Teacher, don’t you fill me up with your rules (fn1)
Brownsville Station was a rock band formed in Ann Arbor in 1969. (Go Blue!) Their biggest hit, Smokin’ in the Boys Room, reached #3 on the Billboard charts and was later covered by Motley Crue. The song was Motley Crue’s first Top 40 hit. Apparently LeeAnn Rimes covered the song too in an album called Nashville Outlaws: A Tribute to Motley Crue, which is I guess was her tribute to a tribute to Brownsville Station.
Business groups in New Jersey and Illinois have also been pleading don’t you fill me up with your rules – in particular, rules related to the use of temp workers.
As discussed here and here, these two states passed temporarily worker laws that required temps to be paid wages and benefits equivalent to the regular workers they are supplementing.
Those rules are both in effect, but there are still several moving parts you should know about.
In Illinois, a judge struck down the portion of the law that required payment of equivalent benefits, ruling that this portion of the law was preempted by ERISA. Illinois lawmakers are now considering options to amend the law to require the payment of the value of benefits, if not the benefits themselves.
In New Jersey, the law took effect, but there’s an active lawsuit in which staffing and other business groups have challenged the law. The case is pending. New Jersey Staffing Alliance et al. v. Fais et al., No. 1:23-cv-02494, D. N.J.
For now, these two temporary work laws remain in effect, except for the benefits aspect of the Illinois law. But the situation remains fluid. It also would not be surprising if other states enacted similar laws. Companies using temp labor should continue to monitor these developments.
fn1 – Everybody knows that smokin’ ain’t allowed in school.
There was no post last week because I was on vacation. We went to Lake Michigan for a week of lakeside R&R, which was terrific and relaxing. I mostly unplugged, read books having nothing to do with lawyering, and went on two long beach runs (memo to the autocorrect gods: not Long Beach (CA) runs).
The only sad part was that blog mascot and loyal friend Zippy passed away after 16 years of labradoodling. She had been fighting dementia and cancer, which is not a winning combination. The only positive was that the whole family was together, and the kids got to see her one last time.
You may remember Zippy from such blog lists as Face It: The New DOL Independent Contractor Rule Faces Court Challenges; andHow to Support Prong C of the ABC Test, and Why You Can’t Lie Down When Faced with an Audit; and Get Aligned on Commissions: Ten Tips for Using Independent Contractor Sales Reps.
Now that I’ve got that out of the way, and now that we’re back home, the refrigerator is empty and so it’s time to go shopping.
The NLRB is going shopping too, despite what you may have read elsewhere.
On July 19, the NLRB submitted a motion to voluntarily dismiss its appeal in the Fifth Circuit. The NLRB had filed this appeal after a district court judge in Texas invalidated the NLRB’s 2023 joint employer rule. The effect of that ruling was to reinstate the 2020 rule, which makes it difficult to find joint employment under the NLRA.
So the 2023 rule is dead, right? That’s what I’ve been reading. The NLRB must be hanging its head and admitting defeat, right?
I’m not so sure that’s what the NLRB is doing. You see, there is another set of appellate challenges to the 2023 joint employer rule pending in the District of Columbia Court of Appeals. The D.C Court of Appeals is viewed as a more favorable venue for the NLRB to litigate than the more conservative Fifth Circuit.
In June, the D.C. Circuit ruled that it would hold its case in abeyance until the Fifth Circuit ruled, handing a win to business groups fighting the rule, since employers would rather have this issue decided in the Fifth Circuit.
By withdrawing its Fifth Circuit appeal, the NLRB ensures that the dispute will shift back to the D.C. Circuit. Presumably, the D.C. Circuit will reopen its case and consider whether the new joint employer rule can survive.
So when the NLRB withdrew its appeal in the Fifth Circuit, I don’t think that means the Board is giving up the fight. I think they might just be going shopping for a more favorable venue.
I could be wrong. In its Motion for Voluntary Dismissal, the NLRB writes that it “would like the opportunity to further consider the issues identified in the district court’s opinion” and that it seeks dismissal “to allow it to consider options for addressing the outstanding joint employer matters before it.”
I think that means judge shopping, not quitting. We’ll see what happens in the D.C. Circuit.
That’s because I just read the 65-page opinion in Johnson v. NCAA. The issue before the Third Circuit Court of Appeals was whether college athletes could plausibly be employees under the Fair Labor Standards Act (FLSA).
A massive class action had been brought, and the NCAA and other defendants filed a motion to dismiss. The district court denied it, allowing the case to move forward. The NCAA was allowed an immediate appeal, but the Third Circuit has affirmed and allowed the case to proceed.
Here’s why I am whelmed.
I am underwhelmed by the Third Circuit’s legal analysis, which has more faults than a novice tennis player learning to serve. I am overwhelmed by the massive unintended consequences that would flow from an eventual finding that college athletes are, in fact, employees.
Overwhelmed plus underwhelmed must equal whelmed, right?
The word overwhelmedcomes from the Middle English whelmen, which meant “to overturn.” For speakers of Modern English, that’s nothing more than a fun fact, though, because we’d have a really hard time understanding anyone speaking Middle English anyway. Maybe you had to read The Canterbury Tales in school? Cliffnotes, please.
I am underwhelmed by the legal analysis for many reasons.
1. The Third Circuit acknowledges but then disregards the Supreme Court’s instruction in Walling v Portland Terminal that “[a]n individual who ‘without promise or expectation of compensation, but solely for his personal purpose of pleasure, worked in activities carried on by other persons either for their pleasure or profit,’ is outside the sweep of the Act [FLSA].”
2. The Third Circuit acknowledges but the disregards the Department of Labor’s longstanding position and guidance in its Field Operations Handbook, sec. 10b03(e), which says that the activity of college students participating in interscholastic athletics primarily for their own benefit as part of the educational opportunities provided to the students by the school is not ‘work.’”
3. The Third Circuit ignores the long-recognized concept that play is not work. The dictionary definition relied upon by the Supreme Court in the Walling case differentiated “work” from “something undertaken primarily for pleasure, sport, or immediate gratification….”
4. The Third Circuit butchers the well-established Economic Realities Test, which is the standard for determining employee status under the FLSA. The Third Circuit instead advocates for applying the common law test of agency, which, according to the Supreme Court, is not the test.
5. The Third Circuit pays little attention to the fact that students who elect to play sports do so with no expectation of payment, making them volunteers. Volunteers are not subject to the FLSA (whether at U. Tenn. or otherwise).
6. The Third Circuit makes up a new four-part test (out of thin air) for determining when “college athletes may be employees”:
We therefore hold that college athletes may be employees under the FLSA when they (a) perform services for another party, (b) “necessarily and primarily for the [other party’s] benefit,” Tenn. Coal, 321 U.S. at 598, (c) under that party’s control or right of control, id., and (d) in return for “express” or “implied” compensation or “in-kind benefits,”
I am overwhelmed by the massive unintended consequences that would flow from a ruling that 500,000 collegiate athletes across 1,100 schools are employees of their schools.
If these schools had to pay minimum wage and overtime to all college athletes, that would bust their athletic budgets. Sports that do not pay for themselves (essentially all except major football and some basketball programs) would have to be cut.
Remember when Title IX caused schools to cut unprofitable men’s sports like diving and swimming so they could equalize their offerings of men’s and women’s sports? If only football and men’s basketball are profitable, then schools will need to maintain equivalent women’s sports to comply with the mandates of Title IX. That means some women’s sports will survive, at a loss to offset the opportunities given to men in football and basketball, and the other men’s sports will be cut. If we have to pay, then you can’t play.
International students on F-1 visas would have to be cut from their teams, since their visas generally do not allow them to engage in compensable employment. (That’s why international students can’t take NIL money.) Or federal immigration law will need to be changed.
Unless other laws are changed, schools might be required to provide these employees with healthcare benefits, family or medical leave (paid in some states), reimbursement of expenses in some states, unemployment insurance, workers compensation, and a range of other benefits.
If the courts mess this up, which seems very possible, Congress will need to step in and enact a comprehensive set of rules applicable to college athletes.
For now, the immediate impact of this decision is limited. The Third Circuit did not rule that college athletes are employees under the FLSA. They ruled only that it is plausible that circumstances may exist under which college athletes could be employees under the FLSA. Procedurally, all that happened here is that a motion to dismiss was denied.
Next, the parties will fight over class certification, which could cause the case to fall apart, given the massively divergent situations of, say, a D-1 football player at Alabama and a D-3 bowler at Whatsamatta U.
The issue of whether college athletes are employees under federal wage and hour laws, federal labor laws (NLRA), and a myriad of other laws (state and federal) is not going away soon.
My fear, though, is that courts are (1) likely to apply the wrong legal analysis (as the Third Circuit did here, appearing completely lost), (2) likely to misapply laws that were never intended for this situation, and (3) likely to cause a cascade of unintended consequences that will lead to the end of college sports — unless Congress steps in. (Insert joke here.)
Five fisherman from Sri Lanka died last month after drinking the unknown liquid they found in bottles floating about 300 miles offshore. The fisherman reportedly believed the bottles contained foreign liquor.
Ceylon Todayreports that efforts are underway to inform nearby fishing trawlers about the dangers of drinking from floating bottles. It’s a good thing the authorities are doing that because, otherwise, the most common sense thing to do when finding unidentified liquids is to drink them.
Better planning would have saved their lives. You can also plan better when negotiating your staffing agency agreements. Here’s a clause you can include that won’t save lives but will save money.
Overtime Multiplier Caps
When a non-exempt temp works more than 40 hours in a week, the worker must receive overtime pay of 1.5x. But that doesn’t mean you need to pay the same markup rate to the agency for that extra .5x premium.
Here’s what you can do instead.
Suppose you pay a 40% markup on the hourly rate the agency pays to its workers. For a worker receiving $10/hour, you pay the agency $14, The agency gets $4 in revenue for one hour of work provided.
But suppose the same worker works 50 hours in a week. The extra ten hours are paid to the worker at $15/hour, which means the agency gets $6 in revenue for those hours. Here’s the math: 15 x 1.4 = $21, less the $15 that goes back to the worker = $6.
Why should the agency get $6 instead of $4 for the same hour worked? It’s a windfall. You can cap that with an Overtime Multiplier Clause.
The clause would say, essentially, that for straight time, the agency gets a 40% premium. For overtime hours, the markup is the same 40% on the straight time (the 1.0x), then the overtime premium (the extra 0.5x) is reimbursed with no markup on the premiums portion of the pay (the 0.5x).
The worker gets $15, but you pay the agency $19 for that hour, not $21.
In future posts, I’ll address other money-saving clauses you can add to your staffing agency agreements.
In the meantime, remember not to drink from any bottles you may find floating at sea.
Commas are important. See, for example, Let’s Eat, Grandma and the Rachael Ray magazine blurb proclaiming that Rachael Ray finds inspiration in cooking her family and her dog. (The latter, sadly, turned out to be a fake. The real magazine blurb had the commas.)
If I had put a comma in the title above, after How Long, you may have thought this post was intended for Pro Football Hall of Famer Howie Long. It’s not. Howie played 13 seasons with the Raiders but almost certainly does not read this blog.
This post, instead, is intended for anyone who wants to know how long you can retain an independent contractor before that person becomes an employee.
Before I can provide a helpful answer, I’ll need some information first. (Just the basic facts, can you show me where it hurts?)
Question: Is the worker a 1099 independent contractor or a staffing agency’s W2 employee?
We need to know which legal issue to address. If the worker is a 1099 independent contractor, then the issue is independent contractor misclassification. In other words, is the worker really an employee, entitled to the various benefits and protections that the law gives to employees?
But if the worker is employed by a staffing agency and treated by the agency as the agency’s W2 employee, then the worker is already entitled to the benefits and protections of employment. The issue here would be joint employment. Is your business a joint employer?
If your question is about joint employment, an earlier post here addresses that question.
On the other hand, if the worker is a 1099 independent contractor, duration of assignment can be one of many factors that indirectly increases the risk that the worker is really an employee. Factors in the independent contractor classification analysis can include:
Is the assignment indefinite in duration, or instead for a specific project or fixed term?
Can the assignment be terminated at any time for any reason, or does early termination require cause or some other specified event?
Does your business have W2 employees who are performing the same or similar work?
If the assignment is indefinite or can be terminated at will, those are factors that weigh toward employment status. If the worker is performing the same function as employees, then the worker is going to look like an employee, and more so the longer this goes on.
But if the contractor is (1) engaged for a specific project or fixed term, and (2) the work is not something your employees are also doing, then duration is not necessarily a concern. A true independent contractor can be retained for a project that lasts many months or even years. We see this sometimes with implementation of electronic systems, like HRIS or enterprise software. Or there might be a third party contractor you’ve engaged for years to provide a repeating, project-based service that is entirely unrelated to your business, like your plumber or window washer or event photographer.
But if the work relates somewhat to your business, you may have a problem if the long duration is because of mission creep (not Mission CREEP). If the worker finished one project and then is given another and another, that starts to look like indefinite retention, which points toward employment.
If the worker is a 1099 independent contractor, duration of assignment might increase the misclassification risk, but the risk will depend more on how the other questions are answered. Duration is not directly a factor, but a longer duration may be an indication that other factors are starting to point in the direction of employment.
Further analysis would be needed.
The other question you may have is why I haven’t yet referenced the 1974 single by Ace, “How Long (Has This Been Going On),” which will now be stuck in your head the rest of the day, you’re welcome. Turns out, I learned here, that the song is not about romantic infidelity. Vocalist Paul Carrack wrote the song upon learning that bassist Terry “Tex” Comer had been secretly recording with two other bands.
Friday night I saw The Gilmour Project play at Northfield MGM, a smallish venue near Cleveland. Great show with plenty of Pink Floyd deep cuts and a “how did they just do that?” version of The Great Gig in the Sky with an electric guitar handling the Clare Torry solo vocals.
And, as many of you know, there is a law requiring that the last song at any Pink Floyd tribute show must be “Comfortably Numb.” There were no violations of law at this concert.
Last week I came across another law that, in a totally unrelated way, left me uncomfortably numb.
Tucked away in a 1,492-page omnibus bill that regulates, among other things, firearms law, agricultural policy, specialty dentist licensure, minerals taxes, combative sports, and broadband appropriation transfer authority, the Minnesota legislature adopted a new test for determining who is an independent contractor under state law, limited to the construction industry. Page 183.
To satisfy the test, each of 14 factors must be present. Construction includes building improvement but not landscaping services [@LKE: saved you an email].
Why am I posting about such a niche classification test? Two reasons.
First, I suffered through reading it, so I am sharing my pain.
Second, and more important, it’s a good reminder that there are so many worker classification laws out there, with different tests applying across different laws in different states and across different industries.
Minnesota is the champion of this nonsense. The state that brought us rollerblades, water skis, and diaper adhesives has 32 different tests for determining who is an employee under state workers’ compensation law, with different tests applicable to different types of work.
If you are working with large numbers of independent contractors across multiple jurisdictions, there’s a lot to know if you want to do it right. Penalties for noncompliance can be severe, including criminal penalties in some states.
Bonus tip: If you need to fall asleep, pull out that omnibus bill and skip to page 1,086 for the new regulations covering natural organic reduction vessels for human remains. Subdivision 19 prohibits the commingling of bodies in crematorium vessels. I guess that’s good. A different kind of comfortably numb maybe.
If I type “Olson” into google, my top results are Matt Olson, first baseman for Atlanta (makes sense since a lot of my web activity is baseball-related); James A. Olson Guitars (no idea why since the only place I play guitar is on the radio); and Major John Olson of the U.S. Space Force (also no idea why since I have never been to outer space).
The most relevant Olson for me today though is none of these. Instead, it’s a long-awaited decision in a case called Olson v California. In this case, a group of app-based gig economy companies sued the State of California, alleging that AB 5 and its ABC Test are unconstitutional.
Their argument is that the arbitrary grab bag of exceptions to AB 5 is arbitrary and that the law unfairly targets rideshare and delivery drivers.
An 11-judge panel of the Ninth Circuit heard the case en banc, and rejected these arguments.
The Ninth Circuit ruled that AB 5 is constitutional and that the legislature had a rational basis for including and excluding various types of workers from the ABC Test.
The result: AB 5 remains in place. As for rideshare and delivery app companies, Prop 22 created an exception allowing them to treat drivers as independent contractors, although the validity of Prop 22 is being challenged as well. More on that in a future post. The California Supreme Court is hearing arguments on Prop 22 and when a decision is issued, I’ll post about it. But I expect the Prop 22 will survive, just like AB 5 survived.
If I googled Olsen instead of Olson, that might have been more fun. I hopefully would have landed on Keith Olsen, who produced a number of classic rock albums, including Fleetwood Mac by Fleetwood Mac, Double Vision by Foreigner, and a Rick Springfield album with one of the all-time great album covers, Working Class Dog.
The government loves acronyms. Sometimes a little too much. If you check the DHS.gov website for its guide to acronyms, you’d see that AA can refer to eight different things, all entirely unrelated. AA can mean Affirmative Action, Approval Authority, or my favorite, Atomic Absorption. (A close second is Anti-Aircraft Improvised Explosive Device Incident. Sadly, no explanation is provided for why DHS drops the IEDI part.)
AAA has four approved meanings, including American Ambulance Association and Area Agency on Aging.
In law we get lots of acronyms too, and sometimes they show up in case names. Today we’re looking at the case of SEIU v. NLRB, which is battle over JE (joint employment, heh heh).
SEIU v. NLRB is one of two cases involving a challenge to the NLRB’s recent joint employer rule.
The NLRB joint employer rule is being challenged in both the D.C. Court of Appeals and the Fifth Circuit. The Fifth Circuit is generally viewed as more pro-business, with the D.C. Court a bit more deferential to the NLRB. So to U.S. businesses intent on squashing the new joint employer rule, location matters.
Last week, the D.C. Circuit issued an order that it will stay its case, and the Fifth Circuit gets to decide first.
How did we get here?
In October 2023, the NLRB issued its new joint employer rule, which would vastly expand the scope of joint employment.
In November 2023, the SEIU, seeking a friendly ruling, filed a petition in the D.C. Court of Appeals, asking the court to review and uphold the rule. For those of you wondering how the SEIU could file directly with the Court of Appeals, there’s a rule allowing it.
Meanwhile, at about the same time, the U.S. Chamber of Commerce (and others) filed a lawsuit in the Eastern District of Texas, asking the court to stop the rule. In March 2024, the federal court in Texas enjoined the rule. The NLRB then appealed to the Fifth Circuit.
Then we had a potential stalemate, with two federal Courts of Appeal being asked to review the same rule.
Now that the D.C. Court of Appeals has agreed to hold its case in abeyance, the Fifth Circuit will go first, which is likely a good thing for the business community.
The Fifth Circuit case is just getting started. the NLRB’s appellate brief is due June 26, 2024. Until the Fifth Circuit rules, the joint employer rule remains stayed. The joint employer rule did not take effect. So now we wait to see what the Fifth Circuit will do, and we should not expect a ruling until 2025.
When Sly and the Family Stone released “I Want to Take You Higher” in 1969, it was originally a B-side. The song took off, though, and became a Top 40 hit anyway.
The song is an upbeat ode to how music can make you feel good. Fun fact: It was used as the theme song in the Canadian children’s show, Hilarious House of Frightenstein, to introduce the show’s disc jockey, the Wolfman, who is either a fictional part-wolf part-man or a human DJ who achieved vocational excellence (and got his own TV show!) despite an untreated case of hypertrichosis.
The Family Stone wasn’t the only band that would like to take you higher. Jackie Wilson went to Billboard #1 in 1967 with “(Your Love Keeps Lifting Me) Higher and Higher.” In 1990, Damn Yankees asked, “Can you take me high enough?” in their song, “High Enough.” And, not to be outdone, Duran Duran, in 1995, released two covers of the Family Stone song, calling the second, “I Want to Take You Higher Again.”
Why all this talk about higher? Because when you’re working with a third party labor provider that provides high-demand, skilled labor, sometimes you’ll want to take their hire. (Heh heh).
The right to direct hire is often addressed in the vendor agreement. Maybe you’ll pay a finder’s fee if you direct hire within the first 3-6 months. But I was asked a more intriguing question last week that I thought was worth a blog post. (Thanks, P! You know who you are.)
Here’s the scenario, which is most likely to arise in the competition for highly skilled workers, like computer programmers: We want to direct hire, but we don’t control the market. If the third party labor provider pays a premium for in-demand roles, they might pay more per hour than we pay. That would make it hard for us to direct hire to worker.
Which leads to this question: How do we cap the wage paid by the third party labor provider (so we can offer the direct hire a raise, not a pay cut), without dictating the wages paid by the third party, which would create joint employment risks?
Excellent question! The answer is to do it indirectly. Here’s how.
Suppose you want the option to direct hire a chimneysweep but wouldn’t dare pay more than $50/hour for a chimneysweep (other than Dick Van Dyke himself, but only in his prime). Chimneysweeps are in high demand and so third party labor providers may be paying their chimneysweeps $50/hour too so they can get the best ones. It’s a competitive labor market, you know.
You don’t want to tell the third party labor provider what to pay its chimneysweeps. Dictating the wages of a third party worker is a strong indicator of joint employment.
Instead, you should agree to pay the agency $50/hour for its chimneysweeps. Then you know they are paying the chimneysweeps less than $50/hour because the agency has to be making a profit. The markup is probably 35-45%, so you could even pay the agency up to about $65 per hour and be confident the chimneysweep is not taking home more than $50/hour.
Then, if you wanted to direct hire the chimneysweep for which you are paying the agency $60-65/hour, that sweeper is likely only being paid about $42-45/hour and so his sweeping prowess could be yours for the low low price of roughly $50/hour or less. That’s how I would approach this problem.
I don’t think any bands are singing about this issue directly, but if I told you they were really singing “I Want to Take Your Hire,” you just might hear it that way next time you listen.
About six months ago in Cambridge, Ontario, Sonny Ayres was born, the fifth child of parents Britteney and Chance. But Sonny was no ordinary baby. He weighed 14 1/2 pounds. (Yes, for the benefit of those moms reading this and looking aghast, he was delivered by c-section.)
According to Guinness (the book, not the beer), the heaviest recorded birth was 22 pounds, in 1879 in Seville, Ohio. That baby lived just 11 hours.
A different kind of weighing was at issue in a recent decision by the Third Circuit Court of Appeals, determining independent contractor status.
The issue was whether three plaintiffs who owned Pepperidge Farm distribution routes should have been considered employees under Pennsylvania’s wage and hour laws. The district court granted summary judgment for Pepperidge Farm, ruling that they were not employees, and the drivers appealed.
The drivers argued that the court should not have granted summary judgment because the job of weighing the evidence is supposed to be left to the jury. But, as the Third Circuit explained, it is the judge’s role to weigh the relevant legal factors. The judge can apply the undisputed facts to the relevant legal factors and can make a legal determination whether each factor supports employment or independent contractor status. And that’s exactly what the Third Circuit did here.
Applying a ten-factor Right to Control Test, the court determined that 8 of 10 factors supported independent contractor status, and so the plaintiffs were properly classified as contractors, not employees.
The plaintiffs argued that Pepperidge Farm set parameters and expectations for the distribution routes, thereby exerting control. The Third Circuit, however, explained that setting parameters and expectations is consistent with either independent contractor or employee status. The control factor tilts toward employee status when the hiring party sets parameters and expectations and directs the time, place, and manner of performance.
In this case, the right-to-control factors supported independent contractor status because the drivers determined the time, place, and manner for performing deliveries. The drivers bought and sold routes, organized their own distribution businesses, hired their own employees, set their own hours, and made deliveries when and how they chose.
This case is a good reminder of what type of control is relevant in the right-to-control analysis and what type of control is not. Some control is exerted over every relationship, whether it’s independent contractor or employment. The trick is knowing which type of control can be exerted without tipping the scales.
Pepperidge Farm prevailed in this case because it did not reserve or exercise the kind of control that supports employee status. And for that, we say Weigh to Go!
Who Is My Employee? 