What is Joint Employment?

What is joint employment

Despite the spread of marijuana legalization initiatives, the term “joint employment” has nothing to do with edibles, 4/20 day, or the prevailing aroma at a Jimmy Buffett concert. Joint employment simply means that more than one entity is a worker’s employer — at least under some applicable law.

In joint employment there is usually a primary employer and a secondary employer. The primary employer, for example, could be a staffing agency. The staffing agency pays the worker, onboards the worker with tax and immigration forms, and assigns the worker to a worksite. The secondary employer is the company where the staffing agency worker performs the services. It’s the company that most directly benefits from the work being performed.

Even though the secondary employer expects the primary employer (the staffing agency) to pay a minimum wage, to properly calculate and pay overtime, and to provide other benefits to its primary employees, a secondary employer can be held liable if the primary employer drops the ball. If the ball dropping is a violation of the law — for example, the primary employer didn’t properly pay overtime — then both joint employers can be held liable.

Joint employment is a backup plan for what happens when the primary employer doesn’t do what it’s supposed to do. If Staffing Agency A goes bankrupt and doesn’t pay wages, or if it miscalculates overtime, or if it doesn’t pay for off-the-clock work, both Staffing Agency A and Company B can be deemed joint employers. As joint employers, either company can be held fully liable when a worker doesn’t get what the law says he or she should get.

Let’s digest that for a moment: That means a joint employer can be held responsible for wage and hour violations even when it has no control over how the primary employer runs payroll or calculates worker pay.

In other words, being a joint employer can mean getting punished for things you didn’t do — and weren’t expected to do. As we explained here, it’s like taking steroids by accident.

That hardly seems fair. But it’s the law, intended to protect workers and to ensure there are deep pockets somewhere to ensure the worker is properly compensated for work performed.

So do you want to avoid joint employment? Not necessarily.  Joint employment by itself is not against the law. It is not illegal to be a joint employer.  Joint employment becomes a problem only when the primary employer didn’t treat its employees as the law requires. The law doesn’t care who was supposed to do it. In a joint employment situation, both companies are responsible.

That’s why a detailed contract is so important when engaging a staffing firm to supply employee labor. Contracts with staffing agencies should clearly spell out which company is responsible for what. You can read more here about common deficiencies in off-the-shelf staffing agency contracts. Those agreements generally need to be beefed up to provide proper protection.

How do you know if you are a joint employer? That’s (unfortunately) a tougher question to answer. The test for Who Is a Joint Employer? varies state-by-state, law-by-law. Here is a map showing the current chaos and inconsistencies in the tests. Several previous blog posts address the various tests being used and how these tests continue to develop. We’ll continue to post frequently on developments in joint employment, which is one of the focal points of this blog.

For now, my best non-legal advice is: Subscribe to this blog!

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 204 other followers

(After submitting your email address, you will receive an email asking you to confirm. If you do not receive it, please check your spam filter.)

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

2018_Web100Badge

Notification by Telex? Time to update your forms!

937EFF23-96B2-458B-B0DC-AA833A825379

Thank you Wikipedia, You know everything, making me feel so inadequate.

I recently edited a form agreement that allowed for notification “by facsimile or telex.” I deleted “telex” because, well, does telex even exist anymore? I then sent my edits back to the lawyer on the other side.

The other lawyer put it back in!

I then suggested he provide his client’s telex exchange and I asked if we could borrow his 50 baud modem and telex equipment to facilitate communications, because, um, our local antique store was fresh out of telex equipment. (I considered pushing back and insisting that all communications be in morse code but resisted. I admit to feeling pangs of regret that I didn’t push harder for the dashes and dots.)

People, update your forms!

If your independent contractor agreements and staffing agency agreements have not been reviewed since the widespread adoption of horseless carriages, it’s time for a fresh look. The risks of joint employment and independent contractor misclassification are real, and old forms almost definitely do not contain the types of clauses your business needs to protect itself.

For contracts with suppliers of labor, is your vendor accepting sole responsibility to do all of the things that employers must do, including hiring, firing, supervising, withholding taxes, tracking hours, and about a dozen other important tasks? Under many laws, you’re jointly liable if they fail, so you need robust contractual representations to shift liability.

Does your contract include sufficient insurance requirements and specific enough indemnity provisions to protect against a joint employment or misclassification claim?

Does your independent contractor agreement have specific descriptions of the types of control your business can and cannot exert? If you are not disclaiming the right to control a list of items, you’re missing a prime opportunity to turn the contract into strong evidence in your favor, in the event of a misclassification challenge.

For those of you, like me, who wouldn’t have the first clue how to telex someone, here’s what I learned on Wikipedia:

The telex network was a public switched network of teleprinters similar to a telephone network, for the purposes of sending text-based messages. Telex was a major method of sending written messages electronically between businesses in the post World War II period. Its usage went into decline as the fax machine grew in popularity in the 1980s.

The “telex” term refers to the network, not the teleprinters; point-to-point teleprinter systems had been in use long before telex exchanges were built in the 1930s. Teleprinters evolved from telegraph systems, and, like the telegraph, they used binary signals, which means that symbols were represented by the presence or absence of a pre-defined level of electric current. This is significantly different from the analog telephone system, which used varying voltages to encode frequency information. For this reason, telex exchanges were entirely separate from the telephone system, with their own signalling standards, exchanges and system of “telex numbers” (the counterpart of telephone numbers).

Telex provided the first common medium for international record communications using standard signalling techniques and operating criteria as specified by the International Telecommunication Union. Customers on any telex exchange could deliver messages to any other, around the world. To lower line usage, telex messages were normally first encoded onto paper tape and then read into the line as quickly as possible. The system normally delivered information at 50 baud or approximately 66 words per minute, encoded using the International Telegraph Alphabet No. 2. In the last days of the telex networks, end-user equipment was often replaced by modems and phone lines, reducing the telex network to what was effectively a directory service running on the phone network.

Keep your telex handy, my friends. You never know when you might need one — by contract.

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

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 204 other followers

What is the Test for Joint Employment? It Depends.

Joint employment together

There are lots of ways to be together. Some are good, some less good.

Let’s compare:

  • By the end of the movie Grease, the graduates of Rydell High have decided that they “go together like rama lama lama ka dinga da dinga dong.” That, I think, is supposed to mean good.
  • In The Fox and Hound 2, a direct-to-video DisneyToon generally rated as “not terrible,” our four-legged heroes sing that they “go together like wet dog and smelly peanut butter jelly fleas on my belly.” That sounds less good.

In employment law, being together can be good or bad, depending on your perspective.

When a company retains someone else’s employees to perform work, it sometimes becomes necessary to decide whether the first company is a “joint employer” of the second company’s employees. Being a joint employer is not illegal, but it means that if the primary employer violates employment laws, a “joint employer” is liable too — even if it wasn’t primarily responisble for the unlawful act.

The test for joint employment varies depending on which law was violated and depending on the state you’re in. (Here’s a map that illustrates the madness.) For example…

In this post we discussed how you determine if someone is a joint employer under federal wage and hour law (the Fair Labor Standards Act) (FLSA).

In these posts, we discussed how you currently determine whether someone is a joint employer under federal labor law (the National Labor Relations Act) (NLRA). In this post, we discuss how and when that test is likely to change.

In today’s post, we’ll examine how you determine whether someone is a joint employer under federal employment discrimination and breach of contract law. For these laws, the test for joint employment looks to the common law of agency.

A recent decision by the federal Court of Appeals for the 11th Circuit reminds us that different tests apply to different laws. Applying the joint employment test for FLSA claims, the trial court had ruled that a citrus grower was the joint employer of migrant workers after the primary employer who hired them did not properly pay them.  (The farm-labor contractor who hired them allegedly demanded kickbacks from the migrant workers’ wages under threat of deportation. Today’s Tip: Don’t do that.)

The migrant workers had another claim too. They alleged breach of contract under federal law (the contract was part of the federal visa process), and it tried to sue both the farm-labor contractor who was demanding the kickbacks and the citrus grower at whose fields they picked delicious fruit.

For the breach of contract claim, the Court of Appeals ruled that the proper way to determine whether someone is a joint employer is to use a Right to Control Test.

There are different versions of Right to Control Tests, but they all try to determine whether a hiring party retains the right to control how the work is performed. If the answer is “yes they do,” then the hiring party is a joint employer under that law. If the answer is “no they don’t, they care about the achieving the result but not how the work is performed,” then the hiring party is not a joint employer.

This Court of Appeals decided that there are 7 factors that should be used to determine whether someone is a joint employer under federal breach of contract law. (The same test would generally apply to federal employment discrimination claims.) State laws may differ. Here are the 7 factors that this court used to determine whether someone is a joint employer under federal breach of contract law:

1. Does the alleged joint employer have the right to control how the work is performed?
2. Does the alleged joint employer provides the tools?
3. Is the work being performed at the worksite of the alleged joint employer?
4. Does the alleged joint employer provide employee benefits?
5. Does the alleged joint employer have the right to assign additional work?
6. Does the alleged joint employer have discretion over when and how long the workers work?
7. Is the work being performed a part of the alleged joint employer’s regular business?

In this case, applying the 7 factors, the Court of Appeals ruled that the citrus grower did not exert much control and therefore was not a joint employer for the breach of contract claim — even though it was a joint employer for the FLSA claim. (The FLSA uses an Economic Realities Test, not a Right to Control Test, to determine whether someone is an employer.) That’s right — different tests, different results.

The citrus grower did not want to be a joint employer because it was not part of the alleged kickback scheme and did not want to be held jointly responsible. Nonetheless, it was found to be a joint employer under the FLSA but not under the breach of contract claim. Confusing stuff.

When making music, being together seems so much simpler, although much more prone to nonsense words. Just ask the Turtles, who in 1969 were “so happy together Ba-ba-ba-ba ba-ba-ba-ba ba-ba-ba ba-ba-ba-ba.”

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

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 204 other followers

Dept of Labor May Redefine Joint Employment with New Rule, Hints Labor Sec’y

DOL may issue new rule for joint employment

Rules are important for avoiding chaos, as I am reminded daily by one of my favorite twitter accounts, @CrimeADay. That’s where I learned that it’s a federal crime to operate a manned (or unmanned) submersible in national park waters without a permit, thereby ruining my weekend plans. (18 USC 1865 & 36 CFR 3.19). I also learned it is a federal crime to bring a child to a cockfight before his or her 16th birthday, thereby ruining my winter plans for father-daughter bonding activities. (7 USC §2156(a)(2)(B) & 18 USC §49(c).)

The Department of Labor (DOL) thinks rules are important too. Taking a page from the NLRB, which last week issued a Notice of Proposed Rulemaking to redefine “joint employment” under federal labor law, the DOL may be about to follow suit.

In a speech to members of the American Hotel & Lodging Association and the Asian American Hotel Owners Association, Labor Secretary Alex Acosta disclosed that the DOL is working on a proposal to redefine joint employment, presumably under the Fair Labor Standards Act (FLSA), which requires the payment of overtime and a minimum wage.

Joint employment is a hot button issue in the hospitality business, where outsourcing functions like housekeeping is commonplace, and where joint employment can mean the hotel operator is liable for for wage and hour violations by other entities who are supplying labor.

As we have discussed in previous posts, the tests for joint employment are different depending on which law is being applied. That means that even if the NLRB revises the definition of joint employment, that new test would not apply to the FLSA. The DOL would need to write a separate rule that would define joint employment under the FLSA.

According to Acosta, that new rule may soon be on the way.

Until then, remember that it is illegal to take a fishing boat into the danger zone of the Potomac near the Naval Surface Warfare Center while they’re firing guns, aerial bombing, using directed energy, or other hazardous operations, unless the patrol boats let you in. (33 USC §3 & 33 CFR §334.230(a)(2).)

Thanks, @CrimeADay!

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

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 204 other followers

 

Inspired by Animal House? NLRB May Force Long-Term Change to Joint Employment Test

Screen Shot 2018-05-12 at 2.00.26 PM

“What? Over? Did you say “over”? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!” —Bluto

The Republican-majority NLRB has been trying to figure out how to overturn the Browning-Ferris joint employment standard without running into conflicts of interest. It tried in December 2017, when it set a new test in Hy-Brand, but then backed off a few months later after allegations that Member Emanuel had a conflict of interest and should not have participated. The Browning-Ferris test went back into effect.

Two members of the Board come from large law firms and may face allegations of conflicts of interest if they vote to overturn Browning-Ferris.

But did you say it’s over? Nothing is over until we decide it is!

The Board announced last week that it is not giving up. Instead, it is planning a new way for changing the joint employment test. This plan, if successful, may mean a new test that is not subject to flip-flopping every time the NLRB majority flip-flops between Ds and Rs (as it does whenever there’s a new President from the other party.)

The new plan involves crafting a rule through the administrative rulemaking process. Sounds boring (and it is). The tedious rulemaking process includes issuing a public notice of the proposed new rule and a comment period.  Then, the Board gets to ignore any negative comments and adopt the rule.

The process takes time, but like a tiny water bacterium with a funny name, the new rule would be sticky.

From livescience.com: The tiny water bacterium Caulobacter crescentus secretes a sugary substance so sticky that just a tiny bit could withstand the pull from lifting several cars at once. With an adhesive force of nearly five tons per square inch, this “glue” is one of nature’s strongest.

The new rule would actually go in the books as a regulation, which future Board members would be obligated to follow.

It’s a sound strategy if it works.

The new rule would presumably resemble the rule the Board tries to enact in the Hy-Brand decision, which makes it much harder to show that a business is a joint employer. The new test presumably would require “joint control over essential employment terms” and would require control that is “direct and immediate,” not “limited and routine.”

For businesses that use other vendors’ workers (such as staffing agencies) and face the risk of being named a joint employer, this is an important development. Keep an eye on this one.

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

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 204 other followers

Is Joint Employment Illegal?

Is joint employment illegal? Buddha statue(Or, How is Joint Employment Like Tibetan Reincarnation?)

In Tibet, it is illegal to be reincarnated as a living Buddha unless “a majority of local religious believers and the monastery management organization” has requested the reincarnation. This is according to State Religious Affairs Bureau Order No. 5, issued in 2007, apparently to clamp down on rampant, uncontrolled reincarnations.

Joint employment is like Tibetan reincarnation in that both have lots of rules. But unlike Tibetan reincarnation, joint employment is not illegal.

Joint employment merely means that, in the eyes of the law, there are two employers. So far, no problem.

The problems arise if the primary employer doesn’t do what it’s supposed to do.

Consider a staffing agency scenario. The staffing agency is the primary employer. If the staffing agency’s employees are working at your company, taking direction from your supervisors, and working side-by-side with your employees, then the staffing agency workers are probably your joint employees.

The staffing agency is expected to pay its employees minimum wage, properly calculate their overtime, track their hours, etc. If they do all those things, no problem.

But if they don’t, that’s when joint employment becomes a problem. Even though your company has no control over the payroll processes of the staffing agency, your company can be held liable for their mistakes. That’s because under the Fair Labor Standards Act (FLSA), joint employers are both responsible for making sure that employees are properly paid.

The lesson here is to be careful about the companies you partner with for your staffing needs. If the agency is reliable, well-established, well-financed, and well-insured, then you should be in good shape. Fly-by-night operations that price their services at too-good-to-be-true discounts are a risk — not just because they might fail to provide you with quality employees, but because they might fail to properly pay those employees and then your company can be held responsible.

Be careful who you invite into your tent. Screen your staffing agencies. Impose contractual requirements that protect your business. Require adequate insurance. And do not ever permit any unauthorized reincarnations.

 

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

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 204 other followers

 

Go Carts or Bumper Cars? NLRB Asks Court to Fix Its Browning-Ferris Blunder

Browning-Ferris joint employment go cartThe two most fun activities at amusement parks (aside from skee-ball) are Go Carts and Bumper Cars. This is scientific fact. Go Carts are fun because you can go fast, weave around, and drive in circles — all without getting honked at. Bumper Cars are fun because, well, you get to bump people.

The NLRB seems stuck on the Go Cart track, going round and round, when it would rather be in the Bumper Cars.

Last week, we reported on the Board’s sudden decision to vacate its important Hy-Brand decision, issued in December 2017. Hy-Brand was important to businesses because the decision restored sanity and workability to the NLRA’s test for joint employment.

But by vacating the Hy-Brand decision, the dreadful Browning-Ferris standard went back into effect, Continue reading