Hairy Situation: Misclassification Settlement Disputes Settle for $6.5 Million; Multiple Tests Would Have Applied

If you have a beard at least 8 inches long, here’s an opportunity you might not have considered. At a bar in Casper, Wyoming, a group of bewhiskered patrons tied their beards together to take the world’s record for Longest Beard Chain.

How long? 150 feet, shattering the previous record of 62 feet, set by a shaggy German crew in 2007.

But that wasn’t even the hairiest highlight of the weekend. Down the street was the National Beard and Moustache Championships, a visual delight featuring moustache categories such as best handlebar, Dali, freestyle, and uber-stache, and partial beard categories including best friendly sideburns, goatee freestyle, musketeer, and Fu Manchu.

Meanwhile, 1,000 miles to the west, a different sort of hairy situation was nearing conclusion for several operators of gentleman’s clubs or nightclubs or strip joints, depending on your preferred terminology.

Last week, a federal district court in San Francisco approved a settlement that combined multiple class action claims of independent contractor misclassification brought by exotic dancers. The settlement covered more than 8,000 dancers and included a total payout of $6.5 million.

The cases were complicated by a number of legal issues, including the fact that — because of the timing of the lawsuit — the question of whether the dancers were contractors or employees was to be determined using different tests for different claims. The dancers’ classification for their California wage order claims would be determined using an ABC Test, but their classification under other Labor Code claims would be determined using the Borello balancing test, which is a California hybrid of Right to Control and Economic Realities Tests.

The class period covered 2010 through 2018, so the Dynamex decision applied to the wage claims, but AB5 had not yet been enacted, which left the Borello test to govern the Labor Code claims. This post explains the complicated situation that existed at the time. Had the class covered the period from January 2020 forward, the ABC Test likely would have been used to determine classification under all of the California claims.

But there were also Fair Labor Standards Act (FLSA) claims. The FLSA uses an Economic Realities Test to determine a worker’s classification, but that test is fluid too. The Economic Realities Test used by most courts is different from the test that was written into the current FLSA regulations in 2020, which is different from the test the DOL recently proposed to enact in a new set of regulations currently under consideration.

So for these class members, there were at least three different tests that would determine whether they were employees or independent contractors under different laws. That’s kind of like trying to determine who had the best musketeer or Fu Manchu but with everyone’s facial hair tied together in a 150-foot beard chain.

There are a few takeaways here for the rest of us.

First, misclassification claims by exotic dancers remain common. The business model needs some internal review. But that’s probably not your concern.

Second, the settlement is a good reminder of how complicated it can be to determine a worker’s classification when multiple laws apply. Different tests apply to different laws, even within the same state. The dancers, had they gone to trial, might have been employees under some laws and contractors under other laws.

Third, there are significant costs in reclassifying contractors to employees. The settlement required the clubs to reclassify their dancers to employees, which means the dancers would become eligible for unemployment, workers’ comp coverage, and protection under the anti-discrimination and leave laws that apply to employees.

Regardless of your business, it’s always a good idea to proactively review independent contractor relationships to see how well they would withstand a classification challenge in court. Misclassification cases are high stakes and can take many twists and turns. Sort of like the facial hair in the Full Beard Freestyle category. (Photos here.)

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

Another Thing to Worry About?: Can Individuals Be Joint Employers under the FLSA?

This gem recently popped up on my twitter feed. Causes of death in London, 1632. Seems to me that cancer would be bad enough, but 10 deaths were attributable to the deadly combination of “cancer and wolf.” Sounds to me like 17th century cancer wards needed a moat.

Other notable causes of death include “Consumption” (1797) and its equally deadly opposite, “Dead in the street and starved” (6). “King’s evil” fell 38 unappreciated subjects of the Crown, and 98 died from “Rising of the lights,” which is a fate perhaps narrowly avoided by Clark in Christmas Vacation.

There were lots of things in 1630s London that could bring a person down, but happily “joint employment” is not among the recorded causes of death. Which raises this question as we head into 2023:

Can individuals be liable as joint employers?

The answer, of course, is sometimes.

The Supreme Court of Virginia recently ruled that individuals could not be joint employers under that state’s law on unpaid wages. The decision, was based on a strict reading of a state statute, which permitted only “entities” to be joint employers. The Virginia court explained that this definition was narrower than the understood meaning of joint employer under the Fair Labor Standards Act (FLSA).

And, indeed, the FLSA does recognize that individuals may be joint employers. This nugget from the First Circuit Court of Appeals answers that question with little room for doubt: “The overwhelming weight of authority is that a corporate officer with operational control of a corporation’s covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages.” Donovan v. Agnew, 712 F.2d 1509, 1511 (1st Cir.1983).

The difference is definitional. The FLSA looks to whether one or more “persons” is the employer. Persons can be individuals or entities. The Virginia statute considered only “entities.”

Individual corporate officers can, therefore, face liability as joint employers, particularly in smaller organizations where corporate formalities might not be followed as closely as they should be. For example, in the Agnew case, the court determined that “corporate officers with a significant ownership interest who had operational control of significant aspects of the corporation’s day to day functions, including compensation of employees, and who personally made decisions to continue operations despite financial adversity during the period of non-payment” were employers under the FLSA.

The bottom line here is that, yes, individuals can — at least under some circumstances — be joint employers under the FLSA. But not necessarily under every state’s law.

So that’s one more thing that individuals need to be wary of, in addition to the king’s evil and the dreaded combination of “cancer and wolf.”

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

Don’t Be Like These Sheep: Check Your Contract Recitals to Avoid This Misclassification Mistake

In Inner Mongolia, these sheep have been walking in a circle for about two weeks, with a few sheep occasionally standing in the middle. Here’s video.

Various theories have been circulating to try to explain the odd behavior, including that it may be some sort of bacteria-induced delirium.

But I think I know the real reason. (And a hearty Mazel Tov! to the wooly couple!)

When drafting independent contractor agreements, it’s never a good idea to be unsure of why you’re doing something. Too often, businesses use generic agreements and don’t understand the impact or purpose of what they’ve written.

One common place I see mistakes is in the very beginning of contracts – the contractual recitals.

Recitals are often used to provide context for the reader. Recitals are also used for six-year old piano players to play chopsticks for grandma, but that’s for another day. For example, an off-the-shelf independent contractor agreement might start with something like this: We’re in the business of doing X, and we are retaining Contractor to do this part of X. Therefore, the parties agree to the following terms.

The problem with that innocent sounding recital is that it may be evidence the contractor is misclassified.

Under a Strict ABC Test, if the work being performed by the contractor is within the hiring party’s usual course of business, the contractor is automatically considered an employee. That fact fails prong B of a strict ABC Test.

Under an Economic Realities Test or a Right to Control Test, one of the factors often considered is often whether the work being performed is “an integral part” of the business, or some variation on that theme. Unlike ABC Tests, these tests are balancing tests and so one factor will not necessarily determine a worker’s classification, but there’s no reason to give the factor away, especially in a contract recital.

In a misclassification challenge, every fact and contract term will be subject to scrutiny.

If you’re unsure whether the term is needed, then question whether to include it. Recitals generally aren’t needed at all, and I often omit them from my independent contractor agreements. Don’t include off-the-shelf terms if you don’t understand their effect.

Unexplainable behavior makes for good blog posts and tweets, but not good contracts.

Which is why I never ask unfamiliar sheep to help me draft contracts.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

`

Rick Springfield & Joint Employment: L.A. County Liable in FLSA Overtime Suit, Despite No Control Over Payroll

Rick jams!

If I ask you to name a song by Rick Springfield, you’ll say “Jessie’s Girl.” If I ask you to name another, you’ll look at me with a blank stare. But there’s another song you probably know. I forgot all about it too until I heard it on the 80s channel last week.

“Don’t Talk to Strangers” was released in 1982 and, around May of that year, spent four weeks at #2 on the Billboard charts. (Bonus Trivia Question: Can you name the #1 song in May 1982? The answer is below.)

Springfield had a couple of other hits too. Remember “Love Somebody” and “I’ve Done Everything for You”? Good times.

Anyway, the State of California and County of Los Angeles are hardly strangers, and they not only talk, but they collaborate on social services programs. That collaboration led to a lawsuit raising joint employer questions under the Fair Labor Standards Act (FLSA).

The State of California and the County of Los Angeles administer an In-Home Supportive Services (IHSS) program, which allows low-income elderly, blind, or disabled residents of the county to hire a provider to help them with daily living activities. The State of California runs the program at a state level, through state regulations, but the counties play a role in administering the program too.

Under a 2013 DOL regulation covering domestic workers, these workers were entitled to overtime pay under the FLSA. Until late 2015, however, the regulation was vacated while a court reviewed it. The state began paying overtime in 2016.

In this lawsuit, one of the IHSS providers filed suit against Los Angeles County, seeking FLSA overtime wages for 2015, while the rule was vacated and under review.

The county responded that the state, not the county, was the employer; and therefore the county could not be liable for the state’s failure to pay overtime in 2015. The district court agreed and ruled that the state, not the county, was the employer. The county would not be liable for the unpaid overtime. Or so it thought.

In a recent decision, however, the Ninth Circuit Court of Appeals reversed that conclusion. Applying the FLSA joint employer test, the Court held that the county was a joint employer, even though it did not control payroll.

Seems a little unfair, but that’s how joint employment works.

According to the Ninth Circuit, here’s the joint employer test under the FLSA: To determine whether an entity is a joint employer, the court must consider “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.”

The test derives from a Ninth Circuit case called Bonette. Other circuits use slightly different tests.

Even though the state controls payroll, the Ninth Circuit ruled that the county had enough involvement, based on the four factors, to make it a joint employer. The county therefore would be jointly liable for the shortfall in overtime pay.

The case is a good reminder of the dangers of joint employment. Even if your business has no control over payroll, a joint employer is liable for the failure to pay overtime.

The idea of two different things coming together is also the answer to today’s trivia question from above: What was the #1 song on the Billboard charts in May 1982?

[scroll down for the answer]

.

.

.

.

.

.

The #1 song in May 1982 was Ebony and Ivory.

Also, random fun facts about Rick Springfield:

  • His real name is Richard Springthorpe.
  • He was born in Guilford, New Sales Wales, Australia.
  • He played Dr. Noah Drake on General Hospital.
  • Before making it big on his own, he played in bands called Wickedy Wak and Zoot.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

Settling Misclassification Lawsuits Is Sometimes the Right Call, But It Might Make You Feel Dirty

Say cheese!

The world’s dirtiest man died last month at the (ripe) age of 94, having reportedly going 60 years without bathing. Covered in soot and living in a cinder-block shack, the Iranian hermit was known for eating roadkill, smoking a pipe filled with animal excrement, and believing that cleanliness would make him ill.

The newest dirtiest man alive may be this guy in India, who as of 2009 hadn’t bathed in a mere 35 years. Instead of water, this man of the people opts for a “fire bath,” in which he lights a bonfire, smokes marijuna and stands on a leg praying to Lord Shiva. The man told a reporter from the Hindustan Times, “Fire bath helps kill all the germs and infections in the body.” Of course it does.

Sometimes when we settle lawsuits, we also feel dirty. Maybe not that dirty, but at least icky. It feels wrong to pay money to a plaintiff when we feel the other party doesn’t deserve it. But settlements are often driven by factors other than the merits of a claim, such as business conditions or considerations other than purely financial.

In independent contractor misclassification cases, a settlement is sometimes the only way to ensure that a lawsuit does not result in forced reclassification of workers. In a settlement, the parties can agree upon terms, including financial payments, without conceding that anyone was misclassified and without requiring a reclassification going forward.

That is what happened in a recent case involving A Place for Rover, which is an app-based gig economy company that connects dog walkers with dog owners.

In May 2021, the app company won summary judgment in a misclassification dispute. The company argued that dog walkers were independent contractors, not employees, even under California law. The company argued that it could satisfy each prong of the ABC Test and that, regardless, it was a referral service under California law, which would exempt it from the ABC Test usually used in California to determine whether a worker is an employee. The company urged the court instead to analyze the classification dispute using the S.G. Borello balancing test, not an ABC Test.

The district court did not reach a conclusion on whether the company was a referral service and instead determined that the ABC Test was satisfied. The court ruled that dog walkers controlled their own work, routes, and prices, making them legitimate independent contractors.

But the plaintiff appealed, and the company may have feared that the Ninth Circuit Court of Appeals would revive the case and send it to trial. Instead of taking a chance on a bad outcome, the company settled.

By settling, the company pays money to avoid the risk of a judgment that the dog walkers were employees, an outcome that would likely render the company’s business model no longer viable. The company’s decision makers probably felt a little dirty, paying any money at all after having won at the district court level. That is not a surprising outcome, even if they felt strongly about their case. Because the stakes are so high in misclassification litigation, that’s often how these cases conclude. Icky but sometimes necessary.

But at least in litigation, afterwards you can take a bath.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

Green or Yellow: What’s the Difference Between Co-Employment and Joint Employment?

There’s an ongoing debate in my family over whether tennis balls are green or yellow. I sit firmly in the green camp and can’t see the yellow. My family thinks I am an idiot.

Turns out we’re both right. (Read into that as you wish.)

Tennis balls are officially Optic Yellow, but on the color wheel, that’s the same color as Electric Lime. There’s been some serious investigative journalism devoted to this topic, and the debate rages on. See here and here.

While Optic Yellow and Electric Lime may be the same, co-employment and joint employment are definitely not the same. Here’s today’s explainer.

In both co-employment and joint employment, there are two employers. For our purposes, the secondary employer is the one that benefits from the workers’ services. The primary employer is the one that pays them.

Co-employment is a voluntary arrangement in which one entity (often a Professional Employer Organization, or PEO) agrees to perform administrative/HR tasks for another entity, usually including providing benefits, HR services, and taking on the obligations of an employer in each jurisdiction where the workers will be.

The company that will benefit from the workers’ services selects them, determines their pay, determines their schedules, terminates them, and generally decides on all terms and conditions of employment. The company then sends them to the co-employer (PEO) to be hired and onboarded for the sole purpose of providing services to the secondary employer.

Unlike an employee leasing or staffing agency relationship, when a co-employment relations ends, the employees stay with the secondary employer. They don’t go back into a pool.

In co-employment, the employees and all parties acknowledge up front that this is a co-employment relationship, with the terms and conditions of employment dictated by the secondary employer. The offer letter and employee handbook will generally explain to the new hire the nature of the co-employment relationship.

No one worries about being deemed in a co-employment relationship because co-employment is an intentional choice. It’s not something that a court declares.

Joint employment, on the other hand, is a legal conclusion, often not a relationship that is acknowledged by the parties. The most common scenario for joint employment is when a staffing agency provides workers for staff augmentation, with the workers fully integrated into the secondary employer’s workforce and supervised by the secondary employer’s managers.

Joint employment can arise when labor services are provided by a staffing agency, a subcontractor, or a consulting firm. In a joint employment situation, there are two distinct employers. The staffing agency, subcontractor, or consulting firm is the primary employer and, if there’s not joint employment, then it’s the sole employer.

The primary employer determines wages and benefits and often selects the workers to be hired. Those workers often provide services for multiple companies, either sequentially or simultaneously.

If a secondary employer terminates a worker’s assignment, the worker stays with the primary employer. The primary employer can reassign the worker to another job site or make its own determination whether to keep the worker employed. You’ll want your staffing agency agreement to make clear that you can end a worker’s assignment but that you have no right to control the worker’s employment status with the agency.

There is a contractual relationship between the two companies that one will provide services for the other. But joint employment is not a foregone conclusion. Joint employment can exist, for example, if the secondary company makes decisions about the workers’ wages, working conditions, schedules, training, etc. To oversimplify a bit, joint employment is somewhat likely in a staffing services situation; less likely when retaining professional outside consultants.

Unlike with co-employment, joint employment does not involve a trilateral understanding among the worker and the two companies that the worker is employed by both.

Generally, the secondary company will argue that it does not control wages and working conditions, is therefore not a joint employer, and is therefore is not liable for any employment-related errors by the primary employer. The determination of whether joint employment exists is a legal determination, not based on an agreement among the parties and the worker.

What you’re worried about, therefore, is a finding of joint employment. Joint employment is not unlawful, but it creates unplanned risks and liabilities for the secondary employer. For example, if a staffing agency fails to pay its employees as required by law, the secondary employer is fully liable for the underpayment and the other legal consequences, even though it had no control over the primary employer’s payroll practices.

For more fun facts about joint employment, choose the Joint Employment category of posts in the blog. But be mindful of the date of the post. In the world of joint employment and determine when joint employment exists, the rules are always changing. So that’s fun, right?

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

Silly Old Moo: Watch What You Say When Trying to Preserve Independent Contractor Status

The parliament of New Zealand maintains a list of words and phrases that are considered unbecoming to say about another member and are therefore banned from use during parliamentary debates. These include:

  • His brains could revolve inside a peanut shell for a thousand years without touching the sides.
  • Energy of a tired snail returning home from a funeral.
  • Could go down the Mount Eden sewer and come up cleaner than he went in.
  • Silly old moo.

Words matter when trying to preserve a worker’s independent contractor classification too. Avoid possessives when referring to independent contractors, who are not “your” anything. The terminology you use should be consistent with the concept that the contractors are in business for themselves.

Check your company’s website and public facing materials and try to avoid phrases like this:

  • Our technicians [or representatives or whatever]
  • Our team of [whatevers]
  • We install/repair/other verb

Other words and phrases can also suggest employment and should be avoided when referring to contractors:

  • Hire (instead, retain)
  • Wages (instead, compensation)
  • Assignment (instead, project or engagement)
  • Duties (instead, services)

Using terminology that does not sound like employment will help when trying to show a court of agency that the relationship is not employment.

And never, ever tell anyone that your independent contractor’s brains could revolve inside a peanut shell for a thousand years without touching the sides. That’s just unbecoming.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

But the Onions! DOL’s Contractor Rule May Cause Companies Heartburn

Have you ever gone to a new restaurant that took over the space where one of your favorite restaurants used to be?
 
You’ve been wanting to try the new restaurant. You get there and the menu looks similar, so you order the fettucine with shrimp because that dish was always really good at the old place. It arrives and it looks the same but you’re not sure that it tastes quite the same.
 
Maybe the sauce tastes a little different but it’s hard to tell for sure. Then, you get home later that night and you feel a little queasy. You realize that the new restaurant must have put onions in the sauce. You probably didn’t notice because when the dish was served it looked just like it did at the old restaurant.
 
But you’re not supposed to eat onions, and now you have to wait and see if you’re going to start cramping up from eating the onions or if you’re going to be just fine. You really just don’t know. It could just as easily go either way, and now all you can do is wait.
 
That’s kind of how I feel after reading the Department of Labor’s proposed new independent contractor rule, released earlier this week.

Click here to read the rest of the story, originally published in Law360 on 10/13/2022.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

No Bear Wrestling? Poorly Drafted D.C. Law Turns Contractors Into Employees, Sort Of

According to this article in USA Today, state and local legislatures pass all kinds of strange laws. In Tennessee, you can’t hold office if you’ve been in a duel. In North Carolina, you can’t hold a meeting if you are dressed in costume. In Louisiana, it’s illegal to wrestle a bear.

Other times, legislatures pass laws that make sense, but they do it in a way that’s sloppy or lazy. A recent amendment passed by the D.C. Council falls into this second category.

Like many state and local anti-discrimination laws, the D.C. Human Rights Act prohibits discrimination and harassment in the workplace. An amendment to the Act, effective 10/1/2022, expanded the law’s protections to most independent contractors. Seems reasonable, right?

But the way the law extends these protections is lazy drafting, and the lazy drafting creates problems for those of us who are careful about preserving the distinctions between employees and independent contractors.

The amendment expands the Act’s coverage by changing the definition of “employee.” Under the amended text, the term “employee” now also includes individuals “working or seeking work as an independent contractor,” as well as unpaid interns. The amendment then excludes some independent contractors from coverage, explaining that an independent contractor for purposes of the Act “does not mean a service vendor who provides a discrete service to an individual customer.”

There are two problems here. First, starting at the end, what does the exception really mean? I presume the exception exists to carve out rideshare and delivery services, but if that’s what they meant, they should have said that. It’s unclear. Maybe some guidance will be issued later.

But the larger problem is the second one, and that’s what I want to focus on here. Instead of amending the law so that it applies to “employees and covered independent contractors,” the law lazily changes the definition of “employee” to say that “the term ‘employee’ includes … an individual working or seeking work as an ‘independent contractor.’”

But the word employee (as everyone commonly understands it) doesn’t include individuals working or seeking work as independent contractors. That’s the whole point of differentiating them by calling them independent contractors.

Let’s try an analogy. If you wanted to expand coverage for a law that applies to police officers so that the same protections applied to fire fighters, you wouldn’t redefine the term “police officers” to “include” fire fighters. You’d say the law applies to police officers and fire fighters.

The same principle applies in every day life. If you went to the ice cream store and ordered vanilla soft serve, you’d be unhappy if the clerk handed you a vanilla-chocolate twist. You’d complain, but the clerk would point you to the sign on the wall that says “We define vanilla to include chocolate.” That’s dumb and would never happen. I think. But I would check twice before ordering soft serve at the D.C. Council cafeteria.

Preserving independent contractor status is already complicated, with so many different state and local tests for determining who is an employee and who is a contractor. We don’t need lazy amendments that define the term “employee” in a way that just includes “independent contractors.” It makes everything more confusing for everyone, especially when it remains important to differentiate between contractors and employees in every other context.

We don’t even need to look beyond D.C. to see how the D.C. Council has messed this up. Let’s compare the amended Human Rights Act to other D.C. laws.

The D.C. unemployment compensation law uses a common law test to determine whether someone is an employee or an independent contractor. So does D.C. wage and hour law. The D.C. workers comp law uses a different “relative nature of work test,” but that’s a balancing test too. The point is, under these other D.C. laws, the term “employee” definitely does not include independent contractors, and there’s a way of differentiating which is which.

It’s laudable that the D.C. Council wants to extend anti-discrimination protections to independent contractors. Some state laws do that too. (Federal anti-discrimination laws do not.) But don’t lazily do it by calling independent contractors “employees.” Because they’re not.

At least in D.C. it’s still legal to wrestle a bear.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge
 

Curse of the Lamprey: Company Faces Costly Negligence Suit Because It Was NOT a Joint Employer

Henry I of England, possibly playing with a toy castle

The history of the Middle Ages is filled with tales of unusual and unexpected deaths. In 1016, for example, Edmund Ironside, King of England, was allegedly stabbed while on a toilet by an assassin hiding underneath. In 1131, Crown Prince Philip of France died while riding his horse in Paris after the animal tripped over a black pig that was running out of a dung heap. In 1135, Henry I of England supposedly died after eating too many lampreys, against his physician’s advice. A lamprey, for those keeping score, is a long, jawless fish with a funnel-like sucking mouth. (“Doctor, how many of these delicious-looking sea creatures may I ingest for dinner?”)

While Henry I might have fared better had he listened to medical advice, Edmund and Philip seem to have just found themselves in the wrong place at the wrong time.

This can happen to businesses too when retaining non-employee laborers.

But the cautionary tale in today’s post is different from those I usually write about. We often discuss here how businesses can take steps to avoid being deemed a joint employer. Today’s post, however, is about an unexpected bad outcome that can arise from not being a joint employer.

The culprit here is not a dung-covered black pig or a toilet assassin. The culprit here is workers’ compensation law.

As we all know, workers’ compensation law covers employees only. When workers’ compensation law applies, it is the only course of recovery for a worker injured on the job. There’s no suing for negligence, no tort claims, and no personal injury lawsuits.

Being a joint employer, in other words, can limit your liability when a worker is injured on the job.

A recent Texas case illustrates the point.

King Aerospace is a military contractor. It often relied on another company, ATG, to find maintenance specialists. ATG would identify and hire the specialists, who would then go work for King. ATG treated the workers as its employees and reported their pay on a Form W-2.

One of the workers supplied by ATG fell off a ladder while working on a project for King. He filed a personal injury suit against King Aerospace, alleging that King was negligent in causing his injuries. King responded by arguing that it was the man’s joint employer, meaning that the injuries would subject to Texas workers’ compensation law. When workers’ compensation law applies, workers’ compensation law provides the only available remedy for a workplace injury. There’s no separate personal injury suit.

A jury was asked to determine whether the man was King’s employee at the time of the injury, and the jury said he was not. King was therefore exposed to the full range of damages available in a negligence lawsuit. Hey, watch out for that black pig.

King appealed the decision, arguing that it was a joint employer as a matter of law. The Texas Court of Appeals, however, ruled that there were issues of fact and the jury was entitled to find that there was no joint employment relationship. The case now goes back to the trial court, where King Aerospace will face tort liability under personal injury laws.

Businesses are usually looking to avoid joint employer status. But as this case shows, when there’s a serious workplace injury involved, joint employer status can actually be beneficial.

The decision does not address whether ATG had workers’ compensation coverage for the worker. Presumably it did not. The case is also a good reminder to make sure that in agreements with companies supplying labor to your business (such as staffing agencies), the supplier company should agree to provide workers’ compensation coverage.

An agreement like that between King and ATG that could have prevented King’s bad outcome here. Or King could have taken more direct steps to establish itself as the man’s joint employer, even if that move seems counter intuitive.

On the other hand, I have no idea what could have saved poor Martin of Aragon, who supposedly died in 1410 from a combination of indigestion and uncontrollable laughing. Martin apparently was suffering from indigestion after eating an entire goose when his favorite jester, Borra, entered the king’s bedroom. Martin asked Borra where he had been, and Borra replied, “Out of the next vineyard, where I saw a young deer hanging by his tail from a tree, as if someone had so punished him for stealing figs.” This joke caused the king to die from laughter.

I guess you had to be there.

For more information on unusual deaths in the Middle Ages, click here: https://en.wikipedia.org/wiki/List_of_unusual_deaths#Middle_Ages

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

2018_Web100Badge