A Brazilian woman brought her Uncle Paolo to a bank branch so he could sign a loan document for her. Uncle Paolo was in a wheelchair and couldn’t seem to grip a pen, despite the woman’s best efforts to get him to cooperate.
But Uncle Paolo had good reason not to grip the pen and sign. You see, Uncle Paolo was dead. The woman brought the deceased to the bank in a wheelchair, thinking that — well, I don’t know she was thinking.
The bank called the police, and the woman was arrested. Uncle Paolo, reportedly, is still dead. The best part? There’s video.
Also still dead is the NLRB’s recent joint employer rule, struck down by a federal judge on March 8th.
Congress just took action to try to make it deader.
On April 10, the Senate voted 50-48 to invalidate the NLRB rule, following a 206-177 vote by the House.
President Biden has indicated he would veto the resolution, but the fact that the resolution received support from moderate Democrats, not just Republicans, may be a sign of how far out of touch the NLRB’s rule really was. Two Democratic Senators and eight Democratic members of Congress voted for the resolution.
Assuming the district court decision survives on appeal, the NLRB rule will remain dead, and the Congressional vote doesn’t make any difference anyway. That’s because dead is dead.
I’m taking today off for the eclipse. The Federal Trade Commission never takes the day off. More on that below. But first, some fun facts, courtesy of exploratorium.edu.
-> In Vietnam, legend has it that a giant frog swallows the Sun. Its master, the lord of Hahn, then convinces the frog to spit it out.
-> In Javanese mythology, the god of darkness, Batara Kala, swallows the Sun. Javanese villagers try to make Batara Kala release the Sun by offering sacrifices and beating drums.
-> In Andean mythology, a puma devours the Sun. To prevent the Sun’s death, the puma must be frightened away by the screams of children and the cries of animals.
I don’t feel the need to ask my children or animals to scream away the eclipse, but I may do some crying and screaming on my own if the FTC has its way and starts getting involved in independent contractor classification disputes.
According to a recent speech by FTC Commissioner Alvaro Bedoya, the FTC may consider trying to bring independent contractor misclassification claims.
Misclassification has always been viewed as an issue of employment and tax law. But according to Bedoya, the FTC may choose to see misclassification as an unfair competition issue, thereby granting it jurisdiction (so he says) to bring enforcement actions of its own.
In his published remarks, Bedoya outlined several examples of egregious misclassification that would not pass muster under any law. Then he used these extreme and unusual examples as reasons why the FTC should get involved in pursuing misclassification wrongdoers. He argues that the FTC should get involved because misclassifiers are engaging in unfair competition, in violation of section 5 of the FTC Act.
But if the examples he gave already violate the FLSA and NLRA and state laws, why does the FTC need to pile on? It doesn’t.
Bedoya acknowledged that the DOL and the NLRB “are doing everything they can to stop it.” But then in the next sentence he said he thinks the FTC should “step up to the plate” too.
We have already seen that the FTC is trying to flex its muscle on issues like noncompete agreements, seeking to expand its authority beyond the traditional antitrust arena. Fighting misclassification might be the next battle the FTC wants to take on.
Businesses should remain vigilant and know that misclassification claims can come from lots of different places. Soon we may need to add the FTC to that list.
I think for now he’s just testing the waters and floating the idea to see what kind of support it might garner. I doubt the FTC truly has the jurisdiction or authority to enforce worker misclassification, but that doesn’t mean it won’t try — just like it’s trying to prohibit noncompete agreements by calling them a tool of unfair competition.
We’ll watch what the FTC does, but if it gets more aggressive on this issue, I may need to gather some children and animals to try to scream the FTC away.
I would not go so far as to offer sacrifices or beat drums. I’ll leave that to the ancient Javans.
If you’re in the line of totality, enjoy the eclipse!
Last weekend, I didn’t post because I was in D.C., where I had my first tour of the cherry blossoms. One of the most beloved trees at the Tidal Basin is this poor shrub of a tree affectionately known as Stumpy.
Stumpy looks dead, but every March he (he?) sprouts a cheery hat of blooming cherry blossoms. But this bloom will be Stumpy’s last. Because of repeated flooding around the Tidal Basin, the sea wall is being raised, which will require the chopping down of 150 trees.
While Stumpy is in for a rude surprise after the bloom, companies using independent contractors can plan in advance to avoid their own demise.
I was asked recently what are the most common ways that claims of independent contractor arise. I thought, that’s a good blog post topic. So here goes.
Here are the most common way that a claim of independent contractor misclassification can arise:
Individual lawsuit
Class action lawsuit
Government audit, random – IRS, DOL, state DOLs, state tax agencies
Government audit, based on complaint – IRS, DOL, state DOLs, state tax agencies
Former IC files for unemployment. Employer denies IC was an employee, but the agency investigates and concludes the worker was misclassified. Typically, the agency will then assume all similarly situated ICs were also misclassified and the employer failed to pay into the unemployment system for the lookback period (probably 3-4 years) and will then issue a large bill for unpaid assessments, often six figures+.
Workers’ compensation claim, same scenario as for unemployment
There are also unexpected and odd situations that can arise, like here.
A similar list for Stumpy might look like this:
Most likely ways that Stumpy might meet his demise:
Chainsaw
Axe
Lightning strike
George Washington’s chopping method of choice if he could tell a lie
Typhoon
Ok, typhoon seems unlikely. I assume it’ll be a chainsaw.
According to this NBC News story, the New Orleans police department headquarters is in such bad condition that not only are there rats everywhere, but the rats are eating the marijuana from the police evidence lockers.
“They’re all high,” the police superintendent testified in a recent hearing. (Skip to 1:45 of the video. Showing great respect, she calls them “major rodents.”)
Staffing firms and businesses in Illinois were saying “Rats!” when Illinois amended its temp staffing law in late 2023, but now they might be feeling a bit of a high.
The 2023 amendment required staffing firms in Illinois to pay their temps wages and provide benefits that were equivalent to those received by similarly situated workers of the client business where they were placed. The law caused a decline in temp staffing use in Illinois, as businesses understandably didn’t want to disclose their wage and benefit structure to staffing firms.
Last week a federal judge provided some relief, entering an injunction that prevents part of the law from taking effect.
A group of staffing agencies had filed the federal lawsuit, arguing that the state law requirement to pay equivalent benefits was unlawful and preempted by ERISA. The judge agreed, finding that ERISA is intended to promote a consistent national approach to employee benefits and that Illinois could not use state law to impose benefit requirements on staffing agencies.
Section 42 of the amended state law is titled “Equal pay for equal work,” and it requires agencies to pay temporary employees who work at a particular site for more than ninety days within a year at least the same wages and “equivalent benefits” as the lowest paid, comparable, directly-hired employee employed by the third-party client. 820 ILCS 175/42. Or, instead of providing equivalent benefits, agencies could pay “the hourly cash equivalent of the actual cost benefits.”
The law also required the staffing agencies’ clients to provide the agencies with “all necessary information related to job duties, pay, and benefits of directly hired employees” to allow agencies to comply.
Illinois businesses using staffing agencies will still be required to disclose pay information, and the requirement that staffing workers receive equivalent pay remains in effect. But the benefits portion of the law will not be enforced.
Action Item: Staffing agency agreements in Illinois may need to be updated to account for the removal of this requirement. Clients of staffing agencies should not longer be required to disclose employee benefit information.
Now about those rats. They’re eating the marijuana in evidence lockers?! I wish they had rat-cam video of that.
No quips or musical references today. Just hard news, and here it is. If you do not already subscribe to BakerHostetler labor and employment alerts but would like to, drop me an email.
Police in Wejherowo, Poland arrested a 19-year-old man for stealing a horse. The man was caught after neighbors reported that he was trying to lead a horse up the stairs to his third floor apartment.
Why would someone do that? Apparently he was trying to conceal the horse and thought his apartment would make a good hiding place. (After all, who would look in a third-floor walk up for a missing horse?) But getting the horse to the apartment was the man’s undoing.
He didn’t think through his plan. Don’t be like that man. Today’s post is to help you think through your plan in advance, but in the context of retaining non-employee labor, not stealing a horse.
I generally recommend having three types of agreements in your stable of documents. (Heh heh, see what I did there?) Each serves a different purpose and contains different features, even though there is often some overlap.
1. Independent Contractor Agreement. This should be crafted for use with solo independent contractors (1099s), regardless of whether there’s a single member LLC or a sole proprietorship.
The goal here is limit the risk of misclassification, that is, a finding that the worker is really your employee.
The agreement should identify and memorialize the facts that support IC status, such as that the company retains no right to control how the work is done, where it’s done, when it’s done, steps, sequence, etc.
If there are lots of ICs doing the same thing, individual arbitration agreements with class waivers can be highly useful to include too, as they reduce the downside risk of misclassification.
2. Vendor Outsourcing Agreement. This document is for when a function is entirely outsourced, such as in the hospitality industry, where it is common to outsource the housekeeping function.
There are two goals here.
One goal is to memorialize the facts that will help avoid a finding of joint employment. These workers should be managed independently of your company’s employees and should not be directly supervised by your managers.
The second goal is make it difficult for a disgruntled worker of the vendor to allege joint employment, and there are various tools in the toolbox to help accomplish this objective.
3. Staffing Services Agreement. This document is to be used when a third party provides staff augmentation services or other workers who are commingled with your employees or supervised by your managers. In this scenario, there’s a reasonable risk of joint employment.
We want to use the contract to build defenses.
First, we want to lay the groundwork for a claim against the vendor if the vendor fails to pay its employees in accordance with the law.
Second, we want to throw obstacles in the way of anyone who might want to bring a joint employment claim. Individual arbitration agreements with class waivers are helpful in that regard.
If you’re working with a staffing agency, the form they provide you is not likely to help limit your legal risks. It’s always better to start with your own form.
Don’t Horse Around
Agreements provided by your vendors are unlikely to provide you with any meaningful protections. Different agreements have different purposes, and these three agreements should each be used in different situations.
It doesn’t work to use a staffing agreement with outsourced employees, and it doesn’t work to use an independent contractor agreement with outsourced labor employed by the vendor. Those workers aren’t independent contractors at all; they’re employees of the vendor. The legal risk you’re trying to address is whether you’re a joint employer. That’s a very different legal question than whether the worker is misclassified.
So be sure to use the right kind of agreement for the right kind of situation.
That means planing ahead and having the right forms on hand, ready to go. As our friend in Wejherowo learned the hard way, you’ve got think all the way through your plan in advance.
I could think of a few songs called “Hold On” – Yes and Wilson Philips were the two that first came to mind. But I had no idea how popular a song name that was.
According to Wikipedia, there are at least 17 albums called Hold On and 311 songs with that name. Who knew?
“Hold on” is the theme of today’s post because that’s what a federal court in Texas decided to do with the NLRB joint employer rule. Judge H. Campbell Barker pushed back the effective date of the rule from Feb. 26 to March 11.
But that doesn’t mean the rule will go into effect March 11.
In the meantime, the judge is considering the arguments presented by both sides and may invalidate the rule entirely. I believe the delay is to buy time to draft a thorough opinion. Whatever the ruling is, it will be appealed to the Fifth Circuit.
For now, employers should review their agreements with vendors supplying labor (e.g., staffing agencies, outsourced functions) and use this opportunity to button them up. Here are ten things that should be in your staffing agency agreements but probably aren’t.
Employers should also review the degree of control they exercise over outsourced labor. On one hand, staffing workers who are intermingled with regular employees and supervised by employer managers are likely in a joint employment relationship already. But with outsourced workers, steps should be taken to avoid joint employment. The new NLRB rule would make it harder to avoid joint employment, and employers should take steps to minimize control over outsourced workers.
Before reading this post, please enjoy this adorable video of a porcupine eating an apple.
The porcupine seems harmless and cute, but remember – it’s still a porcupine. Those quills are sharp, and they can impale small would-be predators.
And speaking of impale: A Congressional resolution, if passed, would impale the NLRB’s joint employer rule. The effort has enough support that it could bear fruit. Like the tasty apple in this video.
On January 12, the House passed H.J. Res 98, which would nullify the NLRB’s new joint employer rule. The resolution passed, 206-177, with eight Democrats voting in favor.
The Senate is considering an identical companion bill, S.J. Res 49, which has the support of at least one Democrat. Senator Manchin is a co-sponsor.
Under the Congressional Review Act, Congress can nullify an agency regulation with a simple majority of votes in each house. Sixty votes are not needed in the Senate.
But if the bill passes, President Biden can still veto it, and he has indicated that he would.
Meanwhile, the rule continues to face challenges in federal court. If Congress does not nullify the rule, a court might enter an injunction to prevent it from taking effect. Having reviewed the arguments presented to a federal judge in Texas last week, I think there’s a strong chance the rule will be set aside, at least temporarily.
Remember: The NLRB joint employer test is supposed to be a common law right-to-control test. The scope of the new rule is substantially broader and would create joint employment relationships automatically, including in situations where the common law balancing test would not result in a finding of joint employment.
We can expect a ruling from the court this week, since the NLRB joint employer rule is scheduled to take effect next Monday, February 26.
The 1980s British band the Thompson Twins were not twins. They didn’t even look alike. Instead their name came from a comic strip called The Adventures of Tintin, which featured detectives named Thompson and Thompson, who were also not twins.
I don’t know why the comic strip seemed like a good name for a band. I’ve always thought a good name for a band would be Cantaloupe. Not saying I’m right. My point is just that there’s a lot of room here for a difference of opinion on band names.
The only reason I remember the Thompson Twins is that in 1983, they released a song called “Hold Me Now.” (I have a picture, pinned to my wall…) The song received a lot of air time, then faded to a distant memory, only to be revived when it pops up on one of the 80s music channels. Or in this blog post.
“Hold Me Now” is also the theme for today’s post. We’re not going so far as to recommend “Lovin’ Touchin’ Squeezin’.” That could border on sexual harassment. Instead, think just a friendly hug.
We’re talking, of course, about joint employment.
The usual strategy with joint employment is to avoid it all costs. Avoid supervising staffing agency temps. Do not direct their work. Don’t hire, fire, schedule, discipline, or maintain personnel records.
And that’s the right strategy when it’s possible to avoid joint employment. But sometimes avoiding it isn’t possible.
Often staffing agency temps are used to fill gaps where you don’t have enough employees. Sometimes they’re seasonal, and sometimes temp-to-hire. But if they’re intermingled with your regular employees, doing the same work, reporting to the same supervisor, and taking the same direction on how to perform the job, you’re probably already a joint employer.
Is that bad? Not necessarily.
Joint employment is not illegal. With one exception (below), joint employment is not a problem unless the primary employer — the staffing agency — doesn’t do what it’s supposed to do. If the agency doesn’t pay minimum wage or overtime, for example, or miscalculates the regular rate of pay, then both joint employers are 100% liable for the violation. An aggrieved plaintiff can recover from either party.
So if you’re already a joint employer, the goal should be to prevent the harms. That’s when you might want to embrace joint employment. Once you are a joint employer, you’re a joint employer. You can’t be more or less; it’s binary.
If you’re already a joint employer, you can lean into it. Make sure that agency workers are clocking in and out at the proper times. Make sure they don’t work off the clock. Make sure they take a proper meal break. Make sure they are being paid a minimum wage and overtime. You can even ask them to confirm that they’re being paid correctly and that they have no pay dispute with the agency. They’ll probably appreciate the show of concern.
If you’re already a joint employer, you can also direct and control their work, the same way you direct your own employees. Exerting more control will not change the result. Exerting more control may also help you ensure quality standards and enhance the customer experience.
But again, this strategy is only appropriate if you’re already a joint employer.
I wrote above that there is one exception to joint employment, for the most part, not being a problem if the staffing agency does what it’s supposed to do as an employer.
The exception is the National Labor Relations Act. If you’re a joint employer under the NLRA, you will have an obligation to bargain with a primary employer’s union. A joint employer must respect the right of its employees to engage in protected concerted activity. Employees may strike or picket a joint employer, the same way it can strike or picket a primary employer.
The advice you usually hear is to avoid joint employment. But that’s not necessarily the right strategy for everyone. Sometimes, it’s ok to give it a nice embrace.
1982 was a great year for music. Not only did it give us “867-5309 (Jenny)” by Tommy Tutone and “Tainted Love” by Soft Cell, but if you look a little harder, you’ll also notice that several releases that year contained important hidden messages about joint employment.
On one hand, you had the opposers, like “I Can’t Go For That (No Can Do),” in which Hall & Oates were staying away from every action that could lead to a finding of joint employment. Wanna hear a little known fact I just made up? Here were the original opening lines from the song:
Easy, ready, willing, overtime Where does it stop, where do you dare me to draw the line? You sent me staffing temps, now you want me to exert control Don’t even think about it, say no go
Rick Springfield offered some tips about keeping outsourced workers separated from your primary workforce. When you supervise, schedule, direct, and hire/fire someone else’s employees, you’re increasing the likelihood of joint employment. (More info here.) Tip for management: “Don’t Talk to Strangers.”
Hey temp worker, are you feeling left out because we won’t hire/fire, schedule, control your work, set your pay, or maintain your employment records? You’ll get no sympathy from Quarterflash. “Harden My Heart.”
On the other hand, there’s a counter-intuitive approach toward joint employment that I sometimes advocate. If you already know you’re a joint employer based on the facts, then you might choose to embrace it. In other words, avoid the harms. Make sure the workers properly record their time, take their meal and rest breaks, and don’t work off the clock. (Read more here.)
You’ve got to pretty sure you’re already a joint employer to adopt the “Open Arms” strategy, advocated by Journey and supported by Fleetwood Mac in “Hold Me.”
I’ll write more about the Embrace Joint Employment strategy in upcoming posts. It’s a question I am asked about a lot, probably because it’s the opposite of what everyone is generally told.
So maybe Kenny Loggins was right when he advised “Don’t Fight It”?
Who Is My Employee? 