Category Archives: Joint Employment

06.03.24
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I Wanna Take Your Hire: How to Control a Third Party’s Wages without Becoming a Joint Employer

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.

 

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.13.24
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Can You See It? NLRB Fights to Restore New Joint Employer Rule

This past weekend, the solar storm was supposed to be strong enough that we could see the aurora borealis in Cleveland. At 11:30 Friday night, my family went to the Polo Fields in nearby South Chagrin Metropark to see for ourselves.

Lots of others had the same idea, and the fields allowed us an unobstructed view of the sky, where we saw…. nothing really.

We read that iPhones capture light better than our eyes, so we too photos of the blank sky. Turns out there’s some truth to that. I took the photo above, which makes it appear that I saw a nice light show. But I didn’t. I took a photo of what appeared to me to be dark sky. So it was there, but I couldn’t see it.

The NLRB also wants us to see something that isn’t there.

Last week, the NLRB filed an appeal in the Fifth Circuit Court of Appeals, asking the court to reinstate its new joint employer rule.

A quick rewind, for context: In 2023 the NLRB tried to implement a new rule for determining whether joint employment exists. The rule would have made it much easier to find joint employment, including in situations where most of us never would have thought joint employment would exist. On March 8, 2024, a federal judge in Texas vacated the rule, just days before it was scheduled to take effect. You can read more about that decision here.

So with this latest filing, the NLRB is trying to revive the rule, but the NLRB faces an uphill battle in a largely conservative Fifth Circuit.

For now, the NLRB rule remains dead. It’s possible that could change, depending on how the Fifth Circuit rules.

But if you take an NLRB-issued iPhone to the courthouse in New Orleans that houses the Fifth Circuit Court of Appeals and snap a photo, you just might see a glimpse of the rule, invisible to the naked eye. Or maybe that’s just a picture of gumbo.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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04.22.24
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Still Dead: Senate Votes to Void NLRB Joint Employer Rule

A Brazilian woman brought her Uncle Paolo to a bank branch so he could sign a loan document for her. Uncle Paolo was in a wheelchair and couldn’t seem to grip a pen, despite the woman’s best efforts to get him to cooperate.

But Uncle Paolo had good reason not to grip the pen and sign. You see, Uncle Paolo was dead. The woman brought the deceased to the bank in a wheelchair, thinking that — well, I don’t know she was thinking.

The bank called the police, and the woman was arrested. Uncle Paolo, reportedly, is still dead. The best part? There’s video.

Also still dead is the NLRB’s recent joint employer rule, struck down by a federal judge on March 8th.

Congress just took action to try to make it deader.

On April 10, the Senate voted 50-48 to invalidate the NLRB rule, following a 206-177 vote by the House.

President Biden has indicated he would veto the resolution, but the fact that the resolution received support from moderate Democrats, not just Republicans, may be a sign of how far out of touch the NLRB’s rule really was. Two Democratic Senators and eight Democratic members of Congress voted for the resolution.

Assuming the district court decision survives on appeal, the NLRB rule will remain dead, and the Congressional vote doesn’t make any difference anyway. That’s because dead is dead.

Tell that to the Brazilian woman in the video.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.11.24
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Court Vacates New NLRB Rule

No quips or musical references today. Just hard news, and here it is. If you do not already subscribe to BakerHostetler labor and employment alerts but would like to, drop me an email.

https://www.bakerlaw.com/insights/court-vacates-new-nlrb-joint-employer-rule/

03.04.24
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Don’t Horse Around: Here Are Three Agreements You Should Have on Your Shelf

Police in Wejherowo, Poland arrested a 19-year-old man for stealing a horse. The man was caught after neighbors reported that he was trying to lead a horse up the stairs to his third floor apartment.

Why would someone do that? Apparently he was trying to conceal the horse and thought his apartment would make a good hiding place. (After all, who would look in a third-floor walk up for a missing horse?) But getting the horse to the apartment was the man’s undoing.

He didn’t think through his plan. Don’t be like that man. Today’s post is to help you think through your plan in advance, but in the context of retaining non-employee labor, not stealing a horse.

I generally recommend having three types of agreements in your stable of documents. (Heh heh, see what I did there?) Each serves a different purpose and contains different features, even though there is often some overlap.

1. Independent Contractor Agreement. This should be crafted for use with solo independent contractors (1099s), regardless of whether there’s a single member LLC or a sole proprietorship.

The goal here is limit the risk of misclassification, that is, a finding that the worker is really your employee.

The agreement should identify and memorialize the facts that support IC status, such as that the company retains no right to control how the work is done, where it’s done, when it’s done, steps, sequence, etc.

If there are lots of ICs doing the same thing, individual arbitration agreements with class waivers can be highly useful to include too, as they reduce the downside risk of misclassification.

2. Vendor Outsourcing Agreement. This document is for when a function is entirely outsourced, such as in the hospitality industry, where it is common to outsource the housekeeping function.

There are two goals here.

One goal is to memorialize the facts that will help avoid a finding of joint employment. These workers should be managed independently of your company’s employees and should not be directly supervised by your managers.

The second goal is make it difficult for a disgruntled worker of the vendor to allege joint employment, and there are various tools in the toolbox to help accomplish this objective.

3. Staffing Services Agreement. This document is to be used when a third party provides staff augmentation services or other workers who are commingled with your employees or supervised by your managers. In this scenario, there’s a reasonable risk of joint employment.

We want to use the contract to build defenses.

First, we want to lay the groundwork for a claim against the vendor if the vendor fails to pay its employees in accordance with the law.

Second, we want to throw obstacles in the way of anyone who might want to bring a joint employment claim. Individual arbitration agreements with class waivers are helpful in that regard.

If you’re working with a staffing agency, the form they provide you is not likely to help limit your legal risks. It’s always better to start with your own form.

Don’t Horse Around

Agreements provided by your vendors are unlikely to provide you with any meaningful protections. Different agreements have different purposes, and these three agreements should each be used in different situations.

It doesn’t work to use a staffing agreement with outsourced employees, and it doesn’t work to use an independent contractor agreement with outsourced labor employed by the vendor. Those workers aren’t independent contractors at all; they’re employees of the vendor. The legal risk you’re trying to address is whether you’re a joint employer. That’s a very different legal question than whether the worker is misclassified.

So be sure to use the right kind of agreement for the right kind of situation.

That means planing ahead and having the right forms on hand, ready to go. As our friend in Wejherowo learned the hard way, you’ve got think all the way through your plan in advance.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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02.26.24
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Hold On: Court Delays NLRB Rule, But More Detailed Ruling Will Follow

I could think of a few songs called “Hold On” – Yes and Wilson Philips were the two that first came to mind. But I had no idea how popular a song name that was.

According to Wikipedia, there are at least 17 albums called Hold On and 311 songs with that name. Who knew?

“Hold on” is the theme of today’s post because that’s what a federal court in Texas decided to do with the NLRB joint employer rule. Judge H. Campbell Barker pushed back the effective date of the rule from Feb. 26 to March 11.

But that doesn’t mean the rule will go into effect March 11.

In the meantime, the judge is considering the arguments presented by both sides and may invalidate the rule entirely. I believe the delay is to buy time to draft a thorough opinion. Whatever the ruling is, it will be appealed to the Fifth Circuit.

For now, employers should review their agreements with vendors supplying labor (e.g., staffing agencies, outsourced functions) and use this opportunity to button them up. Here are ten things that should be in your staffing agency agreements but probably aren’t.

Employers should also review the degree of control they exercise over outsourced labor. On one hand, staffing workers who are intermingled with regular employees and supervised by employer managers are likely in a joint employment relationship already. But with outsourced workers, steps should be taken to avoid joint employment. The new NLRB rule would make it harder to avoid joint employment, and employers should take steps to minimize control over outsourced workers.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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02.19.24
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Will Congress Kill the NLRB Joint Employer Rule? Will a Court?

Before reading this post, please enjoy this adorable video of a porcupine eating an apple.

The porcupine seems harmless and cute, but remember – it’s still a porcupine. Those quills are sharp, and they can impale small would-be predators.

And speaking of impale: A Congressional resolution, if passed, would impale the NLRB’s joint employer rule. The effort has enough support that it could bear fruit. Like the tasty apple in this video.

On January 12, the House passed H.J. Res 98, which would nullify the NLRB’s new joint employer rule. The resolution passed, 206-177, with eight Democrats voting in favor.

The Senate is considering an identical companion bill, S.J. Res 49, which has the support of at least one Democrat. Senator Manchin is a co-sponsor.

Under the Congressional Review Act, Congress can nullify an agency regulation with a simple majority of votes in each house. Sixty votes are not needed in the Senate.

But if the bill passes, President Biden can still veto it, and he has indicated that he would.

Meanwhile, the rule continues to face challenges in federal court. If Congress does not nullify the rule, a court might enter an injunction to prevent it from taking effect. Having reviewed the arguments presented to a federal judge in Texas last week, I think there’s a strong chance the rule will be set aside, at least temporarily.

Remember: The NLRB joint employer test is supposed to be a common law right-to-control test. The scope of the new rule is substantially broader and would create joint employment relationships automatically, including in situations where the common law balancing test would not result in a finding of joint employment.

We can expect a ruling from the court this week, since the NLRB joint employer rule is scheduled to take effect next Monday, February 26.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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02.12.24
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Hold Me Now?: An Alternative Strategy for Joint Employment

The 1980s British band the Thompson Twins were not twins. They didn’t even look alike. Instead their name came from a comic strip called The Adventures of Tintin, which featured detectives named Thompson and Thompson, who were also not twins.

I don’t know why the comic strip seemed like a good name for a band. I’ve always thought a good name for a band would be Cantaloupe. Not saying I’m right. My point is just that there’s a lot of room here for a difference of opinion on band names.

The only reason I remember the Thompson Twins is that in 1983, they released a song called “Hold Me Now.” (I have a picture, pinned to my wall…) The song received a lot of air time, then faded to a distant memory, only to be revived when it pops up on one of the 80s music channels. Or in this blog post.

“Hold Me Now” is also the theme for today’s post. We’re not going so far as to recommend “Lovin’ Touchin’ Squeezin’.” That could border on sexual harassment. Instead, think just a friendly hug.

We’re talking, of course, about joint employment.

The usual strategy with joint employment is to avoid it all costs. Avoid supervising staffing agency temps. Do not direct their work. Don’t hire, fire, schedule, discipline, or maintain personnel records.

And that’s the right strategy when it’s possible to avoid joint employment. But sometimes avoiding it isn’t possible.

Often staffing agency temps are used to fill gaps where you don’t have enough employees. Sometimes they’re seasonal, and sometimes temp-to-hire. But if they’re intermingled with your regular employees, doing the same work, reporting to the same supervisor, and taking the same direction on how to perform the job, you’re probably already a joint employer.

Is that bad? Not necessarily.

Joint employment is not illegal. With one exception (below), joint employment is not a problem unless the primary employer — the staffing agency — doesn’t do what it’s supposed to do. If the agency doesn’t pay minimum wage or overtime, for example, or miscalculates the regular rate of pay, then both joint employers are 100% liable for the violation. An aggrieved plaintiff can recover from either party.

So if you’re already a joint employer, the goal should be to prevent the harms. That’s when you might want to embrace joint employment. Once you are a joint employer, you’re a joint employer. You can’t be more or less; it’s binary.

If you’re already a joint employer, you can lean into it. Make sure that agency workers are clocking in and out at the proper times. Make sure they don’t work off the clock. Make sure they take a proper meal break. Make sure they are being paid a minimum wage and overtime. You can even ask them to confirm that they’re being paid correctly and that they have no pay dispute with the agency. They’ll probably appreciate the show of concern.

If you’re already a joint employer, you can also direct and control their work, the same way you direct your own employees. Exerting more control will not change the result. Exerting more control may also help you ensure quality standards and enhance the customer experience.

But again, this strategy is only appropriate if you’re already a joint employer.

I wrote above that there is one exception to joint employment, for the most part, not being a problem if the staffing agency does what it’s supposed to do as an employer.

The exception is the National Labor Relations Act. If you’re a joint employer under the NLRA, you will have an obligation to bargain with a primary employer’s union. A joint employer must respect the right of its employees to engage in protected concerted activity. Employees may strike or picket a joint employer, the same way it can strike or picket a primary employer.

The advice you usually hear is to avoid joint employment. But that’s not necessarily the right strategy for everyone. Sometimes, it’s ok to give it a nice embrace.

For a related Pink Floyd themed post, click here.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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02.05.24
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Why Kenny Loggins Is Sometimes Right (in His Joint Employment Advice)

1982 was a great year for music. Not only did it give us “867-5309 (Jenny)” by Tommy Tutone and “Tainted Love” by Soft Cell, but if you look a little harder, you’ll also notice that several releases that year contained important hidden messages about joint employment.

On one hand, you had the opposers, like “I Can’t Go For That (No Can Do),” in which Hall & Oates were staying away from every action that could lead to a finding of joint employment. Wanna hear a little known fact I just made up? Here were the original opening lines from the song:

Easy, ready, willing, overtime
Where does it stop, where do you dare me to draw the line?
You sent me staffing temps, now you want me to exert control
Don’t even think about it, say no go

Rick Springfield offered some tips about keeping outsourced workers separated from your primary workforce. When you supervise, schedule, direct, and hire/fire someone else’s employees, you’re increasing the likelihood of joint employment. (More info here.) Tip for management: “Don’t Talk to Strangers.”

Hey temp worker, are you feeling left out because we won’t hire/fire, schedule, control your work, set your pay, or maintain your employment records? You’ll get no sympathy from Quarterflash. “Harden My Heart.”

On the other hand, there’s a counter-intuitive approach toward joint employment that I sometimes advocate. If you already know you’re a joint employer based on the facts, then you might choose to embrace it. In other words, avoid the harms. Make sure the workers properly record their time, take their meal and rest breaks, and don’t work off the clock. (Read more here.)

You’ve got to pretty sure you’re already a joint employer to adopt the “Open Arms” strategy, advocated by Journey and supported by Fleetwood Mac in “Hold Me.”

I’ll write more about the Embrace Joint Employment strategy in upcoming posts. It’s a question I am asked about a lot, probably because it’s the opposite of what everyone is generally told.

So maybe Kenny Loggins was right when he advised “Don’t Fight It”?

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.02.24
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Snakes! And Other Things to Watch for in 2024

This is a venomous Eastern Brown Snake, native to Australia. Stay away.

Tennis star Dominic Thiem knew what to watch for in his match this past weekend in Brisbane. It was on-court hazard he couldn’t ignore.

Play was interrupted when a “really poisonous snake” slithered onto the court near the ballkids. The intruder, an Eastern Brown Snake, “has the unfortunate distinction of causing more deaths by snake bite than any other species of snake in Australia.” The snake’s venom causes “progressive paralysis and uncontrollable bleeding,” which is not one of the on-court hazards typically of ballkidding.

(I don’t know if ballkidding is the real word for this, but it should be. Or ballkiddery maybe. I also learned from the snake bite article that the proper term for being bit by a venomous snake is “envenomation,” which is a word I hope to use elsewhere in a sentence sometime in 2024. So there’s a New Year’s resolution. [@Lisa, take note, I made one, even though you {correctly} say I am no fun because I won’t play the New Year’s Resolution game.])

The Eastern Brown Snake is not present in the U.S., so we don’t have to watch for any in 2024.

But here are several other things that could bite you in the behind in 2024 if you’re not paying attention:

1. New DOL test for independent contractor misclassification. The DOL issued its proposed new rule in October 2022 and targeted the fall of 2023 for release of a new final rule. The proposed rule would identify seven factors to consider when evaluating whether someone is an employee under the Fair Labor Standards Act (FLSA). The final rule will likely be very similar. We’re still waiting, and the final rule could be released at any time.

2. The new NLRB test for joint employment takes effect Feb. 26, 2024. Unless it doesn’t. The new rule is being challenged in both a federal district court in Texas and the U.S. Court of Appeals in D.C. Either court could quash the rule. The new rule will substantially expand who is a joint employer under the NLRA, even for worksites without unions.

3. Increased state and local enforcement activity. States and localities are filing their own lawsuits alleging worker misclassification. The New Jersey Attorney General recently filed a major lawsuit. The California Attorney General and California localities have been pursuing misclassification lawsuits too. Remember this: As much as I advocate for individual arbitration agreements with class waivers, they have no effect on enforcement actions brought by a state or local government. These lawsuits pose a substantial risk, and the governments love to issue one-sided accusatory press releases when they file the lawsuits.

4. The feds are doing this too. The DOL is bringing its own enforcement actions and publicizing them.

5. State and local laws that affect independent contractor classification and joint employment. We’re seeing legislative activity in three main areas:

(a) laws to change the tests;
(b) laws that provide a safe harbor for independent contractor classification if certain protections are provided to the workers (Cal. Prop 22, this proposed Mass. state law); and
(c) Freelancers laws that impose various requirements when retaining a solo independent contractor (currently: NY, IL, Los Angeles, Minneapolis, Seattle, NYC, Columbus).

6. State laws that criminalize worker misclassification. Take a look at recent legislation passed in NY State and Rhode Island.

7. State laws governing the use of temporary workers. Look for more states to enact laws like the Illinois Day and Temporary Worker Services Act (amended in Aug. 2023) and the New Jersey Temporary Workers’ Bill of Rights (enacted in Aug, 2023). These laws force companies that use staffing agencies to disclose the wages and benefits being paid to direct employees.

8. California’s AB 5 is still being challenged. This is the law that codified the ABC Test for most independent contractor relationships. But it also included a grab bag of miscellaneous and arbitrary exceptions. A full en banc Ninth Circuit has agreed to rehear Olson v. State of California, which challenges the constitutionality of AB 5.

Wishing you a happy, healthy, and litigation-free 2024.

Best wishes,
Todd

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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