held.  In the case of Henderson v. Thompson, a majority of the Court determined a prima facia case was met.

The ruling drew praise; but also concern.  The Court has been on a campaign to eradicate implicit bias.  But the aspects of the defense that were identified as calling for implicit bias are typical for many civil cases.  The Plaintiff was described as “combative” under cross examination.  The defense counsel highlighted the Plaintiff’s financial motive.  Lay witnesses were described as having bias.  Seasoned civil attorneys may be scratching their heads why these common arguments create grounds for a new trial.

The application of the new ruling is yet to be seen, but nothing limits its use to plaintiffs.  Close observers are keen to see what deference trial courts are given.  What is clear is that there is a new battlefield for overturning unfavorable verdicts—both for plaintiffs and defendants.  To be ready for that battlefield, civil attorneys must be or become familiar with the history and literature surrounding implicit bias.  Strong advocates should prepare such motions in any civil case regardless of the race of their client.  Attorneys should consider addressing racial bias throughout trial to Henderson-proof a favorable verdict.

Will other states follow Washington’s lead?  Only time will tell.  But savvy litigators in states with liberal supreme courts should consider making similar arguments.  And attorneys and claims professionals everywhere can look to Washington State to see what the future might hold for efforts to eradicate implicit bias.

The slip opinion in Henderson v. Thompson, No,. 97672-4 (Oct. 20, 2022) can be found here.

Finding More Time to Perfect Removal to Federal Court

Source: May 2023 • Willcox Savage

Even practitioners well-accustomed to federal practice often overlook the critical rule regarding the deadline for removal when a defendant has been served through a statutory agent, an agent appointed to receive process by operation of law, such as a state insurance commissioner or secretary of state. Most courts have held that the thirty-day window for removal in such a situation does not begin to run until the defendant has received the complaint. Thus, service on a statutory agent alone does not trigger the countdown to remove. Keeping the majority rule in mind when considering whether a case is removable may provide the extra time needed to remove a case that, at first glance, appeared destined to remain in state court.

An (All-Too-Common) Scenario

Frequently, defense counsel for an out-of-state defendant receives the case well after the statutory agent has been served with process. Especially in product liability cases involving multiple defendants, determining the citizenship of each defendant can take time. For example, it may not be immediately apparent what entities or people are members of a co-defendant LLC.  Given the delay between when many statutory agents, such as secretaries of state, receive process and when they transmit it to the defendant, the majority rule may provide the additional time needed to ascertain the citizenship of each defendant. Measuring the period for removal from the date when your client actually received the complaint may add the critical few days needed to pull together the loose ends that otherwise would prevent timely removal, if service on the statutory agent was the benchmark for calculating the removal period.

“Receipt by the Defendant” Through Service on a Statutory Agent

Title 28 of the United States Code establishes a thirty-day period for removal. The removal statute provides:

The notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within 30 days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

28 U.S.C. § 1446(b)(1) (emphases added). Accordingly, “receipt by the defendant” of the complaint, through service of process, triggers the beginning of the thirty-day period in which the defendant can remove the action. In most cases, the application of this rule is straightforward, because the plaintiff obtains service of process on the defendant through its registered agent. 

When the plaintiff serves a defendant’s statutory agent, the analysis becomes more complicated. Statutory agents are agents appointed by operation of law to accept process for a defendant. Though the defendant does not select it, as it would a registered agent, by statute, the agent—often a government entity—is deemed to be the defendant’s agent for the purposes of accepting service. If the plaintiff serves a statutory agent, in one sense, the defendant has received a copy of the complaint through its agent. After all, generally, a corporation is in “receipt” of the complaint when an agent authorized to receive service of process on behalf of the corporation has received same. In cases involving a statutory agent, the entity that receives service has—by statute—been deemed authorized to accept service of process on behalf of the corporation. But if the entity that received service only is the defendant’s agent by operation of a statute, can it truly be said that the defendant is in “receipt” of the complaint?

A few courts have answered that question in the affirmative and concluded that service of process on a statutory agent constitutes “receipt by the defendant” of the complaint, beginning the thirty-day period for the defendant to remove. For example, a Kansas district court has held that service on the Kansas state insurance commissioner qualified as “receipt by the defendant,” because a statute mandated that service on the commissioner “constitute[d] service upon an insurance company’s registered agent.” Ortiz v. Biscanin, 190 F. Supp. 2d 1237, 1242 (D. Kan. 2002). In a similar case out of the Middle District of Florida, the court found that, without a “definitive interpretation” of the portion of the removal statute regarding receipt of the complaint, the removal statute was ambiguous. Masters v. Nationwide Mut. Fire Ins. Co., 858 F. Supp. 1184, 1189 (M.D. Fla. 1994). Based on such ambiguity, in light of the rule that the removal statute must be strictly construed against removal, the court found that service on the Florida Insurance Commissioner was “receipt by the defendant” of the complaint because, under Florida law, the Commissioner was deemed to be an agent of the insurance company for the purposes of receiving service.  Id. 

However, the vast majority of courts that have considered the issue have concluded that service on a statutory agent does not qualify as “receipt by the defendant”; instead, the time to remove begins to run when the defendant actually has received a copy of the complaint. District courts across the country have held that, for removal purposes, a statutory agent is not a true agent of the defendant, such that a defendant is in “receipt” of the complaint when same is served on the statutory agent. See, e.g., White v. Lively, 304 F. Supp. 2d 829, 831 (W.D. Va. 2004). Under the majority rule, the period for removal does not begin to run until the defendant actually has received a copy of the complaint.  These courts have recognized that the intent of the thirty-day period is “to ensure that defendants know that they are the subject of a suit [] as well as the basis for the suit before the removal period begins.” Tucci v. Harford Fin. Servs. Grp., Inc., 600 F. Supp. 2d 630, 634 (D.N.J. 2009) (emphasis in original). Because a defendant must be able to review the complaint before it can evaluate whether it can (and should) remove the case, it follows that the removal period should be calculated based on when the defendant has received the complaint, rather than when the plaintiff has served it on the statutory agent. After all, allowing service on a statutory agent to trigger the running of the removal period effectively would shorten the period of time in which a defendant could remove, even though the defendant cannot review the complaint until it has received same from the statutory agent. 

The minority rule also would force the defendant to “depend upon the rapidity and accuracy with which statutory agents inform their principals of the commencement of litigation against them.” Calderon v. Pathmark Stores, Inc., 101 F. Supp. 2d 246, 247 (S.D.N.Y. 2000) (quoting Cygielman v. Cunard Line Ltd., 890 F. Supp. 305 (S.D.N.Y. 1995)). If the statutory agent has a serious enough backlog, the thirty-day period for removal might elapse even before the statutory agent has transmitted the complaint to the defendant. In other words, under the minority rule, a defendant might never have the opportunity to remove the case, because the statutory agent’s delay will prevent it from even learning of the complaint within the thirty-day period, much less filing a notice of removal. 

Given those problems with measuring the period for removal from the date of service on the statutory agent, rather than when a defendant actually has received the complaint, it is perhaps unsurprising that the two circuit courts of appeal to consider the question have rejected the former rule and embraced the latter. See Elliott v. Am. States Ins. Co., 883 F.3d 384, 394 (4th Cir. 2018) (“[W]e now hold that service on a statutory agent is not service on the defendant within the meaning of § 1446(b)(1).”); Anderson v. State Farm Mut. Auto. Ins. Co., 917 F.1126, (9th Cir. 2019) (“We join the Fourth Circuit and hold that the thirty-day removal clock under 28 U.S. § 1446(b)(1) does not begin upon service on and receipt by a statutorily designated agent, and begin in this case only when [defendant] actually received [plaintiffs’] complaint.”); see also Gordon v. Hartford Fire Ins. Co., 105 F. App’x 476, 480 (4th Cir. 2004) (unpublished) (per curiam). “These holdings reflect what ‘appears to be settled law’ nationwide ‘that the time for removal begins to run only when the defendant or someone who is the defendant’s agent-infact receives the notice via service.’” Sara v. Talcott Resolution Life Ins. Co., No. 21-CV-3094, at *6 (S.D.N.Y Jan. 3, 2022) (citing 14C Charles Alan Wright et al., Federal Practice & Procedure § 3731 (Rev. 4th ed. 2021 update)).

As an important caveat, even under the majority approach, courts have distinguished between service on a statutory agent and service on a registered agent. When a defendant has specifically designated an agent to receive process on its behalf, as opposed to having one appointed for it by operation of law, service of process on the designated agent triggers the removal period, even if the defendant does not receive, from the agent, a copy of the complaint until a later time. See, e.g., Val Energy, Inc. v. Ring Energy, Inc., No. 14-1327-RDR, 2014 WL 5510976, at *2 (D. Kan. Oct. 31, 2014) (unpublished). Courts distinguish service on a registered agent from service on a statutory agent because of the greater degree of control exercised over a registered agent. See, e.g., Hardy v. Square D Co., 199 F. Supp. 2d 676, 683-84 (N.D. Ohio 2002). Because a defendant itself selects a registered agent, the registered agent likely will be more accountable to the defendant for promptly notifying it of service and forwarding process than a statutory agent. Id. Accordingly, the receipt rule applicable to service on a statutory agent does not apply to service on a registered agent, and the time period for removal begins to run when process is served on the registered agent.

Conclusion

When an initial assessment suggests that the deadline for removal may already have passed, defense counsel should not overlook the possibility of additional time to remove following service on a statutory agent. Remembering the “receipt by the defendant” rule can be the difference between an unfavorable state-court venue and removal to federal court when a defendant has been served through a statutory agent.