On 11 March 2024, the Wage and Hour Division (WHD) of the Department of Labor (DoL) finalized the Employee or Independent Contractor Classification Under the Fair Labor Standards Act. Even without this latest federal codification, National Association of Mortgage Field Services (NAMFS) members have paid out tens of millions of dollars in employee misclassification settlements dating back to 2010. And in a one-two punch, the FTC just made non compete agreements illegal in the US. Thus far, neither NAMFS nor the International Association of Field Service Technicians (IAFST) have issued any guidance on the matter. It really comes as no surprise as both Associations have a lot to lose when it comes to employee misclassification. The only people poised to benefit from this is Labor. With that said, let’s dig into it!

The Department of Labor states the following as determinate factors — a worker’s “skill and initiative,” the “investments by the worker and potential employer,” and the “nature and degree” of worker autonomy. To their point, the rule’s sextet of definitive criteria concludes with a vague caveat: “additional factors may be relevant.”

Where the rubber meets the road is in a few of the below quotes from the publishing of the Final Rule in the Federal Register,

The Department identified a nonexclusive list of facts that may be relevant when considering this factor: whether the worker determines or can meaningfully negotiate the charge or pay for the work provided; whether the worker accepts or declines jobs or chooses the order and/or time in which the jobs are performed … [.]

The final rule also provides broader discussion of how scheduling, remote supervision, price setting, and the ability to work for others should be considered under the control factor, and it allows for consideration of reserved rights while removing the provision in the 2021 IC Rule that minimized the relevance of retained rights. Further, the final rule discusses exclusivity in the context of the permanency factor, and initiative in the context of the skill factor.

The Department notes that this concept of economic dependence — one which does not focus on the amount of income earned or whether the worker has other income streams — has been the Department’s consistent position […] [T]he concept of economic dependence in the NPRM and this final rule is identical to the 2021 IC Rule, which stated that, “other forms of dependence, such as dependence on income or subsistence, do not count” and that “dependence of income or subsistence, is not a relevant consideration in the economic reality test.”

Let’s review a few things, though, that the law firm, Seyfarth Shaw LLP, with over 900 lawyers in 18 offices, had to say,

One important change from the NPRM is that the Final Rule clarifies that “actions taken by the potential employer for the sole purpose of complying with a specific, applicable Federal, State, Trial, or local law or regulation are not indicative of control.” In contrast, “actions taken by the potential employer that go beyond compliance . . . and instead serve the potential employer’s own compliance methods, safety, quality control, or contractual or customer service standards may be indicative of control.”

Separately, the NPRM originally provided that any means of technological “supervision” would be relevant evidence of control. The Final Rule, however, acknowledges that is not always the case, and provides that technological supervision is only evidence of control if used to “supervise the performance of the work.” That is, under the Final Rule, merely collecting data generated from the actions of a worker (e.g., that an item was delivered) is not necessarily evidence of control. However, if that data is paired with additional supervisory action, such as directing or correcting the worker’s conduct, it may be evidence of employer-like control under the Final Rule.

The Final Rule states that “this factor does not depend on whether any individual worker in particular is an integral part of the business, but rather whether the function they perform is an integral part” and that when the work a worker performs is “critical, necessary, or central to the employer’s principal business,” then this factor weighs in favor of employer status.

Currently, there is not a singe Prime Vendor or order mill whom could survive an employee misclassification lawsuit. And the reality is that while NAMFS members have acquiesced — approved through their silence — the five dollar and some change inspections now throughout Chicago and New York City being sold by their own members, while being paid $30 and $45 per inspection. The time to sue is NOW! The time is now to begin targeting the order mills with litigation they cannot afford and then use those carcasses to pivot, later this year, against the Prime Vendors. And if you don’t, enjoy the next level of price drops coming up in May from GIS Field Services. If you want to, why not reach out for a Consulting Session and see where you could end up!

We are going to dig deeper in this including the outing of price sheets and kicking into high gear the horrific state of preservation pricing this week along with more Foreclosurepedia Podcasts rolling out.

On April 23, 2024, the Federal Trade Commission (FTC) sent shockwaves through the American workplace by issuing a final rule banning non-compete agreements for most employees and independent contractors. This landmark decision, hailed by worker advocates and criticized by some businesses, promises to reshape worker mobility and competition within the U.S. economy.

Why the Ban? The FTC’s Argument

The FTC argues that non-compete agreements stifle competition by limiting workers’ ability to take jobs with rival companies. This, they claim, depresses wages, hinders innovation, and discourages entrepreneurship. Their press release cites a statistic: banning non-competes could lead to the creation of over 8,500 new businesses annually. Chair Lina M. Khan emphasizes the impact on worker freedom: “The FTC’s final rule to ban non-competes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The Scope of the Ban: Who’s Affected?

The FTC’s rule casts a wide net. It prohibits employers from entering into new non-compete agreements with almost all workers. Existing non-compete agreements will be unenforceable for most employees after the rule’s effective date, which is 120 days after publication in the Federal Register. There is a narrow exception for “senior executives,” defined as those earning more than $151,164 annually and holding policy-making positions. Existing non-compete agreements with senior executives can remain in place, but employers cannot create new ones even for this group.

Legal Challenges Looming

The FTC’s decision is likely to face legal challenges. Business groups argue that the agency is overstepping its authority and that non compete agreements can be legitimate tools to protect trade secrets and confidential information. The legality of the rule will likely be decided in court. The curious thing for our Industry, though, is that the National Association of Mortgage Field Services (NAMFS) and the International Association of Field Service Technicians (IAFST) both agree that for Inspectors and Field Service Technicians alike, non compete agreements are a quick way to have employee misclassification lawsuits filed. Moreover, though, for the Prime Vendors whom hire order mills to farm out their work, not performing the due diligence downhill is a sure recipe for vicarious liability when it comes to tort claims invoking the respondeat superior doctrine. In a recent review of 15 regional order mills, the non compete agreements were absolute going as far as to list the firms they hold contracts with. No comment was forthcoming from they or the Prime Vendors at the time of publication.

Uncertainties and Potential Benefits

The long-term impact of the FTC’s ban remains to be seen. Some experts worry that it could discourage companies from investing in worker training, fearing employees will take that knowledge to competitors. However, supporters believe the benefits outweigh the risks. Increased worker mobility could lead to a more dynamic and competitive job market, with workers able to negotiate better wages and pursue new opportunities. Additionally, it could encourage entrepreneurship as workers feel freer to strike out on their own.

Conclusion: A Turning Point for Worker Mobility

The FTC’s ban on non-compete agreements marks a significant shift in U.S. labor policy. While the legal battles are likely just beginning, the decision has the potential to empower workers and reshape the American workplace. It’s a story to watch closely, with implications for both businesses and employees in the years to come.