Free Smells! Jimmy John’s Avoids Franchisor Joint Liability

Joint employment jimmy john’s overtime litigation

The famous bank robber Willie Sutton supposedly once said that he robs banks “because that’s where the money is.” I doubt he said that since it seems rather incriminating. (“I’m sorry, your honor. What I meant is ‘If I did it…” See, Simpson, O.J.). But that’s the legend anyway. You can read more here on whether it’s true.

The strategy for plaintiffs in overtime cases is much the same. Sue the deepest pockets. That’s where the money is. When the deepest pocket is not your employer, allege joint employment.

That’s what happened in the recent overtime lawsuit against some Jimmy John’s franchise owners (the direct employers) and the franchisor (corporate Jimmy John’s). The lawsuit is cleverly titled In Re: Jimmy John’s Overtime Litigation. Like many lawsuits, the case has dragged on for four years. It has not been freaky fast.

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Ding-Dong, the Witch is Dead! NLRB Overrules Browning-Ferris

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Remember the good old days, way back in 2014? You recall the time — back when David Letterman was still on the air and it was not yet illegal in New York to take a selfie with a tiger.

Yes, that was life before 2015, when the NLRB waved its magic wand, rewrote the definition of joint employment, and forced several of the planets to spin out of orbit. The Board’s decision in Browning-Ferris erased decades of precedent and caused bloggers everywhere to vomit profuse amounts of text and doomsday predictions.

For those of you who missed the news in 2015 (understandable if you spent the year focused on following the saga of Winston, the Aussie python who swallowed salad tongs), allow me to offer this quick refresher: The 2015 Browning-Ferris decision declared that, under federal labor law, a business would be considered a joint employer if it retained the right to exercise even a teeny tiny bit of control, and even if it never actually exercised that control.

Good news, citizens of earth! The planets realigned on Thursday, when the Board reversed its 2015 decision and reverted back to the old standard. The new standard is the old standard. (Got it?)

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Time to Dance? Momentum Builds for Proposed New Joint Employment Law

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Leadership Lessons from Dancing Guy is a low-quality youtube video that has somehow amassed more than a million hits. In the video, a lone (possibly intoxicated) festival goer starts dancing in a field. After a minute or so, momentum builds and others join him, showing off their terrible dance moves in a video you’ll wish you hadn’t wasted three minutes watching. (Just speaking from experience here.)

Several weeks ago, the House began considering a bill that would rewrite the definition of “joint employment” under federal wage and hour law (Fair Labor Standards Act) and federal labor law (National Labor Relations Act). The Save Local Business Act would require “direct” and “significant” control over “essential terms” of employment before a business could be considered a joint employer of a worker employed by another business (such as a staffing agency or a subcontractor). Read more here and here.

Originally sponsored by Rep. Bradley Byrne of Alabama (you might think of Rep. Byrne as the original dancer in the Leadership video, but dressed as a conservative Southern gentleman), the bill now has 112 co-sponsors, including a few Democrats. Dance party!

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Joint Employment Legislation Needs to Be Expansive — If It’s to Be Effective

IMG_1093On Monday, we wrote about the Save Local Business Act — proposed legislation that, if passed, would create a new definition for joint employment under the NLRA and FLSA. But would that law go far enough?

No. Not at all.

On the bright side for businesses, the law would provide some predictability in that staffing agency workers would most likely be excluded from bargaining units. It would also remedy the current unfairness that results when a staffing agency makes payroll and overtime miscalculations but the company using the workers is held responsible as a joint employer.

But much more needs to be done to provide real clarity and predictability for business owners.

First, the law fails to address who is a joint employer under other federal employment Continue reading

Congress May Rewrite “Joint Employment” Definition

IMG_1092Congress may finally provide some clarity in determining who is a joint employer. In legislation introduced last week, the House proposed a bill that would rewrite the definition of “joint employer” under federal labor law (National Labor Relations Act) and federal wage and hour law (Fair Labor Standards Act).

The Save Local Business Act — despite lacking a fun-to-say acronym — would create a new standard for determining who is a joint employer under these two laws. The proposed new standard would allow a finding of joint employment “only if such person [business] directly, actually, and immediately, and not in a routine and limited manner, exercises significant control over the essential terms and conditions of employment….”

The definition provides examples of what are “essential terms and conditions,” including: Continue reading

Franchises Continue to Fight Joint Employment Claims

IMG_1074.JPGAre franchisors responsible for the wage and hour violations of their individually owned franchisees?

This question continues to vex the courts. (Vex! Great Scrabble word!) Despite the promise of more pro-business policies from the current administration, lawsuits filed by employees against franchisors show no signs of slowing down. Here’s why.

When employees allege wage and hour violations against individually owned franchisees (your local store), such as a failure to properly pay overtime, the employees usually try to convert that lawsuit into a class action.

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What’s Up? Black Car Drivers Are Independent Contractors. Here’s Why.

balloons-1786430_1280At the end of Pixar’s Up, Carl and Russell sit on a curb pointing out cars: “Red one!” “Blue one!” Then Dug (the dog) calls out “Gray one!” which I find endlessly funny every time I watch it.

Whatever color the car, they sat there content, eating ice cream.

Black car companies in New York are celebrating too (hopefully with ice cream), after a recent decision preserving their drivers’ status as independent contractors. In Salem v. Corporate Transportation Group, the Second Circuit Court of Appeals ruled that drivers were not entitled to overtime pay, since they were not employees, but rather independent contractor franchisees.

We’ve written often in this blog about the different tests for determining Who Is My Employee? This case was brought under the Fair Labor Standards Act (FLSA) and comparable New York law, so the Court applied an Economic Realities Test. This test measures whether workers are economically dependent on one company to earn a living or are in business for themselves.

Relying on the Economic Realities factors, the Court ruled the drivers were economically independent and were in business for themselves. Here are the keys to victory:

  1. The drivers purchased franchises, choosing from a variety of options (rent, own);
  2. The drivers used their own cars and paid all their own expenses;
  3. The drivers could drive for competitors or for personal clients;
  4. The drivers were entrepreneurs, controlling many significant aspects of their personal driving business;
  5. The drivers were free to accept or reject jobs;
  6. The drivers chose when, where, and how often to work; and
  7. The franchisor company could not freely terminate the drivers’ franchise agreements.

While independent contractor relationships remain under fire, this decision shows that there’s still hope. Companies can win these cases when they carefully construct the facts, relinquish control, and allow contractors to run their own enterprises.

Although these drivers had considerable discretion over how to run their individual businesses, none (unfortunately) had the creativity to ditch the car and transport customers in a helium-balloon powered house.  Now back to the film.

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© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.