In school we all learned that the longest river is the Nile. But some say the Amazon is longer. In the atlas “Maps of Useful Knowledge” (1846), the Amazon was listed as 3200 miles and the Nile 2750 miles. The current U.S. Geological Survey shows the Nile at 4132 miles and the Amazon at 4000 miles. Brazilian researchers claim the Amazon is 4331 miles long and the Nile a mere 4258 miles.
So which is it, and how can it be changing? Apparently the controversy involves disputes over where the rivers start, where they end, and how to track changes in the rivers’ course.
Whatever you learned about the test for who is an independent contractor under the Fair Labor Standards Act is subject to change too.
Remember October 2022? Elon Musk completed a $44B deal to take over twitter. Germany took steps to legalize marijuana. And the DOL released a proposed new regulation to modify the independent contractor test.
The proposed rule received more than 50,000 comments. We’ve been speculating about when the DOL might issue a final rule.
We’ve now learned that the DOL is targeting this fall for release of the new rule. The latest version of the regulatory agenda lists August as the target release date. August may be a bit ambitious, but the fall seems likely. On June 9, a federal court of appeals granted a motion by the DOL for a 120-day stay in a pending lawsuit. The DOL asked for the stay to allow it time to release the new rule.
So it seems that whatever we know now about the length of the Nile River, the length of the Amazon River, and the independent comntractor test under the FLSA is subject to change. Hopefully we’ll know more about all three by sometime this fall.
We can be pretty sure the final rule will closely resemble the multi-factor balancing test released in October 2022. Businesses can plan accordingly by being proactive in assessing their relationships with independent contractors and taking steps to reduce risk now.
As I wrote a few days ago in the BakerHostetler blog, The Bargaining Table…
The sky is not falling.
When the National Labor Relations Board (NLRB or Board) issued its Atlanta Opera decision on June 14, I read the decision. Then I read some of the commentary issued quickly by news outlets right after the decision dropped. I’m not sure whether all of those commentators read the actual decision. To those who think this decision will have any significant impact on independent contractor classification under the National Labor Relations Act (NLRA or Act), I disagree.
In Atlanta Opera, the Board purported to revise the test for determining employee status under the Act. The Board said it was overruling the 2019 SuperShuttle DFW case and readopting the FedEx II standard from 2014. But is there really any practical difference? I think not.
The albumOld New Borrowed and Blue was released in 1974 by the British rock band Slade. It reached No. 1 on the UK albums chart. Slade recorded the album shortly after a near-fatal car crash involving drummer Don Powell, who played drums on the album despite walking with a cane and needing to be lifted onto his drum stool.
For whatever reason, Slade doesn’t get much air play on classic rock stations in the US. I remember the songs “Run Runaway” and “My Oh My,” both released in 1984, but I don’t remember hearing much more from Slade.
Getting back to Old New Borrowed and Blue, the “Borrowed” portion of the title refers to the fact that at least one song, “Just Want a Little Bit,” was a cover. It wasn’t Slade’s song, until it was. They borrowed it and made it their own.
Can the same thing happen in employment settings? Yes, it can.
We often consider the concept of joint employment, but did you know there’s also a doctrine called the “borrowed employee” doctrine?
What is a “borrowed employee,” and why does it matter?
The concept of “borrowed employee” arises in negligence cases involving vicarious liability. The “borrowed employee” doctrine is a defense that can be asserted if an injured employee at one company alleges that an employee of another company negligently caused the injury. If your employees ever provide services for another company, pay attention.
Philip Pantano, a mechanic employed by Container Services of New Jersey (CSNJ) had his foot crushed and amputated following a workplace accident. Pantano alleged that an employee of a different company, Marine Transport (MT), was negligent and caused the injury. Pantano claimed that MT was vicariously liable for that employee’s negligence and should have to pay for the damages. A jury agreed and awarded Pantano $861,000, on top of his workers’ compensation recovery.
The issue that went before the New Jersey Supreme Court centered around whether MT could be held vicariously liable for its employee’s negligence. The answer would depend on whether the MT employee who caused the accident was deemed a “borrowed employee” of CSNJ when the accident occurred. If MT could prove that the MT employee who caused the injury was a borrowed employee of CSNJ at the time of the accident, then MT is not vicariously liable, even though the worker was being paid by MT and was MT’s W2 employee.
The borrowed employee doctrine is a creation of state law. In New Jersey, there’s a two-part multi-factor test to determine whether someone is a “borrowed employee” for purposes of vicarious liability.
The first part of the test looks at control, which can be demonstrated through “direct evidence of on-spot control” or broad control based on method of payment, furnishing equipment, or having the right of termination. If the primary employer has control over the worker, then we go to part two of the test.
The second part of the test is the “business furtherance” prong. If the worker was furthering the primary employer’s business when committing the negligent act, then the primary employer is vicariously liable. “Business furtherance” is established under NJ law if (1) the work being done is within “the general contemplation” of the primary employer’s business, and (2) the primary employer derives economic benefit by loaning its employee.
Applying the test, a jury is supposed to determine whether the employee was acting on behalf of the primary employer, or was acting as a borrowed employee of the secondary employer, or if both are responsible.
Tip: It is in a primary employer’s interest to show that its loaned employee was acting as a “borrowed employee” of the other company at the time of the accident, if the injured employee was also employed by that other company.
Here’s why. If the employee who caused the accident was acting as a “borrowed employee” of the company that employed the injured worker, then the injured worker’s remedy is limited to workers’ compensation law. But if the accident was caused by the negligence of another company’s employee (and the worker is nit a “borrowed employee”), then the injured worker can bring a negligence claim against that other company.
If all of this is making your head hurt, remember a few things here:
1) When you lend an employee, make sure there’s worker’s compensation coverage all around.
2) When you lend an employee, make sure you have a well drafted agreement between the two companies. Allocation of risk should be addressed in advance.
Borrowing employees is commonplace. If you plan in advance, the arrangement can work well for both companies, and there’s no need to Run Runaway.
Rojakorn Nanon is a businessman in Thailand. He used to feel weak and tired but then started drinking something each day that wakes him up and gives him energy.
Thailand, you see, is one of the top 25 coffee producers in the world, growing mainly arabica beans (the good kind) in the north and robusta beans (icky bitter) in the south. It would not be surprising if our friend Rojakorn discovered the wonders of a morning cup of coffee.
But no.
Twice each day, Rojakorn drinks crocodile blood mixed with alcohol. He gets the concoction from a nearby crocodile farm owner (largest croc farm in Trang province!), who sells the wonder drink for 200-300 baht per glass, about $6-9. A latte would be cheaper, even with a few extra shots, and it would be a much more traditional way to stay focused at work. When you live in a country where coffee is plentiful, there’s no need to think so far outside the box.
The same advice applies when addressing this commonly asked question: Should I give the company’s employee handbook to independent contractors?
The answer is almost always no. Don’t think outside the box on this one. An employee handbook is for employees. It explains employment policies. It provides detail about employees’ attendance rules, vacation time, leaves, exempt/non-exempt classification, and other terms that apply only to employees. These items don’t apply to independent contractors, and if you’re telling your independent contractors that you expect them to follow the policies in the handbook, you may be suggesting that all sorts of things apply them that should not apply to them.
Yes, it’s true that there are some workplace rules you’ll want your contractor to follow. Your discrimination and harassment policies, for example, can and should apply to contractors. But most of that other stuff doesn’t apply. You can include a clause in the independent contractor agreement that the contractor will not engage in any unlawful discrimination or harassment. A simple contractual requirement should be sufficient. Or you can provide a standalone copy of that policy, but you may need to modify it a bit to remove inapplicable parts or to change the terminology.
Many large companies, especially global companies, have Codes of Conduct that apply to vendors and suppliers. You can give those to independent contractors. They are intended to apply to non-employees, and they are written in a way that does not suggest an employment relationship.
You can also subject a contractor to premises rules that do not include control over how the work is done. You could require a contractor to comply with a weapons rule or a violence rule. You could require a contractor to comply with a rule prohibiting unauthorized visitors onsite. But don’t provide the full list of employee workplace rules that may be attached to your disciplinary policy, since many of those prohibitions are specific to employees.
When it comes to employee handbooks and independent contractors, keep it simple. Employee handbooks are for employees. In this situation, there’s no need to think outside the box.
In 1979, my sister and I watched a kids’ movie called C.H.O.M.P.S., a “comic science fiction family film” (according to Wikipedia), which featured a Benji-lookalike border terrier named CHOMPS. Except the dog wasn’t really a terrier, and wasn’t even really a dog.
C.H.O.M.P.S. was an acronym for Canine Home Protection System, and the terrier was a robot [insert plot of every children’s movie here] invented by a brilliant kid, who then outsmarts bumbling adults who try to kidnap the dog but prove inept and not nearly as clever as our young hero.
The movie scores an abysmal 29% on Rotten Tomatoes and I don’t remember much about it, except that my sister and I still talk about it.
Although we’re all grown up now, we’re still overrun with acronyms. Two acronyms often appear in the context of retaining contingent labor, and if your company makes frequent use of temp staffing or other contingent workers, these may be good to know.
First, there’s MSP. An MSP is a Managed Service Provider. MSPs can manage many different things, but in the context of employment law and the contingent workforce, they can manage temporary staffing needs for a business. Generally, they will contract directly with multiple staffing agencies and taking the laboring oar in overseeing those relationships. MSPs can also identify and retain independent contractors. They will monitor spend and can produce all sorts of nifty reports. If your business uses an MSP, then when you need temp labor or other contingent workers, you tell the MSP what you’re looking for, and the MSP does the rest.
Next, there’s VMS. VMS stands for Vendor Management System. It is an online portal through which contingent workforce staffing needs can be arranged and managed. MSPs generally use VMSs, but a company can also use a VMS without an MSP.
When beginning a relationship with an MSP, sophisticated businesses will take a hand-on approach in negotiating the terms of service with the MSP, as well as negotiating (or providing) the form agreements that the MSP will enter into with staffing agencies and independent contractors. Your company is not a direct party to those agreements but, rather, is a third party beneficiary.
Those staffing agency agreements should generally include the same protections against joint employer liability that you’d include if you contracted with the staffing agency directly. Click here for Ten Things That Should Be in your Staffing Agency Agreements But Probably Aren’t.
You’ll also probably want all contingent workers retained through the MSP to sign arbitration agreements with classs action waivers, as well as individual agreements addressing the protection of your confidential information and ownership of any IP created during the assignment.
Bonus tip: Be careful not to say that all deliverables are “works made for hire.” Under some laws, including in California, declaring deliverables to be “works made for hire” automatically converts the relationship into employment. Bummer. Use assignment instead. You can read more about that topic here.
For companies that make frequent use of contingent labor, MSPs and VMSs can save a lot of time and aggravation. When engaging MSPs, it’s worth the up-front investment to renegotiate and modify the template agreements that the MSP will use on your company’s behalf.
If you’re later alleged to be a direct or joint employer of the contingent workers, well-drafted agreements will provide vital home protection — even better than you could get from C.H.O.M.P.S.
Bonus Fun Fact: Red Buttons was in this movie. It’s fun to say Red Buttons. Try it. Really. Say it aloud. But say it quietly in case someone is listening. You’ll like it and will probably keep saying it quietly to yourself all day, with a slight smile, because no one else is in on your little secret.
I like riddles. How could you not? Here are two. Answers are at the bottom of the post:
1. What has to be broken before you can use it? 2. I’m tall when I’m young, and I’m short when I’m old. What am I?
Getting back to business, here’s a question I have been asked many times. It seems a bit like a riddle, with no clear answer and requiring careful thought. But I’m going to declare No Riddle. That’s because I think there’s a straightforward answer, and it might not be what you were thinking.
Here’s the question (in case you are among the 0% of today’s readers who skipped this post’s headline):
Should we cap a temp’s assignment at 6 months? 12 months?
To answer today’s question, I’m going to have to ask you two questions. (Sorry, that’s how we play this game.)
Question 1: As temps, my assumption is that they are intermingled with the company’s employee workforce, doing the same thing as employees, working side by side with employees, and reporting to the company’s supervisors. Is that accurate?
Question 2: Are they employed by a staffing agency and treated by that staffing agency as its W2 employees?
If you answered yes to both, then the amount of time temps are assigned to the company will almost certainly have no bearing on their status. They will be employees of the agency and probably also joint employees of the company. There are various joint employment tests, and we can go through them (fun!) but it would be largely an academic exercise.
From a practical business standpoint, we should assume that any time the answer to my two questions are yes, these two conclusions will follow:
First, The entity receiving the services is likely to be a joint employer under the FLSA, NLRA, anti-discrimination law, and state laws, regardless of whether the temp is assigned for five months or five years. When temps are intermingled with employees in a staff aug situation, there is very likely joint employment, regardless of which test is applied. Arguments could be made under some tests that there is no joint employment, but for purposes of trying to answer the question above in a practical business-oriented way, I would assume there’s going to be joint employment.
Second, joint employment in this scenario is a risk inherent in working with temp staffing agencies. But that’s not necessarily a problem. Joint employment is not unlawful and, with one exception, joint employment only becomes a problem if the staffing agency/primary employer fails to do something it is legally required to do, such as pay overtime or minimum wage. In that event, both companies would be jointly liable if there is a joint employment relationship.
The one exception is the NLRA. If the company is a joint employer, then the various protections of the NLRA start to cross over the temp employee and direct employee populations, such that if the agency workers were to organize, the company might have to bargain with them; or there could be a mixed unit; or if agency workers picketed the company, it would not be illegal secondary picketing.
So, if the answer to both of my questions is yes, then I would not be concerned with the duration of assignment. The company is very likely a joint employer already.
Some companies have a practice of not engaging temps for more than six months or year before deciding either they don’t fit or they should be hired directly. But there is no rule of thumb, and this sort of practice is often implemented based on the misunderstanding that capping a temp’s service time would reduce the risk of joint employment in a staff aug situation.
In reality, it’s unlikely to make any difference. In a staff aug situation, once you’re in the swimming pool of joint employment, you’re wet. It doesn’t matter if you’re on the top step or in the deep end. And once you’re a joint employer, you might as well exercise as much control as you want. You can embrace it at that point.
On the other hand, if you would answer no to either of my two questions, then limiting the duration of the assignment could be helpful in reducing the risk of independent contractor misclassification, especially if the workers are 1099 contractors.
If the answer to either of the questions is no, then we’d have to dive deeper into the facts to be able to say whether limiting the duration of the assignment would make any difference at all.
So, did you get the answer to the two riddles? Scroll down to see the answers.
Last week I was in Boston, spending time with many of my favorite people at our BakerHostetler Labor and Employment Group Retreat. I always enjoy spending time with the people in our other offices. They are wonderful, kind, smart, and a joy to be around.
As part of the programing, each practice team leader gave a six-minute TED-style talk. In my session about the Contingent Workforce Practice Team, I included a slide that I wanted share here.
We sometimes hear from companies that they don’t think they’re at risk for an independent contractor misclassification claim. They sometimes say, we’ve been doing it this way forever, and we haven’t been sued.
To that I would say, you mean you haven’t been sued yet.
Here’s what can happen when companies get sued for independent contractor misclassification.
There are quite a few songs about gals named Sue. There’s “Peggy Sue,” “Wake Up Little Susie,” “Susie Q,” and “Runaround Sue.” There’s a even a song about a “Boy Named Sue.” (The results of a recent survey consisting of me revealed that “Boy Named Sue” is by far the best of the Sue-themed songs.)
As far as I know, no one has yet written a song about Labor Secretary nominee Julie Su, but I would not be surprised if one of the unions in California wrote a ballad to applaud her work heading the state’s Division of Labor Standards Enforcement (DLSE) and Labor and Workforce Development Agency. Maybe something like Fatboy Slim’s “Praise You.”
Su is Biden’s pick for Secretary of Labor, following the resignation of Marty Walsh, who left to lead the NHL player’s union. Her nomination is controversial, and businesses fear they’ll be singing the blues if she’s confirmed.
But in a recent Senate committee hearing, she provided at least two answers that businesses will like.
First, she said she would not advocate for an independent contractor test modeled after California’s AB 5. She testified that it’s her view (mine too, probably the courts’ too) that only Congress could adopt an ABC Test to determine worker classification under the Fair Labor Standards Act (FLSA). That’s reassuring.
Second, she said that the DOL’s next regulatory agenda would not include a new joint employer test. The 2020 joint employer regulation adopted by the Trump DOL has been rescinded, and there has been no replacement regulation, which leaves a regulatory crater in the Code of Federal Regulations, where the joint employer rule used to be. Read more here.
On April 26, a Senate committee voted to advance Su’s nomination to the full Senate. All Democrats on the committee voted yes, and she received no Republican support. In a 51-49 Senate, the success of her nomination will likely depend on whether she can secure the support of Senators Manchin, Sinema, and Tester and whether Sen. Feinstein is healthy enough to vote.
And on that note, we turn back to Johnny Cash:
He said, “Now you just fought one heck of a fight And I know you hate me, and you got the right to kill me now And I wouldn’t blame you if you do But you ought to thank me, before I die For the gravel in ya gut and the spit in ya eye ‘Cause I’m the son of a bitch that named you Sue”
In the Muppet Movie, Kermit famously wondered, “Why are there so many songs about rainbows?”
Articles in Psychology Today and Remind Magazine have attempted to answer this question. A blog post on the Tough Pigs website almost took a contrary view in a post titled “Why There AREN’T So Many Songs About Rainbows,” but that was a twitter gimmick asking for wrong answers only.
Turns out there are quite a few songs about rainbows. You can google it. There’s also a pretty good band called Rainbow (“Man on the Silver Mountain,” “Since You Been Gone”), and the University of Hawaii’s teams are the Rainbow Warriors, f/k/a just the Rainbows, which probably didn’t frighten much of their football competition in the Mountain West.
I’m inspired by Kermit’s lyrical question, but my thoughts stray in a different direction: Why are there so many … joint employment tests, just under the Fair Labor Standards Act (FLSA)? Shouldn’t courts applying a federal law use the same test in every jurisdiction? Of course they should, but they don’t.
Here are the current tests for joint employment under the FLSA, in a nutshell:
The First, Third, Fifth, and Ninth Circuits apply a four-factor test based on a 1983 case called Bonette. The test considers whether the putative joint employer (1) can hire and fire employees, (2) controls employees’ work and employment conditions, (3) determines rates of pay, and (4) maintains employment records. Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983).
The Second Circuit rejects the Bonette test as too focused on agency, instead applying a non-exclusive six-factor test. Zheng v. Liberty Apparel Co, Inc., 355 F.3d 61, 71-76 (2d Cir. 2003).
The Eleventh Circuit applies an eight-factor test that includes the Bonette factors and adds factors related to economic dependence. Layton v. DHL Express (USA), Inc., 686 F.3d 1172, 1176-78 (11th Cir. 2012).
The Fourth Circuit is having none of what the other circuits are having and goes in an entirely different direction. The Fourth Circuit’s test compares the two putative employers to determine whether they are “completely dissociated.” Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017); Hall v. DIRECTV, LLC, 846 F.3d 757 (4th Cir. 2017). The Fourth Circuit’s test is so far off the mark that it relies on a (mis)interpretation of a federal regulation that no longer exists.
And speaking of federal regulations that no longer exist, the Department of Labor’s regulation defining joint employment under the FLSA? You guessed it. It no longer exists.
In 2021, the DOL rescinded the joint employer regulation that had been adopted by the Trump DOL in 2020. The 2020 regulation has rescinded the previous regulation, which had been around for decades. No new regulation has been adopted, and so there is no regulation. Part 791 of Title 29 of the Code of Federal Regulations, formerly home to the DOL’s joint employment regulation, is empty.
So, why are there so many tests for joint employment? No good reason. There just are.
But that could change. Following a recent Ninth Circuit decision tagging Los Angeles County as a joint employer, L.A. County has petitioned the Supreme Court to reconsider the joint employment test. So we’ll see what happens there. A conservative Supreme Court majority might recognize how absurd it is that one federal statute can be interpreted so many different ways. Maybe they’ll take the case and announce one test for everyone.
In the meantime, if you’re looking for the joint employer test under the FLSA, you’ll need to look in several places. The test depends on where you are. All of us under its spell. We probably know that it’s ma-gic!
Kathleen Corradi has been an educator, a land use and sustainability expert and — now — New York City’s first Rat Czar.
The word czar derives from the Latin Caesar and had been used by the Russians to describe their emperor from the 1500s until the 1917 February Revolution, which led to Czar Nicholas II’s unemployment (and, not to bury the lede, the subsequent imprisonment and murder of the former czar, his family and staff).
But Ms. Corradi does not seek to be emperor of the rats. She seeks to eradicate them. Hell of a thing for an emperor to do, don’t you think?
NYC advertised the position with a bit of whimsy, seeking someone “bloodthirsty” with a “general aura of bassassery.”
NYC exercises considerably less whimsy, however, when dealing with independent contractors in its midst.
In most jurisdictions, independent contractors receive none of the protections of employees. NYC, however, imposes some additional burdens on businesses retaining contractors. Here are four things that New Yorkers retaining independent contractors should know:
1. NYC independent contractors are protected against discrimination and harassment under the NYC Human Rights Law.
2. NYC businesses with 15 or more workers must provide annual sexual harassment training to independent contractors, if the contractors (a) work for that business more than 80 hours in a calendar year, and (b) perform on at least 90 days, which don’t have to be consecutive.
3. NYC’s Freelance Isn’t Free Act requires written contracts with freelancers who provide services worth $800 or more, and the contracts must include specified information. This law applies to individuals retaining contractors, not just businesses.
4. NYC rideshare drivers must receive at least a specified minimum wage.
Who Is My Employee? 