NLRB’s Proposed New Joint Employment Rule: Same But Different

[Reposting with revised link to the article, not behind paywall]

When I was 5 years old, and my sister was 3, the rule was that we had to be in our rooms by 8 p.m.

We followed that rule, but in our own way. We’d put on our pajamas, say good night and go into our rooms. But then we would lie down on the carpet at the very edge of our rooms, with our bodies still in the room and our heads in the hallway so we could talk.

In the strictest sense, we followed the rule. But we did it in our own way, to serve our own purposes. In essence, we chose to define what it means to be in our rooms.

The same sort of rulemaking is happening at the National Labor Relations Board on the subject of defining joint employment.

Click here to read the rest of this article, published 9/12/2022 in Law360.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved. This article originally published on Law360, 9/12/2022.

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Can Independent Contractors Sue For Disability Discrimination?

On Sunday, I visited the American History Museum in Washington, where I came across this poster. Which I love. During World War II, Americans were encouraged to save their used cooking fat, which could be repurposed for manufacturing explosives. According to the University of Illinois, one pound of fat contained enough glycerin to make nearly a pound of explosives.

And that’s how bacon (sourced from a “wonderful, magical animal”?) helped win the war.

A different kind of battle continues to be fought over independent contractors’ rights. As we’ve discussed in many contexts, independent contractors lack many of the rights that employees have. That’s one of the reasons we see so many independent contractor misclassification claims.

One of the rights independent contractors lack is the right to be protected against disability discrimination—at least under federal law. In a recent case before the Sixth Circuit Court of Appeals, a nurse sued the hospital where she worked, alleging interference with her rights under the Americans with Disabilities Act (ADA). The nurse had been unable to work for several weeks after a head injury, and the hospital declined to re-credential her.

The problem for her, though, is that the hospital was not her employer, and so she didn’t have any rights under the ADA. (We can ignore the public accommodation sections of the ADA. They don’t apply here.)

The ADA allows workers to sue their employers for disability discrimination or for interference with their ADA rights. But a worker can’t sue a business that’s not the worker’s employer, even if the business takes action because of a disability.

The law has been clear for a long time that independent contractors cannot sue for disability discrimination under the ADA. This case was a bit different, though, because it dealt with the non-interference clause of the ADA, not the anti-discrimination clause. The court ruled that the same limitation applies to non-interference claims.

The plaintiff had another potential argument, and it was probably the better argument. But her lawyers never asserted it.

You see, the nurse was employed by a physicians’ group when she worked at the hospital. She first tried to sue the physicians’ group, but it went into bankruptcy, and the bankruptcy court disallowed her claim. She then sued the hospital where she performed the work. The hospital, not insignificantly, used to be her direct employer, but she had been rebadged as an employee of the physicians’ group three years earlier.

She probably should have argued that the hospital was her joint employer. But she didn’t. Because she never made the argument, the court didn’t conduct a joint employment analysis, and so we don’t know if the facts could have supported a finding of joint employment. But at least she might have had a viable argument. Maybe. But without any employment relationship, she had no argument and no chance to win. And that’s why the district court dismissed her claim and the Court of Appeals affirmed the dismissal.

There are two takeaways here.

First, independent contractors have far fewer rights than employees. Federal anti-discrimination laws protect employees, not independent contractors. Some state anti-discrimination laws protect independent contractors, but the ADA does not.

Second, when a worker is employed by a vendor or subcontractor, the real danger is joint employment. Your business can be held liable as a joint employer for misdeeds of the direct employer. The dangers of joint employment are even greater when the direct employer goes bankrupt. The whole purpose of joint employment is to make sure there is someone who can make the employee whole for any damages suffered. If your business is a joint employer, it doesn’t matter if you were primarily responsible for the wrong or not. Joint employment means both employers are fully liable for the loss.

You might be saying, hey, wait a minute. If she couldn’t work, how was that an ADA violation? We don’t know if her underlying claim had any legs or not. That’s not the point here. The point is that the court never got into the merits of the claim because it didn’t have to. The hospital had a complete defense. No employment relationship, no claim.

This case serves as a reminder of how important it is to be careful with non-employment relationships. Just like you would have been careful with your bacon grease, back in the 1940s.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Garbage Bird? Don’t Get Poisoned By A Double Hit of Misclassification and Joint Employment

Photo: Benjamin Freeman/Wikimedia Commons (CC BY 4.0)

The natives of Papua New Guinea call the hooded pitohui a “garbage bird,” and they don’t eat it or touch it. As Westerners learned more recently, there’s a good reason for the islanders’ hostility.

The hooded pitohui is the first bird confirmed to be poisonous. The bird‘s feathers emit batrachotoxins, which causes numbness and burning in low concentrations. A heavier does can cause paralysis, cardiac arrest and death. In other words, there’s good reason for keeping the hooded pitohui off the menu.

Numbness and burning may also describe the impact of a recent DOL enforcement action on two contractors in Louisiana. They were dealt a double hit—the DOL found independent contractor misclassification and joint employment.

After an investigation, the DOL’s Wage and Hour Division found that hundreds of painters and drywall workers had been misclassified as independent contractors. The company that retained the workers, PL Construction, failed to pay overtime and failed to maintain accurate time records, both violations of the Fair Labor Standards Act (FLSA).

Adding to the pain, the DOL found that a higher tier contractor, Lanehart, was the workers’ joint employer. That meant Lanehart was jointly liable for the violations—even though it had no control over PL Construction’s pay practices.

The DOL recovered more than $240,000 in overtime back wages for 306 workers.

There are several lessons here, both for companies that retain independent contractors directly and for higher tier contractors that engage subcontractors that use ICs.

1. The DOL considers independent contractor misclassification an enforcement priority. The agency is actively looking for violations.

2. The DOL publishes its wins. That means you can expect a press release naming and shaming your company if the DOL finds that there’s a practice of misclassifying workers. Have you heard the old adage that there’s no such thing as bad publicity? It’s not true.

3. Higher tier contractors are taking a risk if they put their head in the sand and disregard misclassification by their lower tier subs—especially if they plan to direct the work of the lower tier sub’s workers.

Here, the DOL found that Lanehart, the higher tier contractor, supervised PL’s workers and maintained records of who worked when. Lanehart’s supervision and direction made it a joint employer of PL’s workers. Under the FLSA, a joint employer is fully liable for wage and hour violations, even where it had no control over how the lower tier sub paid its workers.

4. A lawsuit is not the only way misclassification claims arise. Federal and state agencies can initiate investigations too. And while arbitration agreements with class action waivers can prevent class action litigation, they can’t stop a federal agency from pursuing claims on its own.

The DOL made its position pretty clear in its press release: “Our investigation shows the costly consequences employers face when they or their subcontractors fail to comply with the law. When we determine a joint employment relationship exists, the Wage and Hour Division will hold all responsible employers accountable for the violations.”

Misclassification hurts. Joint employment doubles the pain. The DOL can inflict an uncomfortable burning sensation, even without sending a a hooded pitohui your way.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Smackdown, Live!: Joint Employer Test Must Consider ‘Reserved or Indirect Control,’ D.C. Circuit Rules

Picture Source: nypl.org

In 2009, the James Brown compilation album The Godfather’s Smackdown, Live! was released. It’s a two-disc compilation of live shows from 1980. I never saw James Brown live, but I did see James Brown’s Celebrity Hot Tub.

The D.C. Circuit Court of Appeals issued a different kind of smackdown, chastising the National Labor Relations Board (NLRB) for ignoring the Circuit Court’s earlier directive about the joint employer test. Believe it or not, this case is another chapter in the ongoing Browning-Ferris saga.

Click here to read the rest, originally posted on the BakerHostetler Employment Law Spotlight blog.

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Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment.

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Dead End for Class Certification? Ninth Circuit Provides Roadmap for Defending Independent Contractor Misclassification Class Claims

For businesses using independent contractor vendors, misclassification claims are usually well-suited for class certification. A plaintiff’s path toward certifying a class can be relatively smooth when all vendors of a particular kind are treated as contractors. The argument goes that if one is misclassified, all are misclassified.

But a new Ninth Circuit ruling may help businesses change the path toward class certification into a dead-end road.

Click here to read the rest of the post, originally published on BakerHostetler’s Employment Class Action Blog.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Strap Yourself In: NLRB’s Joint Employer Rule is About to Change Again

Strap yourself in. It’s going to be a bumpy ride.

I drove behind this band of safety-conscious paddle boarders near Chicago recently. The guy in back is secured in by bungy cord. At least he looks comfortable.

The NLRB is about to make things a lot more uncomfortable for businesses concerned about joint employment.

As discussed here, the NLRB made clear earlier this year that it wants to revamp the independent contractor vs. employee test under the National Labor Relations Act.

Expect a new rule on joint employment to drop any day. The NLRB indicated several months ago that the joint employment rule was a target in its rulemaking agenda, and the expected release date is July 00, 2022.

Like most of you, I switched from the Julian calendar to the Gregorian calendar in 1752. While the changeover caused 11 days in September 1752 to be lost, I missed the memo about inserting a 0th day in July, starting 270 years later. Since I could find no way to mark the expected release date in my iPhone, I’ll give the NRLB the benefit of doubt and assume the date is a placeholder for “sometime in July.”

On Friday, it will be “sometime in July.” So get your bungy cord ready. You may need to take steps to better protect your business against joint employment risks.

The new rule will displace the current Trump-era regulation, which currently requires direct and substantial control over essential terms and conditions of employment before joint employment can be found.

Expect the new rule to track the Browning-Ferris standard imposed by the Board in 2015. Under Browning-Ferris, when one company has the right to control aspects of the work, joint employment exists — regardless of whether control is actually exerted, and regardless of whether the control is over wages, hours, scheduling or anything else that fits within the meaning of essential terms and conditions.

Joint employment under the NLRA can have several effects:

1. It can force you to the bargaining table for matters involving workers you did not consider to be your employees.

2. It can open the door to bargaining units that include workers you didn’t think were your employees.

3. It can open another door to bring union organizing activity into your business – through non-employee workers.

4. It can convert illegal secondary picketing into lawful primary picketing. If another company’s employees picket your site but the workers turn out to be your joint employees, they have the right to be there.

5. Each business that is a joint employer may be found jointly and severally liable for the other’s unfair labor practices.

When the new rule is posted, we’ll discuss what employers should do in response. Until then, enjoy the summer and try paddle boarding. But try to use a car with enough seats.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Don’t Get in Over Your Head: Set Up a Gatekeeper

Last month in Washington State, at a trailhead on the Olympic Peninsula, a woman dropped her cell phone in a pit latrine. Yes, that’s a flushless outhouse. The woman tried to retrieve the phone using a dog leash, then tried to use the dog leash to support herself as she reached down into the stinky muck. Dog leashes, however, are not meant for such endeavors, and — yes, this really happened — the leash failed. The woman fell head first into the latrine.

Making the best of a shitty situation, the woman found her phone, which she then used to call for help. The fire department rescued her, and the dispatch operator will be telling the story of that intake call forever.

The lesson here is: Know when to get help.

That lesson also applies to your company’s independent contractor relationships. Today’s tip is to set up a Gatekeeper System.

If your company is like most businesses, it’s simpler to contract with outside labor than to hire new employees. Operations managers or a procurement team are the people most likely to approve contracts for services. Because there are no employees being engaged in these contracts, the contracts don’t go to Human Resources, and they probably don’t get reviewed by Legal.

But every contract for services carries a risk that the individuals providing the services may be misclassified. Even if treated as independent contractors, those workers might be your employees under federal or state law. Or, if they’re being treated as employees of the business you contract with, they might be your joint employees. Both scenarios – independent contractor misclassification and joint employment – present legal risks.

But your operations managers or procurement team have not been trained to recognize those risks. They likely have never considered that the people providing those services might be deemed your company’s employees.

To protect against these risks, set up a Gatekeeper System. That would be a policy that says, anytime we retain non-employees to provide a service, there must be a written contract and it must be reviewed by a specific individual, the gatekeeper.

The gatekeeper will be trained to issue-spot and to recognize circumstances that may present an elevated risk of misclassification or joint employment. The gatekeeper can raise concerns with the legal department. Or maybe the gatekeeper is part of the legal team.

Setting up a Gatekeeper System is easy. It’s just a policy requiring a specific layer of review whenever non-employees are retained to perform a service. Make sure everyone authorized to enter into contracts for the business knows of the policy. Then train your gatekeeper to issue spot and to escalate for further analysis when necessary.

The point is that someone needs to know to look out for these risks. You can only protect yourself against the risks you have identified. Once you get sued or hit with an audit, it’s too late.

Just like it was too late for our friend the Washington hiker, who should have asked for help a bit earlier — before getting in over her head.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Iguanas with Jackets: Here’s One Exhibit to Include with Every Staffing Agency Agreement

I met this little guy in Costa Rica, 2017

It happens every year.

When the temperature in Florida drops into the 30s, the iguanas freeze. Unable to regulate their body temperature, they drop out of trees, landing on sidewalks and in yards like solid rubber toy animals.

The freeze doesn’t kill them though. It just stuns them for a while, then they eventually warm up, reanimate, and go about their daily iguana business.

Getting stunned like this can’t be avoided for the iguanas. Amazon is not yet selling iguana jackets, and online delivery to lizards is notoriously complicated. (Note to self: Business opportunity?)

But unlike iguanas, businesses can reduce their chances at getting stunned — at least when it comes to avoiding lawsuits from staffing agency workers.

When staffing agency workers file wage and hour lawsuits, they often sue both the staffing agency and the business where they worked. The workers allege that both are joint employers, often bringing class claims or a collective action.

Businesses that carefully draft their staffing agency agreements will have some natural defenses against these claims. I’ve written about that here. I call this strategy The Monster with Three Eyes.

But there’s a fourth strategy too. Force individual staffing agency workers to arbitrate these claims instead of pursuing them in court, and include class action waivers with the agreement to arbitrate.

There are two ways to introduce arbitration agreements with class waivers in your staffing agency agreements.

First, you can mandate that staffing agencies sign arbitration agreements with their own employees. Some courts have found that arbitration agreements between a staffing agency and its employee protect the third party business too, even if the third party hasn’t signed the agreement.

But that approach carries risk. The agency’s arbitration agreement might be poorly written, or it might include terms that make it unenforceable. Your protection is only as good as whatever form agreement the agency presents to their workers.

There’s a second approach I like better. It goes like this:

  • Draft your own individual arbitration agreement (with class waiver) for staffing agency workers to sign, requiring them to arbitrate any claims against you. Make it mutual, of course.
  • Append it to the staffing agency agreement as an exhibit.
  • Include a clause in the staffing agency agreement requiring the agency not to assign anyone to your business unless they’ve first signed this agreement.

The agreement will be short. No more than two pages. It can also include an agreement by the agency worker to protect your confidential information and assign inventions.

If the document is properly characterized as an offer by your business, accepted by the worker, you have offer plus acceptance equals contract — even if your business doesn’t sign it. There is specific language you can include that can make that work.

So if you use staffing agency workers, don’t assume you won’t get sued as a joint employer. You particularly want to avoid class and collective actions, and this type of arbitration agreement will do the trick.

Plan for bad weather in advance. Include this layer of protection with your staffing agency agreements. Consider it your own little iguana jacket.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Dole-Kemp ‘96? NLRB Announces Plan to Go Back to Old Rules on Joint Employment (But Not That Old)

The internet may be a playground and an encyclopedia, but it’s also a living graveyard. For those of you politically inspired, it’s not too late to join up with Dole-Kemp ‘96. Fans of the X-Files, who still await the next episode, can stay caught up at Inside the X. And anyone still looking to join the Heaven’s Gate cult can check out the group’s webpage here. The site is supposedly maintained by two of the only members who did not commit suicide in 1997, so leadership opportunities may be available.

The NLRB is hopping on the retro train too. Earlier this month, the Board announced its intent to adopt a new rule on joint employment. The new rule would displace the Trump-era regulation, which currently requires direct and substantial control over essential terms and conditions of employment before joint employment can be found.

The NLRB’s Notice of Proposed Rulemaking follows the trail blazed by the Wage and Hour Division (WHD) of the DOL, which in July rescinded the joint employment regulations passed during the Trump Administration. The WHD didn’t make a new rule; it just left a giant crater in the landscape, and now for Fair Labor Standards Act claims, there is no regulation at all.

The NLRB seems intent on adopting its own rule, not just rescinding the current regulation. There’s little doubt as to what the new rule will look like. Expect it to track the Browning-Ferris standard imposed by the Board in 2015. Under Browning-Ferris, when one company has the right to control aspects of the work, joint employment exists — regardless of whether control is actually exerted, and regardless of whether the control is over wages, hours, scheduling or anything else that fits within the meaning of essential terms and conditions.

Expect a substantial expansion in the scope of who a joint employer under the NLRA after the new rule is released. The impacts of joint employment under the NLRA can include being forced into bargaining with workers directly employed by a different company (a subcontractor, for example), being accused of a broader range of unfair labor practices, and being subjected to picketing that would be illegal secondary picketing if there were no joint employment relationship.

Back when Bob Dole was seeking the White House, actual control was required to be a joint employer under the NLRA. Since 2015, the standard has ping-ponged back and forth as the political winds have shifted. We’re about to see another major change sometime in mid-2022. If after the change you find yourself missing the good ol’ days, at least you can still cozy up with your Apple 2E and check out the Dole-Kemp campaign website.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Don’t Get Stuck Naked: Tips for Enforceable Arbitration Agreements When Using Staffing Agency Workers

He was in here. Really. Source: Syracuse Fire Dept Facebook

A Syracuse man was rescued from inside the walls of a historic theater last month after spending two days trapped, naked. The man apparently had entered the building’s crawlspace (why?) and fell from the ceiling into a gap between walls in the men’s restroom. No word on why he was au naturale.

But I’m sure he was glad to be freed from this unexpected situation. He should have planned better — like by not hiding in a crawlspace or, if he had a really, really good reason to hide there, by at least wearing clothes.

You can protect your business from unexpected situations (different ones), such as by making sure your staffing agency agreements include valid arbitration clauses with the staffing agency’s workers. The goal here is to avoid being left naked and stuck, if faced with a joint employment claim.

In a recent Oklahoma case, two staffing agency workers sued the staffing agency and the company where they provided services, alleging a failure to pay overtime.

The company where they worked filed a motion to compel arbitration, arguing that the arbitration agreement the workers signed with the staffing agency should cover all claims against both defendants. The district court initially ruled that the arbitration agreement was only between the worker and the staffing agency, and so it could not be relied upon by the other company. Motion denied.

But the Tenth Circuit disagreed, finding that the non-signatory company could enforce the agreement because the plaintiffs’ claims “allege substantially interdependent and concerted misconduct” against the two defendants. The plaintiffs were therefore “estopped from avoiding their duty to arbitrate their claims arising out of their employment relationship.”

That was good news in this case, but I wouldn’t count on that result every time. This case turned on Oklahoma estoppel law. But with proper planning, you can achieve the same result.

Here’s how:

First, in your agreement with staffing agencies, require the agencies to have all individuals assigned to perform services at your company sign an individual arbitration agreement.

Second, make sure it’s not just any old arbitration agreement, but one that includes customized terms. For example:

  • Require the worker to acknowledge that signing is a condition to being placed at your company.
  • Make sure the scope of covered claims is broad enough to include claims that are not just against the staffing agency.
  • List your company as a third party beneficiary with authority to enforce the agreement.
  • Make the obligation to arbitrate bilateral and binding on your company, even though your company will not sign the agreement. In other words, if you agree to perform services at the company, the company will agree to arbitrate any claims against you.

There are a few more tricks of the trade, but these are some of the key items. Keep the agreement short, and use simple language.

With some careful advance planning, you can avoid being left naked and stuck if faced with a joint employment lawsuit filed by staffing agency workers.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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