Category Archives: Non-Employee Workers

12.11.23
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The Best of You: When to Use a Master Services Agreement with Independent Contractors

In “Best of You” by Foo Fighters, Dave Grohl repeats the word “best” 40 times. In “Coconut,” Harry Nillson repeats the word “coconut” 28 times. I get it, Harry, she put the lime in the coconut and she got a bellyache. In “I Don’t Care Anymore,” Phil Collins ends the song with 18 mentions of “no more,” which all right I get your point.

Repeating the same thing over and over might be a useful device when performing a song. But it’s annoying in independent contractor agreements. And it’s unnecessary.

Consider using a Master Services Agreement (MSA) instead, which is a particular type of independent contractor agreement.

An MSA is an evergreen contract that describes the terms of the relationship but does not specify the particular project. The MSA will often describe the type of service to be performed — delivery, installation, whatever — but it will not describe the specific delivery or installation (or whatever).

Instead, each specific project will be described in a separate Work Order. For an installation, the Work Order would describe the customer, the location, the product to be installed, any specific customer requirements tied to that order, the installation time or deadline, and the fee to be paid. The MSA and Work Order would both make clear, in pre-printed text, that every Work Order is subject to the MSA.

The advantage of this setup is that it’s simple and convenient. There’s no need to restate the full terms of the relationship in every Work Order, particularly if the contractor is likely to perform multiple projects, all of which are subject to the same general terms and conditions.

The MSA will be a multi-page document containing all of the general terms we would expect to see in an independent contractor agreement, including representations as to IC status, a recitation of facts that support IC status, the obligations of each party, payment and invoicing terms, a general description of services, a list of things the contracting party will not control, indemnity, insurance, duration or termination, survival, and other typical IC contract terms.

The MSA should make clear that the IC can reject or accept specific proposed Work Orders, which is consistent with the IC being allowed to choose when to work. But the MSA should also make clear that once a Work Order is accepted, the IC has a contractual obligation to perform.

The MSA might also specify the manner in which Work Orders are offered and accepted. While it is preferable to have each Work Order signed, that’s not always practical. Consider how Work Orders will be accepted, and describe in the MSA what will constitute acceptance. In some cases, acceptance might be indicated by the contractor’s receipt of a Work Order and the contractor’s failure to decline it within 24 hours. It’s ok to create a presumption of acceptance, but you’ll want to preserve the contractor’s right to decline any particular Work Order without penalty.

And that’s how you can create the best, the best, the best of contracts.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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12.04.23
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Beware of Falling Tortoises: Large Fines Are the Law for Willful Misclassification in California

Aeschylus (525-456 BC) was a Greek playwright and is often described as the father of tragedy. While only seven of his estimated 70+ plays have survived, the story of his death remains solidly entrenched atop the list of all-time oddest deaths (if it’s true).

Apparently, Aeschylus died after being struck in the head by a tortoise dropped by an eagle which had mistaken his head for a rock suitable for shattering the shell. That qualifies as a surprise ending to an otherwise successful career.

Today’s post is intended to help businesses in California avoid their own surprising deaths, sans tortoises.

Businesses using independent contractors in California are reminded that misclassification risks extend beyond the usual laws you’d think to be worried about. The California Labor Code has a special section devoted to making willful misclassification of workers illegal, period, end stop, and the law imposes substantial fines.

In other words, if you are working with independent contractors who should — under California law — be classified as employees instead, your business may be subject to substantial fines, even if you are not violating any of the laws addressing overtime, meal and rest breaks, reimbursement of expenses, etc.

Under Labor Code section 226.8, “willful misclassification” of independent contractors is, by itself, unlawful. Penalties start at “not less than” $5,000 and “not more than” $15,000 for each violation. If the Labor and Workforce Development Agency or a court determines that the violations are part of a pattern or practice, the fines jump to “not less than” $10,000 and “not more than” $25,000 for each violation.

Violators will also be required to post a notice on their website or in a location accessible to the public.

If your business is registered with the Contractors’ State Licensing Board, violations will also be reported to the Board for disciplinary proceedings.

The law defines “willful misclassification” as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” The law applies to “any person or employer,” raising questions as to whether individuals may be penalized too.

So if you’re doing business with independent contractors in California, be aware of the usual range of potential violations — overtime, meal and rest breaks, wage statements, expense reimbursements, etc. But also be aware that willful misclassification is, by itself, unlawful. Fines under Labor Code section 226.8 should be something you’re aware of. Enforcement is more frequent and more likely than being hit in the head by a falling tortoise.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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11.27.23
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New York State Jumps on the Band Wagon with New Freelancer Law

In the 1800s, P.T. Barnum used to promote the arrival of the circus with parades and clowns and band wagons through the town. By the late 1800s, politicians were noticing the excitement generated by the band wagons, and they would ride their own band wagons through town to generate support and excitement for the campaigns. Supporters would climb aboard, and the phrase “jump on the band wagon” was born.

So it seems fair to say, even back then, politicians were imitating clowns.

Over time, the phrase has come to mean rallying around any popular cause, clowns or no clowns.

And with the new statewide Freelance Isn’t Free Act, signed by Gov. Hochul on Nov. 22, the State of New York has done just that. New York’s statewide adoption of this freelancer law follows similar laws enacted in Illinois, New York City, Los Angeles, Minneapolis, Seattle, and Columbus. You can compare the four cities’ laws here and read more about Illinois’ law here.

Here’s what the NY State version will require, any time there is a contract with an individual independent contractor for services valued at $800 or more, either for one project or an aggregation of projects over 120 days:

  • Written contract required, which must include:
    • Name and address of hiring party and contractor
    • Itemization of services
    • Value of services
    • Rate and method of compensation
    • Date payment is due, or how due date will be determined
    • Any deadline by which the contractor must submit a list of services provided so that the hiring party can timely process payment.
  • The hiring party must provide a copy of the contract to the contractor.
  • The hiring party must retain the contract for six years!
  • Payment to the contractor must be made by the deadline specified in the contract or, if no deadline is specified, then within 30 days after the services have been completed.
  • The hiring party cannot require the contractor to accept less than the contracted amount. (The law does not seem to provide any exception for unsatisfactory services.)
  • Retaliation is prohibited against any contractor who seeks to exercise rights under the Act.

If there is a dispute over whether timely payment was made, the burden of proof is on the hiring party.

The law creates a private right of action.

The penalty for failing to provide a written contract is $250, if the contractor requested the written contract. Such a claim must be brought within two years.

The penalty for failing to make payment as required by the law or under the contract is the value of the contract, plus double damages, plus attorneys’ fees, and possibly injunctive relief. The statute of limitations for this type of claim is six years.

Waivers of any right under this Act are void as against public policy.

The law takes effect on May 20, 2024, and it will apply to contracts entered into after that date. In December 2022, Gov. Hochul vetoed an earlier version of this law, finding that it imposed too great a burden on the NYSDOL. Those concerns have been resolved in the new version of the Act.

The law does not apply to contracts with independent sales representatives, lawyers, medical professionals, or construction contractors.

The law applies not only to businesses, but to anyone in New York State who retains an independent contractor. As we discussed here when the New York City version of the law was enacted in 2017, the Act applies even to babysitters and dog walkers, if the minimum compensation amount is met.

Businesses and individuals who retain individual independent contractors in New York State, Illinois, Los Angeles, Minneapolis, Seattle, and Columbus need to know their obligations under these laws and act accordingly.

The Freelance Isn’t Free laws do not weigh in on whether the contractor is properly classified as an independent contractor.

There is a clear trend toward passing these types of laws, and we can expect more cities and states to jump on the band wagon.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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11.13.23
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No Unions? No Escape: NLRB’s Joint Employer Rule Imposes New Risks on Businesses Without Unions

TikTok star Matthew Lani earned a substantial following as a 27-year old medical prodigy, having graduated high school at age 16 before becoming a doctor. He posted videos of himself walking through a South African hospital, dishing out medical advice to his followers or selling them medication.

Lani, however, turns out not to be a doctor at all. When the ruse was uncovered and authorities went to arrest him, he said he had to pee and then tried to escape through a bathroom window. TikTok later banned his account.

The NLRB’s new joint employer rule has many employers trying to figure out whether they need a doctor or whether they can avoid the rule’s reach by escaping through a bathroom window.

Today we’ll answer questions about how the new joint employer rule affects non-union businesses.

We have no unions. Does the rule apply to me?

Yes, 100% yes. In fact, companies without unions may be most at risk here. If your business has vendors, suppliers, business partners, or even customers with employees, pay attention.

The point of the rule is that if your business exerts any control over any of the listed seven terms or conditions of employment, you’re a joint employer. In fact, the rule makes you a joint employer even if you merely have the right to exert control over one of these seven terms, even if you never do.

The listed terms and conditions are broader than the usual suspects, and they include control over health and safety matters.

If the other company’s workers are ever in your building while doing their jobs, you might be exercising control over their terms and conditions of employment without realizing it. Read more here.

What if the vendor’s employees don’t have a union?

Still yes. The rule may still directly affect your business’s rights and legal obligations.

What happens if I have no unions but am deemed a joint employer of someone else’s employees?

If you are a joint employer under the new rule, here’s what that means:

(1) If the other company’s employees form a union, your business would be required to participate in the collective bargaining process.

You’d be required to bargain regarding any term or condition that you have the authority to control. That could include your site-wide health and safety rules.

(2) If the other company’s employees have complaints about terms or conditions that your business can control, you cannot retaliate against them for raising these concerns.

Under federal labor law, all employees — including those not in unions — have the right to engage in protected concerted activity without being retaliated against.

Protected concerted activity can mean just about anything that involves more than one employee, including actions by one employee that are intended to seek support from other employees. Like an Instagram post or a Glassdoor review. Ending their assignment or asking the vendor to remove them from the project could be considered unlawful retaliation.

But these are not my employees? Why would I have to do these things?

Because joint employment.

The concept of joint employment is that more than one person can be the employer. If your business is deemed a joint employer of another company’s employees, then under the National Labor Relations Act (NLRA), you’re also their employer.

What about wage and hour law, unemployment compensation, and workers comp? Would I be a joint employer under those laws too?

No. The new NLRB joint employer rule applies only to the NLRA. Other laws have other tests for determining who is a joint employer.

You can be a joint employer under the NLRA and not a joint employer under other laws. But a finding of joint employment under one law could make it more likely that your business is deemed a joint employer under other laws — particularly if you comply with the new NLRB rule by, let’s say, participating in collective bargaining.

Do I need a real doctor, or will a TikTok doctor be good enough?

All businesses should pay attention to the new NLRB joint employer rule, even if you don’t have unions.

Proactively evaluate your risk of joint employment under the new rule. The whole point of the law is that you may be an employer of other workers without realizing it.

And you can’t escape the reach of the rule by climbing through a bathroom window.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.29.23
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Feeling At Risk? You Might Be, Now That NLRB Issued New Joint Employer Rule

I took this picture on Friday of a window washer at the Hilton across the street.

Late last week, the NLRB issued its new joint employer rule. I’ve listed three takeways below. Don’t be left hanging. Click here for the full Alert.

1) The National Labor Relations Board has issued a Final Rule that changes the test for determining who is a joint employer.

2) The Final Rule rescinds the Rule enacted in 2020 and adopts a test that will vastly expand the circumstances under which a company is a joint employer of the employees of another company.

3) The new rule may cause absurd results, including creating joint employment from the application of worksite safety rules to everyone onsite, including a vendor’s employees. The new rule requires joint employers to participate in the collective bargaining process.

The full Alert explains in more detail. If you are not subscribed to BakerHostetler employment law alerts, let me know and I’ll add you to the distribution list.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.16.23
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Weighing Heavy: Rhode Island Makes Some Misclassification a Felony

Because of gravitational pull, topography, and geology, people apparently weigh a bit more when in Southern Illinois than in Ohio or Indiana.

For an adult human, the difference is only about .02 pounds, so relocation is probably not a viable weight loss strategy. But still. Who knew?

Meanwhile, in Rhode Island a new wage theft law is going to weigh heavily on some buysinesses, no matter what the gravitational pull might be in Providence.

Amendments to the Rhode Island Payment of Wages Act, effective 1.1.2024, drastically increase the penalties for independent contractor misclassification.

Outside of the construction industry, penalties for misclassification will include fines between $1,500 and $5,000 per misclassified employee. Complaints will result in an investigation and, if a violation is found, a lengthy new administrative process ensues that may result in referral to the state attorney general for criminal prosecution.

In the construction industry, independent contractor misclassification will now be a felony, punishable by up to three years in prison, if the violation (a) is knowing and willful, (b) is a second violation of the Rhode Island law, and (c) is valued at $1,500 or more. First violations, if knowing and willful, are misdemeanors punishable by up to one year of imprisonment, for violations valued at $1,500 or less. Violations may also result in a fine of up to $1,000, instead of or in addition to imprisonment.

The amendment contains a possible drafting error (using “and” instead of “or), creating ambiguity as to whether a first violation in the construction industry may be punishable as a felony if the offense is knowing and willful and results in an underpayment of more than $1,500. The questionably drafted section is 28-14-19.1(i)(2)(i).

“Construction industry” is defined broadly and includes remodeling, repairing, improving, and maintaining any building.

“Employer” is also defined broadly and includes “any agent” of the employing entity.

The standard for determining misclassification will be the same standard that applies to the Fair Labor Standards Act (FLSA). That means an Economic Realities Test.

The amendments also impose criminal felony penalties for other selected wage and hour violations, if knowing and willful, including (a) failure to follow payday requirements, (b) failure to timely pay wages or accrued unused vacation upon termination, and (c) failure to timely pay an employee’s family wages due upon an employee’s death. Penalties for violations of these provisions include imprisonment for up to three years.

According to this article on SHRM.org, the Rhode Island Attorney General supported the amendments as providing enhanced tools and penalties for wage theft violations. The Attorney General seems particularly focused on going after independent contractor misclassification in the construction industry.

Businesses with employees and contractors in Rhode Island should review their current practices and double check for misclassification risks. The penalties for wage and hour violations in Rhode Island will be heavier than ever, starting in 2024.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.09.23
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Guard Your ‘Stache: Massachusetts May Consider Its Own Version of Prop 22

This is the Moustache Guard.

Invented by Virgil A. Gates of West Virginia, the Guard is intended for “holding the moustache out of the way of food or liquid while eating or drinking.” As you may have already guessed, Virgil filed for a patent in 1876. Why would you have guessed that? Because 1876 was the last time anyone was named Virgil.

Moustaches, while certainly worth guarding (especially those of the handlebar variety), aren’t the only thing in need of protection. Solo independent business owners in the delivery and rideshare industries have been under attack, as class action lawsuits and government agency activity increasingly seek to take away their independence by declaring them employees.

In 2020, California enacted Prop 22, which preserved independent contractor status for these drivers so long as the app companies provided a list of preset benefits and guaranteed pay. In a statewide vote, Prop 22 passed overwhelmingly with 59% of the vote.

Massachusetts may soon follow suit. A similar ballot measure is likely to be considered by voters in the Bay State about a year from now.

The ballot measure, if successful, would create a system like Prop 22 in Massachusetts. Delivery and rideshare drivers would be granted independent contractor status, so long as the app company they were using provided them with a litany of worker benefits. The required benefits would include:

  • Guaranteed pay at 120% of state minimum wage for time spent completing delivery or rideshare requests;
  • Additional per mile pay for each mile driven in a personal vehicle;
  • A healthcare stipend for drivers who average 25 or more hours per week;
  • One hour of paid sick time per 30 hours worked;
  • Accident insurance; and
  • Prohibitions on discrimination based on race, sex, sexual orientation, and other protected characteristics.

Click here for the official summary of the proposed law.

If the ballot initiative receives enough signatures, it may appear on the ballot for a statewide vote in November 2024. Alternatively, the legislature may choose to consider the issue on its own, before the 2024 general election.

Initiatives like this one and California’s successful Prop 22 provide a reasonable, common sense third alternative to what is usually a binary choice between classification as an independent contractor (with no employee rights) and an employee. Rideshare and delivery drivers generally value their independence and the ability to operate their own business. Laws like this one allow them to do so as contractors while receiving certain benefits and guarantees.

And that’s worth protecting.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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08.28.23
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Who Pays for Reasonable Accommodations to Staffing Agency Workers? Ask Shorty.

Limb lengthening reasoable accommodation

[This was college move-in week, so I’m a bit behind on writing a new post for this week. Instead I’m re-posting a favorite from 2020. I like this tip for staffing agency agreements!]

Suppose you’ve got a staffing agency worker (we’ll call him Shorty) who’s a bit vertically challenged and is self-conscious about it. He tells you he’s gonna need some time off because he found this:

A limb-lengthening clinic in Las Vegas claims it can make you a few inches taller through minimally invasivce surgery. According to this article on OddityCentral.com, here’s how it works:

“We cut the leg bones – either femur (upper leg bone) or tibia (lower leg bone) – and insert a device that slowly stretches them out which makes you taller permanently.”

“I insert a device that responds to an external remote control that the patient will control at home. Once the device is set, I place screws at the top and bottom of the device to lock into position. This is done on each leg.”

The doc says you then just press a button at home and you’ll stretch by 1 mm a day. Just like nature intended.

So, back to Shorty. Suppose he has this surgery one weekend and comes back to work a bit achy from all the stretching. He wants some extra breaks to get him off his feet. Or he wants you to provide him a stool so he can rest more often from his station on the assembly line. Do you have a reasonable accommodation obligation?

If you’re in HR, you know that weird stuff happens, so maybe you hadn’t considered limb-lengthening, but let’s use this as an excuse to think about relationships with staffing agency workers and what your obligations might be for medical issues.

This is unlikely to be a disability situation, unless Shorty’s stature is due to a medical condition. But you’ll undoubtedly have staffing agency workers who do have disabilities and who do need reasonable accommodations.

That brings us to today’s Tip of the Day:

Consider adding to your staffing agency contracts a clause requiring the agency to pay the expenses for any reasonable accommodations provided to qualified staffing agency employees to allow them to perform their job functions.

Accomodations can sometimes be expensive, and it’s not unforeseeable that staffing agency workers will need accommodations at some point. Plan ahead, and build this contingency into the contract.

A clause like that may lengthen your contract a bit, but this lengthening can be done in a sentence or two — with no surgical intervention, no cuts in your femur or tibia, and no insertion of a stretch button in your leg. That’s the kind of lengthening I’d be much more inclined to try. I’ll leave my limbs just the way they are.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

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08.21.23
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Snake & a Hawk: Illinois Passes Temp Worker Law, Imposes New Burdens on Companies

Not a hawk, but I like this picture I took in Utah a couple years ago

A woman in Texas was mowing her lawn last month when she was suddenly attacked by a snake and a hawk — at the same time. The hawk had been carrying the snake but dropped it. It landed on poor Peggy Jones. The snake wrapped itself around her arm. Still hungry, the hawk dove at Peggy to retrieve its tasty treat, clawing at her and the snake, and ripping up her arm in the process. Eventually the hawk won and flew off with the snake. Peggy had severe cuts and bruises, and her husband had to finish mowing the lawn.

We’ve got another double attack to report, this one in the world of temporary staffing.

Last week we wrote about New Jersey’s new temporary staffing law, which imposes new burdens on companies using temp staffing. Not wanting to be left out of the fun, Illinois has followed suit with a similar law.

The Illinois law imposes several new burdens on companies using temp staffing workers.

I’ve listed those obligations here, on the BakerHostetler Employment Law Spotlight blog. I list eight things that companies in Illinois will need to know.

I haven’t yet decided which law is the hawk and which is the snake. But both will inflict some pain.

Meanwhile, enjoy this song called Snake Hawk, by The Budos Band.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.17.23
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Free Lancers? Fourth Major US City Now Requires Written Contracts for Freelance Workers

In ancient and medieval warfare, cavalrymen who fought battles with lances were known as lancers. Actually, they were probably known as whatever Assyrians or Normans or Persians called lancers in their languages, but that’s not important right now.

I should share that my junior high, Palmetto, was also known as the Lancers when I attended in the 1980s. I don’t know if they are still the Lancers, but I do know that they are no longer Palmetto Junior High. Instead, the school is now known as Palmetto Middle School, which is unfortunate and a bit cruel to the teenage cheerleaders who must wear the school’s initials across their chests.

Medieval lancers might have been paid, or might not. Don’t know, don’t care. I know that PMS Lancers are not paid. But this post is not about free lancers. It’s about freelancers. And that space makes a lot of difference.

Los Angeles is the latest major city to pass an ordinance that imposes several strict requirements when retaining freelancers. The Freelance Worker Protection Ordinance took effect July 1, and L.A. now joins NYC, Seattle, and Minneapolis as cities that require a written contract when retaining a solo independent contractor.

This L.A. law is not a TV drama where “office politics and romance often distract the legal staffers from matters in the courtroom.” No, this L.A. law is more boring. This law applies when retaining a solo contractor who will earn $600 or more in a calendar year. If that’s the case (see what I did there?), then these rules now apply:

  • Must have a written contract that includes:
    • name, mailing address, phone, email of both hiring party and freelance worker,
    • itemization of services to be provided,
    • rate and method of compensation, and
    • date by which payment is due, or manner for determining due date.
  • Payment must be made by the due date or, if none is specified, within 30 days after services are rendered.
  • Both the hiring party and freelancer must retain records for 4 years.
  • Any waiver of these requirements is unenforceable.

The NYC, Seattle, and Minneapolis ordinances also require written contracts with similar contents when retaining solo independent contractors who will earn about the same amount. The NYC law applies to work worth $800 in one project or in the aggregate over 120 days. The Minneapolis law applies to work valued at $600 in a calendar year or $200 in a single week. The Seattle law applies to work valued at $600 in a calendar year.

Businesses and individuals who retain solo independent contractors in these cities need to be aware of these laws, which apply even if the hiring party is located elsewhere.

Hiring parties who fail to comply may be liable for double damages, fines for not providing a written contract, penalties for late payments, and attorneys’ fees. The most egregious violators may also be subjected to cavalry charges and lance attacks. Maybe.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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