Can Your Business Be Liable for Sexual Harassment by an Independent Contractor?

Independent contractors sexual harassment

Damage can come from unexpected places.

Earlier this year, Brock Holt of the Boston Red Sox landed on baseball’s Injured List after his two-year old son poked him in the eye. Baseball players accept the risk of injury, but that’s not a way you’d expect to get hurt.

I think you see where I’m going here. Don’t let an independent contractor become Brock Holt’s son. Yes, a business can be liable for harassment by a contractor — if it fails to respond appropriately to a complaint. If one of your employees complains of harassment by a contractor, pay attention.

According to the Equal Employment Opportunity Commission (EEOC), businesses can be liable for harassment by non-employees if the business knows about the harassment and fails to take reasonable steps to prevent it. EEOC Guidance says:

The employer will be liable for harassment by non-supervisory employees or non-employees over whom it has control (e.g., independent contractors or customers on the premises), if it knew, or should have known about the harassment and failed to take prompt and appropriate corrective action.

That means you can’t just say, “It’s not our employee so we can’t do anything about it.” Investigate. Interview witnesses. Take statements. If there’s something there, act upon it.

If the bad actor is a contractor, options may include:

  1. Terminating the independent contractor relationship, 
  2. Limiting the contractor’s access to your facility,
  3. Poking out the contractor’s eye (or both eyes, if the harassment is particularly egregious), or 
  4. Any other steps to prevent bad behavior. 

My wife, who is in HR, says #3 is not an appropriate response, so I stand corrected. Don’t do #3. The other options are still good though.

As for #4, you should not discipline an independent contractor, but you can issue a stern warning to that contractor that the relationship will be terminated if there are any further complaints. Just don’t call it “discipline.” Disciplinary action is a sign of control, which can be used as evidence that the contractor might really be an employee. The last thing you need if one of your employees is being harassed by a contractor is to convert that contractor into your employee. 

Whatever you decide, do something.

While businesses might not expect that they could be held liable for bad acts by a contractor, the risk is real. Employers have a responsibility to provide their workers with a workplace that is free from harassment. If you allow a contractor to create a hostile work environment, your business can be liable for allowing that environment to persist. The employer’s responsibility is to take “prompt and appropriate corrective action.” 

For Brock Holt, terminating the relationship with the wayward eye-poker was not an option. (His wife reportedly vetoed that proposal. She is probably in HR.) But for businesses whose contractors are accused of harassing employees, terminating the relationship may be the best decision. 

So the answer is yes. Business have a responsibility to provide a workplace that is free from harassment, and the failure to do so may result in liability, even if the harassment is coming from a non-employee. Busiensses can be liable for harassment by contractors if the business knows or should know about the harassment and fails to take prompt and appropriate corrective action.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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What is the Test for Independent Contractor vs. Employee? (Jan. 2019)

what is the test for independent contractor misclassificationSeems like a simple question, but it isn’t. My question to your question is, “Why do you ask?” That’s because the test for Independent Contractor vs. Employee is different under different laws.

And worse, the tests keep changing, as we saw in Monday’s post about the NLRB’s SuperShuttle decision.

As of today, January 31, 2019, here’s where we stand:

The current tests for determining Independent Contractor vs. Employee are:

National Labor Relations Act (NLRA)

Right to Control Test (SuperShuttle version, as of 1/25/19)

Title VII, Age Discrimination in Employment Act (ADEA), ERISA

Right to Control Test (Darden version, or some variant of it, as applied circuit by circuit)

Internal Revenue Service

Right to Control Test (IRS version)

Affordable Care Act

Right to Control Test (emphasis on particular factors, based on regulation)

Fair Labor Standards Act (FLSA)

Economic Realities Test (which different courts articulate differently)

California, Massachusetts wage & hour laws

ABC Tests (strict version of Part B)

New Jersey wage & hour

ABC Test (regular version of Part B)

California state laws other than wage & hour

S.G. Borello & Sons Test (customized hybrid version of Right to Control & Economic Realities Tests), we think, for now

State Unemployment and Workers Comp Laws

Pick a card, any card. Tests vary substantially state to state. Some are Right to Control Tests, some are ABC Tests, some are entirely made-up, customized tests that require consideration of — or proof of — specific factors

Other State Laws (wage & hour, discrimination, tax)

Tests vary significantly state by state, law by law

This chart may be a helpful start, but three significant challenges remain, when trying to determine Independent Contractor vs. Employee.

  1. Fifty Shades of Gray.  These tests, for the most part, are balancing tests. Courts and agencies must weigh multiple factors. In most instances, some factors will favor contractor status and some will favor employee status. Different courts may reach different conclusions, even with the same facts.
  2. Planes, Trains, and Automobiles. Multi-state employers face the added challenge of having to deal with different tests in different states. Then, just to keep everyone on their toes, states generally apply different tests for different state laws. Sometimes different tests apply in different industries too. Transportation workers, for example, may be subject to different tests than construction workers.
  3. Into the Wild. The tests keep changing. In January 2019, the NLRB changed its test in the SuperShuttle case. In 2018, California changed its test under state wage and hour law from the S.G. Borello balancing test to a strict ABC Test. In 2015, New Jersey switched to a different version of an ABC Test for its state wage and hour law. The times they are a-changin.

What to do about it? (Free tips!)

  1. Know the tests that apply where your business operates.
  2. Construct your independent contractor relationships in a way that tends to favor the factors supporting independent contractor status. Inevitably, business considerations will get in the way, and tough decisions will have to be made about how much control can be relinquished and how the relationships need to be structured. Adjust the facts of the relationship.
  3. Use a customized independent contractor agreement that emphasizes the factors that support independent contractor status. Avoid off-the-shelf agreements. Merely reciting that everyone agrees the relationship is an independent contractor relationship is only a teeny bit helpful. “Teeny bit helpful” is not the gold standard.
  4. Re-evaluate existing relationships, and make changes from time to time.
  5. Implement a gatekeeper system to prevent operations managers from entering into contractor relationships that may be invalid. Require any retention of a contractor to be approved by a point person, who can issue spot and seek help in evaluating whether a contractor relationship is likely to withstand a misclassification challenge.
  6. Seek legal help before you get audited or sued. Now is the time to review and modify relationships to reduce the likelihood of a misclassification claim. Once a claim is made, your business can only play defense. Create your playbook now, before the defense has to take the field.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Philadelphia on Feb. 26 or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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NYC May Expand Anti-Discrimination Law to Cover Contractors, Interns

NYC anti discrimination gapI will admit, without shame, that in the 1980s, I loved the Gap Band. Songs like “You Dropped a Bomb on Me” and “Burn Rubber on Me” were just plain fun to listen to. Tip: Try it!

The band’s name didn’t refer to any actual gap — the name comes from the first letters of streets in Tulsa, Oklahoma — but I do know there are many gaps in anti-discrimination law, leaving some types of workers without adequate protection.  

The federal laws that prohibit discrimination in employment, like many (but not all) state laws, protect only employees. That leaves a gap. Independent contractors and interns who have been discriminated against may have no recourse.

The New York City Council is trying to close that gap.

In the same bill we excoriated on Monday for unfairly attacking the franchise model, the New York City Council also proposes to expand the protections of the City’s anti-discrimination law (section 8-107 of the Administrative Code) to protect independent contractors and interns, not just employees. 

Closing that gap makes sense. Hopefully this bill will be amended to keep the parts that expand anti-discrimination protection to non-employee workers (a good idea), while removing the parts that would expand liability to companies not responsible for the discrimination (a bad one).

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

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NYC to Franchisors: We’re Going “Crazy on You”!

Barracuda NYCIn 1976, the band Heart released the album Dreamboat Annie. Soon after its release, the label (Mushroom Records) released a suggestive National Enquirer-style ad suggesting that sister Ann and Nancy Wilson might also be lesbian lovers. Ann’s outrage led her to write the song “Barracuda,” about ambush and false accusations.

A different Heart song title came to mind as I read the latest attempt by the New York City Council to hold franchisors responsible for acts they did not commit. 

A bill co-sponsored by 19 council members would amend the City’s anti-discrimination law to hold franchisors strictly liable for discriminatory acts by their franchisee. We have seen many attempts to expand the definition of “joint employer” to include franchisors, but this proposal goes beyond anything we’ve seen. This bill doesn’t even deal with the concept of “joint employment.” It just says that franchisors are liable for discriminatory acts of their franchisees, without any analysis of their involvement in the discriminatory acts or their level of control over the franchisee. It’s automatic.

That’s crazy. Holding one company strictly liable for the wrongful acts of another raises all sorts of legal concerns and, if passed, the bill will certainly be challenged in court.

Franchisors, the Council wants to go “Crazy on You.”

Now, truth be told, in the Heart song, going “Crazy on You” has a very different meaning than I intend it here. Ann Wilson and Roger Fisher (her bandmate, co-writer, and lover) meant it in an amorous way, but there is certainly no love between NYC and franchisors. The attacks by NYC on the franchisor-franchisee relationship are more like those of the sharp-toothed predator of the sea, the Barracuda.

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

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When Are Shareholders Also Employees? (Disney-Themed Version)

When are shareholders considered employees

I have always believed that in the song made famous by Happy, Dopey, Sneezy and friends, they were saying “Off to work we go,” but I just checked a few sites for lyrics and the lyrics all show the dwarves singing, “It’s home from work we go.” Can this be true? Have I been mixed up all these years about which way the dwarves were going to dig dig dig with a shovel or a pick?

Work can be confusing. A non-cartoon-dwarf scenario that can be confusing is trying to determine whether shareholders in a business are also employees of that business. In today’s post, we examine that question by celebrating the 15th anniversary of a 2003 Supreme Court case. (Happy Anniversary, case! 🎂)

Like many tests for determining Who Is My Employee?, this one comes down to control and the familiar Right to Control Test.

In Clackamas Gastroenterology Associates, P. C. v. Wells, an employee of this Oregon-based medical clinic tried to sue for disability discrimination under the federal Americans with Disabilities Act (ADA). To bring claim under the ADA, though, the plaintiff must show that her employer has 15 or more employees.

The clinic had four owner/shareholders who were also physicians. If they were also employees, then the clinic had 15 employees and Ms. Wells could pursue her ADA lawsuit. If these physicians were just shareholders and not employees, then the clinic had fewer than 15, and Ms. Wells would be SOL.

The dispute made its way to the U.S. Supreme Court. The Court ruled that the proper way to determine whether the physician/shareholders counted as employees was to apply a Right to Control Test. But which version?

The standard Right to Control Test tries to distinguish between an employee and an independent contractor. Because the question here is a bit different, the test had to be adapted to fit the situation.

The Court decided that these six factors were most important for deciding whether the physician/shareholders were also employees:

1. Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;
2. Whether and, if so, to what extent the organization supervises the individual’s work;
3. Whether the individual reports to someone higher in the organization;
4. Whether and, if so, to what extent the individual is able to influence the organization;
5. Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and
6. Whether the individual shares in the profits, losses, and liabilities of the organization.

Like the traditional Right to Control Test, this is a balancing test. Some factors may weigh in one direction, some may tilt the other way. Ultimately, a judge (or jury) needs to weigh the factors and make a determination.

In this case, the Supreme Court did not do the weighing. Instead, it articulated the test and sent the case back to the Oregon district court to weigh the factors.

So for Ms. Wells, the case left the Supreme Court and went back to the federal court in Oregon. And so the real question is: For Ms. Wells after the Supreme Court’s ruling, was it “off to court we go” (headed back to Oregon) or “home from court we go” (leaving D.C.)? I bet she never thought about that.

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

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Can Independent Contractors Sue for Employment Discrimination?

diaper independent contractor discrimination

The answer brings to mind the one must-have item for the thousands of crazies who spend 12 hours in Times Square waiting for the ball to drop every New Years’ Eve with no available public restrooms:

Depends.

Under federal anti-discrimination law, an individual generally needs to be an employee to bring an employment discrimination claim. Laws like the Age Discrimination in Employment Act (ADEA) and Title VII of the 1964 Civil Rights Act require employment status to file a lawsuit. Race discrimination claims, on the other hand, can potentially be brought under a different statute.

State laws, however, vary. Some states permit independent contractors to bring “employment discrimination” lawsuits; other states do not.

A recent decision by the Washington Supreme Court serves as a reminder that in the Great Northwest (home of Mount St. Helens and Blaine Peace Arch Park [which I visited  last month and got to run around and around the obselisk that marked the international border]), an independent contractor can bring a state law claim for discrimination “for the making or performance of a contract for personal services.”

The Pennsylvania Human Relations Act also prohibits discrimination against independent contractors.

On the flip side, state anti-discrimination laws in Ohio and Florida protect only employees, not independent contractors.

To determine whether independent contractors are protected under anti-discrimination laws, the answer truly is: It depends.  It depends on the type of alleged discrimination and depends on the state whether the alleged discrimination occurred.

None of this is to say that companies in states like Ohio or Florida should discriminate against contractors. In fact, where facts of any individual case are particularly egregious, common law claims might be recognized by courts uncomfortable with the idea that there is no remedy, even if the state’s anti-discrimination statute does not permit the claim. Although I live on the defense side, I still say: Do the right thing.

And if you should ever find yourself in Times Square on New Years’ Eve, passing the hours until the ball drops, I say this: Bring your adult undergarments. There’s no place to pee.

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

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Why You Should Limit Workplace Rules That Apply to Contractors (Twisted Sister Edition)

There are so many great songs about defying authority. What’s the best? Hard to say. The best video, though – that’s easy. We’re Not Gonna Take It by Twisted Sister. (Watch here, then thank me later. I could watch the first minute a hundred times. Say it with me: “What do you want to do with your life?”)

Rock may about breaking rules, but business is not. With your employees, there are lots of rules you want them to follow, and you probably list them in painful detail in handbooks, posters, flyers, brochures, catalogs, signposts, compendiums, directories, and mandatory worker inner eyelid tattoos.

What about independent contractors, though? To preserve independent contractor status, you already know you want to try to minimize your exercise of control. But some rules are needed, expecially for contractors who work on your site.

Here are some guidelines to consider:

Rules appropriate for employees, but not well-suited for contractors: Continue reading