“There was boxes back there”: How a flood and a healthy dose of incompetence sank a strip club’s plan to force a dancer into arbitration

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Sorry, not that Godfather

Forgive me in advance if I sound condescending. And skeptical. And incredulous. But above all, I am amused.

This is the story of a strip club called the Godfather. When one of its dancers, a young lassie named Tassy, tried to sue, alleging that she had been misclassified as an independent contractor, the Godfather asked the court to send her claims to arbitration, as required under the Godfather’s dancer agreement.

But the Godfather had one small problem. It could not produce the agreement because, it claimed, the agreement was washed out in a flood caused by a rusted-out water heater in the back room. As everyone knows, the flood-prone back room with the rusted-out water heater is the best place for storing corporate legal documents. (Note to self: update template document retention guidelines.) Preferably, as the Godfather did, store them in unmarked boxes with no index or system for determining exactly what was in the boxes. But Tassy’s agreement was in there. They’re pretty sure, anyway.

So the court held an evidentiary hearing, and that’s when the rest of the wheels fell off. The Godfather produced two key witnesses, and they contradicted each other in virtually every aspect of their testimony — about the content of the agreements, the procedure for signing agreements, the procedure for signing other new dancer paperwork, the procedure for being retained, the procedure for auditioning, what other documents had been lost in the flood, who worked in the back office, who was the most talented Jonas Brother, and what were the real lyrics to Wild Thing by the Troggs.

The only things the witnesses could agree on were that there were different versions of the agreement in place at different times, that the versions “constantly changed,” that some versions had an arbitration clause and others did not, and that neither of them was sure which version Tassy signed.

The judge, in a written opinion, excoriated the club, finding none of its witnesses to be credible and expressing a general bewilderment at the supposed back room filing system, which was meticulously described by the Godfather’s key witness as follows: “There was boxes of paperwork back there.” That is an exact quote from the opinion.

The court ruled that the Godfather failed to prove that Tassy had signed an arbitration agreement. She will therefore be allowed to proceed with her claims of independent contractor misclassification in court.

I hope this one goes to trial because it would be hilarious.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Poor Planning Dooms Pet Owner; Good Planning Saves GrubHub’s Arbitration Agreement

35D2D59B-89A6-40D6-8727-7C4C7D87BC9Findependent contractor arbitration agreement GrubHub Wallace

Why did the cassowary cross the road? To get to the other side.

Careful planning and foresight are important. For example, it would have been a good idea for a Gainesville, Florida man to have read up a little more on cassowaries before choosing to own one as a pet. A cassowary is a large flightless bird that grows up to six feet tall and can weigh 130 pounds. It has a four-inch claw on each foot, used to slice open its prey. (Infomercial: It’s both a fork and a knife!) The bird has powerful legs that it can use to kill its prey with a single kick — or chase it down by running at speeds up to 30 mph. Think Big Bird meets Edward Scissorhands meets pissed-off hungry crocodile in a go-cart.

Anyway, some guy in Gainesville bought one as a pet. It promptly killed him. Poor planning. I would have recommended a labradoodle.

A better example of planning ahead is GrubHub and its independent contractor arbitration agreements.

Two drivers recently challenged the validity of those agreements, arguing that after the Supreme Court’s recent New Prime decision (see blog post here), they were “transportation workers” and therefore not covered by the Federal Arbitration Act (FAA) and therefore their arbitration agreements could not be enforced. The FAA is a federal law that favors enforcement of arbitration agreements.

The GrubHub drivers wanted to bring a federal lawsuit alleging independent contractor misclassification and failure to comply with federal and state (Illinois and California) wage and hour laws.

After the Supreme Court’s New Prime ruling — that drivers in interstate commerce were not protected by the FAA — the plaintiffs’ bar began filing lawsuits to test the bounds of what it means to be a driver in interstate commerce.

A federal court in Illinois recently ruled that GrubHub drivers are retained for local deliveries, not for the type of interstate transportation that is covered under the FAA exception. Since the GrubHub drivers’ deliveries are local, not interstate, the FAA does apply. Since the FAA applies to the GrubHub drivers and their arbitration agreements, their dispute must be referred to arbitration.

The court dismissed the case, and the drivers’ claims will have to be brought before an arbitrator.

In contrast to the court decision we blogged about on Monday, this ruling shows that a well-written arbitration agreement can and will be enforceable. Make sure your arbitration agreements are carefully written and include all procedural and substantive safeguards. You can never be too careful when drafting an arbitration agreement — or when choosing a pet bird.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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The Stones, the Dalai Lama, and Arbitration: How Not to Get What You Need in an Arbitration Agreement

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Not Mick Jagger

You can’t always get what you want, said a wise English sage in 1969. This advice still holds true. For example, Chinese Foreign Ministry spokesman Lu Kang recently declared that the reincarnation of the Dalai Lama must comply with Chinese law.  Good luck with that.

The enforcement mechanism for Lu’s edict is unclear, but the Chinese Communist Party knows what it wants. (Allow me a brief diversion. My favorite sentence in the cnn.com story: “It isn’t completely clear whether the Dalai Lama will allow himself to be reincarnated after he dies.”  You and me both, brother!)

Another example arose in a recent court case, in which a messenger service required its independent contractor messengers to sign an arbitration agreement. Like spokesman Lu, the messenger service may have demanded a bit too much. A California Court of Appeal declared the arbitration agreement invalid, ruling that it was both procedural and substantively unconscionable.

What makes an arbitration agreement so one-sided that it’s unconscionable?

Here are the terms that, taken together, the court said rendered the agreement procedurally unconscionable:

  1. The agreement was presented as a take-it-or-leave it proposition, not subject to negotiation;
  2. The contractor’s native language was Portuguese; he spoke very little English; and no one offered to translate or explain to him the meaning of the document;
  3. He was asked to sign on the spot, with no opportunity to review it, translate it, or seek legal advice;
  4. The agreement said that the rules of the American Arbitration Association (AAA) would apply, but did not specify which of the many AAA rules would govern; and
  5. He was not given a copy of the rules.

The court also ruled that the agreement was substantively unconscionable — in other words, so unfair it could not be enforced. The court focused on these defects in the agreement:

  1. The individual was barred from bringing any claims with an administrative agency (he tried to bring a claim with before the Commissioner of Labor);
  2. The agreement barred representative claims from being brought under California’s Private Attorneys General Act (PAGA);
  3. The agreement prohibited any recovery of punitive damages, statutory penalties, equitable relief, or attorneys’ fees; and
  4. The agreement required any dispute to be heard before a panel of three arbitrators, each of whom must have transportation industry experience and a legal background. (The court ruled that it would be very expensive to find and pay three people with these required credentials, which would make it prohibitively expensive for the individual to bring any claim since the agreement also required the parties to split all arbitrator fees.)

This case is a good reminder to check the terms of any arbitration agreements you have with independent contractors. The messenger service will not get what it wants (nor what it needs). The court invalidated the arbitration provision as a whole, finding it so defective that it the invalid portions could not be severed in a way that would otherwise save the agreement.

Arbitration agreements with independent contractors can be a valuable tool for resolving disputes, but only if they are enforceable. Not even the all-powerful Chinese Communist Party can impose terms that are unfair. But they get points for trying. So far, I have found no truth to the rumor that spokesman Lu has asked the Dalai Lama to sign a pledge to arbitrate any disputes over his reincarnation. Maybe Jagger, Richards, and Wood could serve as the three arbitrators.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Can You Offer Paid Vacation to Independent Contractors?

Can you offer paid vacation to independent contractorsVacation is all the Go-Go’s and their misplaced apostrophe ever wanted. Vacation, had to get away. Vacation, had to be spent alone.

Employees want vacation too, and so do independent contractors. Should your company’s vacation policy apply to independent contractors too? Can you grant your independent contractors a certain amount of paid vacation?

Not a good idea.

In the various tests for Independent Contractor vs. Employee, one of the recurring themes is that a contractor is in business for himself/herself.  The contractor is supposed to be able to work when he or she wants, so long as deadlines are met.

Providing paid vacation to an independent contractor may seem like a nice thing to do, but it’s not consistent with the idea of being an independent contractor. Vacation should be an employee benefit, not a perk available to contractors too. You shouldn’t be paying contractors for not performing work.

Belinda Carlisle took a long vacation from the Go-Go’s in 1985, when she embarked on a solo career featuring several annoying songs such as “Mad About You” and “Heaven is a Place on Earth.” The Go-Go’s later reunited, broke up again, reunited, and broke up again, none of which was noticed by anyone.

In contrast, offering your independent contractors employee benefits like paid vacation could get noticed by regulators as a sign of independent contractor misclassification. Paid vacation for contractors would also be a negative fact in any misclassification lawsuit.

When trying to maintain legitimate independent contractor classifications, it is important to respect the lines between employees and contractors. On this topic, we have nothing more to say for now. Our lips are sealed.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Slip Slidin’ Away? Truckers’ Fall Short in Bid to Overturn California’s Dynamex Standard (Plus: Bonus Quiz for Paul Simon Fans)

Truckers Western States dynamex independent contractor misclassificationIt seems a little presumptuous that when Paul Simon released the single, “Slip Slidin’ Away,” he released it as one of two new songs on his 1977 Greatest Hits, Etc. album. How is it a greatest hit before it’s been released? But sure enough, the song rose to #5 on the Billboard charts. Today’s Challenge: Ten bonus points will be awarded to anyone who can name the other new song that debuted on Simon’s 1977 Greatest Hits, Etc. compilation. The answer is at the end of the post.

In July, we wrote about “Convoy,” a 1975 song about a fictional trucker rebellion, as a way to introduce a new lawsuit filed by the Western States Trucking Association. The lawsuit seeks to invalidate California’s burdensome ABC Test (the Dynamex test), which is now used to determine who is a contractor and who is an employee under California wage and hour law.  The truckers argued that the law — as applied to truckers — was preempted by federal laws that seek to promote uniformity in the interstate transportation industry.

Based on a recent decision in a California federal court, the truckers’ hopes of invalidating Dynamex may be Slip Slidin’ Away.

On March 29, a judge dismissed the truckers’ lawsuit. The court noted that Dynamex applied to all California Wage Orders, not just those that cover truckers. The court also noted that the Dynamex ABC Test had only an indirect effect, if any, on any carrier’s “price, route, or service,” which is the scope of state laws that would be preempted by the Federal Aviation Administration Authorization Act of 1994 (the FAAAA). 

The truckers made some other arguments too, but the court rejected them all, finding that it does not violate federal law for California to apply a strict ABC Test for determining whether truckers are employees or independent contractors.

All hope, though, might not be lost. Another federal court in California found in a different trucker case that there was FAAAA preemption, and the First Circuit Cout of Appeals has also ruled that the FAAAA preempted a state law ABC Test from being applied to truckers. [For more, read fn 5 on page 19 of the decision.]

This decision is likely to be appealed to the Ninth Circuit Court of Appeals. Depending on how the Ninth Circuit rules, there could be a circuit split that calls for the U.S. Supreme Court to break the stalemate between the Ninth Circuit and the First Circuit. So maybe the truckers’ claims are not completely Slip Slidin’ Away, but there’s definitely some slippage.

And now for the real reason you’ve stuck with me for the complete post. The answer is…

Stranded in a Limousine.”  

If you got that one, you must be a real Paul Simon fan.  Your ten points are well-earned. I am sure you will spend them wisely.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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“This is a Cabinet”: DOL Proposes New Definition of Joint Employer, Seeks to Clear Up a Confusing Label

This post was originally published as a BakerHostetler Employment Alert on April 3, 2019. Cabinet joint employmentSometimes it’s obvious what something is, and you don’t need a label. Other times it’s not so obvious, and you do need a label. Then there’s the rare instance when it’s obvious what something is, but someone feels compelled to supply a label anyway. That third scenario is what I saw when I went to my daughter’s volleyball tournament last weekend and snapped this photo of a cabinet in the lobby. The label is small, but if you look closely, you’ll see that it helpfully declares the item to be a “cabinet.” It further announces, in red handwriting, that the item has been “sold,” thereby allaying my concerns that my daughter was spending her Saturday playing volleyball in a den of cabinet thieves.

The second scenario – label needed – is the focus of this Alert. And the territory is familiar ground ‒ joint employment.

It’s rarely obvious what that phrase means, and companies that use workers supplied by other companies have been seeking clarity for some time now. Ignoring Ronald Reagan’s famous quip about the nine most terrifying words in the English language, the Department of Labor (DOL) announced on Monday that it’s here to help.

Aiming to provide that much-needed clarity, the Wage and Hour Division of the DOL has proposed a new regulation that would redefine “joint employment” under the Fair Labor Standards Act (FLSA). Since 1958, the FLSA regulations have unhelpfully suggested that two companies may be joint employers if they are “not completely disassociated” from each other. In recent years, that excessively broad language has been used by some courts to label companies “joint employers” under circumstances where the DOL no longer believes the tag is warranted.

The proposed new regulation would replace the “not completely disassociated” guidance with a four-part balancing test, assessing whether a potential joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedules or conditions of employment;
  • Determines the employee’s rate and method of payment; and
  • Maintains the employee’s employment records.

The reserved right to do these things would not be relevant to a company’s status as a joint employer. To be a joint employer, it must actually do them. (Remember, unlike other federal laws, the FLSA does not use a Right to Control Test.)

The DOL would permit other factors to be considered in the joint employment analysis too, but only if they tend to show whether the potential joint employer is:

  • Exercising significant control over the terms and conditions of the employee’s work; or
  • Otherwise acting directly or indirectly in the interest of the employer in relation to the employee.

The joint employment test would not look to whether the worker is economically dependent on the putative joint employer. Economic dependence is still relevant to whether a worker is an employee of the primary employer but, under the proposed new regulation, it would no longer be relevant to the joint employment analysis.

The new rule would also clarify that certain business models are not lightning rods for joint employment. For example, franchising would not increase the likelihood of a joint employment finding.

The new rule would clarify that certain business practices are also not suggestive of joint employment. For example, none of these activities would make a finding of joint employment more likely:

  • Providing a sample employee handbook to a franchisee;
  • Participating in or sponsoring an association health or retirement plan;
  • Allowing an employer to operate a facility on one’s premises; or
  • Jointly participating with an employer in an apprenticeship program.

The new rule would provide that certain types of business agreements are not indicative of joint employment.  For example, requiring an employer to institute workplace safety measures, wage floors, sexual harassment policies, morality clauses, or requirements to comply with the law or promote other desired business practices would not be evidence in favor of joint employment.

The new regulation would promote clarity and would seek to eliminate the sometimes contradictory tests that different federal courts use when trying to answer the same question ‒ who is a joint employer under the FLSA? The answer should no longer be, “That depends on where you live.”

The proposed new regulation will now proceed down the path labeled, Notice of Proposed Rulemaking. In the next few days, the Notice will be published in the Federal Register. That publication will begin a 60-day public comment period. Anyone can submit comments. Really, I mean anyone. Comments about the proposed rule may be submitted electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA26.

Notice of Proposed Rulemaking is a potentially bumpy path, with cobblestones and potholes along the way. Based on the comments, the DOL could decide to modify the proposed rule or rewrite it or scrap it entirely. But hopefully, if things turn out right for the business community, at the end of that road there is a tall beige cabinet with a label on it that says “cabinet,” and inside that cabinet is a newly minted regulation that says “joint employer” and, for the first time in decades, everyone will know what that means.

 

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Too Many Beef Livers? NLRB Addresses How It Will Review 29,000 Comments on Its Proposed Joint Employer Rule

NRLB Ring too many beef livers avocadosToo much of a good thing can be a bad thing. For example, according to this article in Popular Science, consuming 240 avocados in one sitting would put the average man at risk of sudden death by potassium poisoning. (It doesn’t say how many avocados an above-average man could eat, but presumably the number is similar.) 

A similarly bad outcome can result from over-consumption of beef livers, although it would take approximately 431 pounds of beef livers before the toxicity of excessive vitamin A might cause a man to think he should have stopped after 430.

Lots of comments can overwhelm an administrative agency’s internal organs as well. As we discussed here, the NLRB has proposed a new regulation that would make it harder to establish joint employment under the National Labor Relations Act. In response to the Notice of Proposed Rulemaking, the Board has received nearly 29,000 comments from interested organizations, unions, academics, business owners and individual workers (like Cindy, perhaps) about the proposed new rule.

To expedite the Board’s review of these comments, the Board is planning to engage a third party agency to sort and categorize the comments before the Board’s staff attorneys review them for substance. (No word on whether the Board would consider itself a joint employer of the third party sorters. Presumably not. Chuckle. Snort. Chortle.)

Democratic leadership has questioned the Board’s decision to outsource part of the review process, but NLRB Chairman John Ring responded with this letter, providing his assurance that the actual substantive review would be done by Board lawyers, not third party staffers.

So in other words, not much to see here. We have no idea how long it will take for the Board to complete its review of the nearly 29,000 comments, but Chairman Ring has vowed to complete the review as expeditiously as possible. When the review is complete, the Board will decide whether to revise the initial proposed rule, to adopt it, or to select what’s behind door #3.

Meanwhile, this may take a while so I am going back to my oversized platter of beef livers.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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