Category Archives: Contracts

03.26.18
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Arbitration Agreements: Still the Hammer You Want in Your Toolbox

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If I had a hammer, I’d hammer in the morning. I’d hammer in the evening. All over this laa-aaand. That’s a lot of free labor for somebody. And noise. No one should hammer too late in the evening.

The song could describe a national network of independent contractors in the construction field. It doesn’t, but it could. (This is how I think now. Sad. Very sad.)

Thank you, Peter, Paul, and/or Mary for helping me introduce the real hammer for companies that use lots of independent contractors: Arbitration Agreements with Class Action Waivers.

The legitimacy of requiring employees to sign arbitration agreements with class action waivers is under scrutiny by the NLRB and will be the subject of an important upcoming Supreme Court ruling in the Epic Systems case. Regardless of what the Supreme Court decides for employees, however, the Epic Systems decision is not likely to limit the use of arbitration agreements with class action waivers in independent contractor agreements.

A ruling this month by the Sixth Circuit Court of Appeals showed how useful these agreements can be for businesses. In a short decision, the Court ruled that two independent contractors wishing to bring a class action alleging independent contractor miscalssification were barred from doing so because they had signed arbitration agreements with class action waivers. If they wanted to dispute their status, they had contractually agreed to do so only in arbitration, and only through an individual (not class) claim.

These agreements work. If they are well-drafted and include provisions that help make them fair to all parties, they are enforceable in most jurisdictions and can be an effective tool for keeping your business safe from independent contractor misclassification class actions.

Businesses that rely on independent contractor labor should consider using this tool in the morning and in the evening, all over this laa-aaand.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.12.18
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Arbitrator or Court: Who Decides Who Decides?

New prime v olioviera - who decides who decides

Who decides who decides? That’s as fun to write as it is to think about.

On TV, sometimes the parties agree that Judge Judy can decide. (Here’s how that works.) But sometimes, the parties disagree over who decides. What happens then? Who decides who decides?

That’s an issue the Supreme Court is going to consider, as it relates to arbitration agreements for independent contractors in the transportation industry.

The dispute stems from an arbitration agreement between Dominic Oliviera, an independent contractor (although he’s not so sure of that), and New Prime, Inc., a trucking company. Their arbitration agreement says that all disputes go to arbitration, including those about the scope of what gets arbitrated. In other words, the arbitrator gets to decide whether something is subject to arbitration. (That’s not an unusual clause, by the way.)

Our protagonist Mr. O tried to bring a lawsuit, claiming wage and hour violations by New Prime. In response, New Prime pointed to the contract and said the issue had to be arbitrated. Not to be outwitted, however, Mr. O then pointed to an exception in the Federal Arbitration Act (FAA). The FAA is the federal law favoring arbitration of disputes, but the FAA contains an exception. The FAA doesn’t apply to employees in the transportation industry.

I hope I haven’t bored you because here’s where it gets interesting.

If the FAA exception applies, Mr. O doesn’t have to arbitrate and he can go to court with his wage and hour claims instead.

But the exception only applies (it seems) if he is an employee. If he’s an independent contractor, the FAA should still apply, which means that New Prime can still force him into arbitration.

Now here’s where it gets really weird.

The agreement says that the arbitrator gets to decide whether the matter is subject to arbitration. But Mr. O says he’s an employee and therefore he’s not bound by the arbitration agreement. If he’s not bound by the arbitration agreement, then New Prime can’t force him to go to the arbitrator to decide whether the dispute is subject to arbitration. So, who decides who decides?

Still with me? Here’s the bottom line. There are two important questions that the Supreme Court has agreed to consider in this case:

(1) Whether a dispute over applicability of the Federal Arbitration Act’s Section 1 exemption is an arbitrability issue that must be resolved in arbitration pursuant to a valid delegation clause; and
(2) whether the FAA’s Section 1 exemption, which applies on its face only to “contracts of employment,” is inapplicable to independent contractor agreements.

For businesses using mandatory arbitration agreements, these are important issues.

Last week, in this post, we addressed Issue #2. But Issue #1 is also pretty important for businesses with arbitration agreements in the transportation industry. If the validity of those agreements is contested, who decides whether they are valid?

If the arbitrator gets to decide what is subject to arbitration, the realist deep inside you (he’s roommates with the pessimist) expects that the arbitrator will keep the case. In other words, the most likely ruling by the arbitrator — who is paid by the parties by the hour to conduct the arbitration — is that the matter is going to be subject to arbitration. After all, that’s what the contract says, and if the contract didn’t apply, then the arbitrator never would have gotten involved in the first place.

This case won’t be decided until next year.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

03.08.18
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Can You Require Independent Contractor Drivers to Sign Arbitration Agreements?

Arbitration agreementstranspiortation industry drivers new prime v oliviera coin tossHow do you want your disputes decided? State court? Federal court? Arbitrator? Coin toss?

Ok, probably not coin toss, but that method is still used to break ties in local elections. (Spoiler alert: It was heads.)

Lots of businesses using independent contractors rely on arbitration agreements (with class action waivers) as a way to protect against a claim of independent contractor misclassification. Arbitration agreements with class action waivers prevent large groups of contractors from joining together in court to file class action lawsuits.

Instead, they have to bring any claims on their own. That means much less money is at stake in any individual case, and much of the incentive for hungry plaintiffs’ lawyers to file these claims is gone. (So sad.)

When bound by an arbitration clause, some plaintiffs have pointed out that there is an exception under federal arbitration law that applies to transportation workers. The Federal Arbitration Act, which is the federal law favoring arbitration, doesn’t apply to employees in the transportation industry.

Most courts have said this exception applies only to employees, not to independent contractors. In other words, employees in the transportation industry might not have to arbitrate their claims, but independent contractors do.

A recent court of appeals decision, though, may have changed that. The First Circuit Court of Appeals decided that the FAA transportation worker exception applies to employees and independent contractors. If true, the implications for the gig economy could be massive. Independent contractor drivers are all over the transportation industry. (Some might not be in interstate commerce, but that’s a technical argument for court, not for a blog.) Uber, Lyft, FedEx. They have all switched to using mandatory arbitration agreement with their independent contractor drivers.

The Supreme Court has agreed to decide this important issue in a case called New Prime Inc. v. Oliviera.

The Court just accepted the case last week, so we won’t have a ruling until next spring or summer, but this is an important case to watch for any business using independent contractors in the transportation industry. Will your arbitration agreements survive?

The issue accepted by the Supreme Court for review is: “Whether the FAA’s Section 1 exemption, which applies on its face only to ‘contracts of employment,’ is inapplicable to independent contractor agreements.”

Note for Supreme Court Watchers: This is a separate issue from the Epic Systems case already heard by the Supreme Court, which should be decided by this June. In Epic Systems, the issue is whether the National Labor Relations Act prohibits businesses from requiring their employees to sign mandatory arbitration with class action waivers. The issues are somewhat related, but distinct. Epic Systems deals with employees’ arbitration agreements; New Prime deals with independent contractors and is limited to the transportation industry.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

11.20.17
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Using Independent Contractors Saved This Hospital an Arm and a Leg! (Really, Just a Leg)

leg broken independent contractor vs employee liabilityToday we attempt to answer a medical mystery: If I have to get my leg amputated because a doctor misdiagnosed me at the hospital, can I sue the hospital for malpractice?

Seems like an easy “yes,” right? Not so fast.

Suppose the doctor was an independent contractor, and suppose the hospital is a public institution. Those were the facts presented to the Supreme Court of Wyoming in a recent case (which also serves as a nice reminder that if you are admitted to the hospital with numbness and cramping in the legs and an “inability to walk,” it would be a good idea to get a vascular consult — assuming you want to keep your leg).

The Wyoming Supreme Court had to interpret a state statute that limited the liability of public hospitals to acts by its employees, except if a hospital extended its liability on purpose through an insurance policy. The hospital here had an insurance policy, but the policy did not reference coverage for acts by independent contractors.

Continue reading →

11.06.17
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Don’t Wear Pajamas to Work: Be Careful Using “Statutory Minimum” Workers Comp Clauses in Subcontractor Agreements

Pajamas - Independent Contractor Agreements and Workers Compensation ClausesHave you ever had the dream where you show up at work or school in your pajamas or underwear? You’re exposed and embarrassed in the dream, and you can’t figure out why you forgot to put on regular clothes, right? (Please don’t tell me I’m the only one who’s had this dream. Please?)

You may be living this dream inadvertently in your vendor or subcontractor agreements. (And this is not what people mean when they say, “I’m living the dream!”)

Here’s the problem:

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10.23.17
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Court Rules that New Jersey is a Goat (sort of): a Note on Forum Selection Clauses

goat independent contractor misclassification forum selection clause Mary Kay caseThe Monty Hall puzzle is a brain teaser based on the game show, Let’s Make a Deal. The contestant is presented with three doors and must choose one. Choose the correct door and win a car. Choose either of the wrong doors and win a goat. (Note to rural readers: The puzzle is a first-world conundrum and assumes you’d prefer the car.)

Once the contestant chooses, the host opens one of the doors with a goat and asks the contestant whether he wants to stay with his original choice or choose the other unopened door. As explained here, the contestant should always switch doors, since switching provides a 2/3 chance to win. The math here is not intuitive, but read about it and you’ll understand.

The gimmick relies on the fact that the host knows what’s behind each door and will only reveal a door that hides a goat. The host never reveals a car.

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10.16.17
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Why I Can’t Give You a Template Independent Contractor Agreement

Independent contractor vs employee template independent contractor agreement - generic independent contractor agreement - IMG_1112I am often asked for a sample Independent Contractor Agreement. I do a lot of work in this area, so I should have plenty, right? Well, sure, I have drafted dozens, but they won’t do you much good.

A generic Independent Contractor Agreement that includes a few boilerplate recitals is of little value. A generic agreement probably says something like, “We all agree that you’re an independent contractor and not an employee. We won’t pay employment taxes for you. We’re not paying into your Social Security account or providing you workers’ comp or unemployment coverage. We’re not giving you benefits. You’re lucky if we let you breathe the air in our building. No, you know what, bring your own oxygen tank. You can’t use our air. You agree to all of this and you’ll like it. And Thank you sir, may I have another?”

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09.11.17
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Irma, Harvey and Force Majeure Clauses: What Does It All Mean?

What is Force majeure hurricane legal law irma harvey contracts IMG_1108Your contracts with staffing agencies and consultants probably include a bunch of legalese boilerplate mumbo jumbo at the end, which no one ever reads. One of those standard clauses is a “force majeure” clause. That’s French for “Skim over this clause.”

Companies affected by Irma and Harvey, however, may have good reason to check their contracts for these clauses. “Force majeure” means, literally, superior force.

These clauses typically say that So-and-so is excused from performing under the contract in the event of uncontrollable circumstances, such as war, terrorism, hurricanes, voodoo curses, other Acts of God, or anything caused by Pedro Cerrano and Joboo’s Cult (Major League) [Ed. Note: “Hats for Bats!”].

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08.28.17
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Tip for Master Services Agreements: Protect Your Business Opportunities

Master servbice agreement protect business opportunities non-circumvention clause staffing agency agreement IMG_1095If you google “Quotes about Opportunity,” you’ll find 1273 quotes on Goodreads.com. Everyone’s interested in opportunities. But when it comes to business relationships, don’t let others take yours.

When servicing a customer, businesses often call upon use subcontractors for help. That can be a win-win, so long as the subcontractor does not try to poach the relationship once that deal is done.

Consider protecting the opportunities you present to subcontractors with a non-circumvention clause. The concept here is that when your business has introduced a subcontractor to a customer to work on a project, the subcontractor should not be Continue reading →

08.24.17
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Consultants Can Take Steps to Avoid Joint Employer Liability

Joint employer ;liability management companiy consultant IMG_1097Companies in distress sometimes retain management consultants to try to turn them around. Sometimes the plan works, sometimes not. When the turnaround effort fails and the company shuts down, can the management company be held liable as a joint employer?

This issue arose recently in a WARN Act case. The federal WARN Act requires an employer, before ordering a plant shutdown or mass layoff, to provide 60 days’ notice and pay to its employees.

Here’s what happened. A nursing home with multiple Medicare and Medicaid violations retained a consulting firm to try to solve its many problems. The consulting firm Continue reading →