by Todd Lebowitz

Different Strokes: Be Careful With Choice of Law Clauses in IC Agreements

The phrase “Different strokes for different folks” originated in the 1960s and seems to have been popularized by Muhammad Ali. Describing his knock-out punches against Sonny Liston and Floyd Patterson, he said, “I got different strokes for different folks.”

In 1979, Ali appeared in the sitcom “Diff’rent Strokes,” which was probably named for the Ali quote and which was actually spelled that way and I can’t find anything that explains why. I guess when it comes to punctuation, different strokes for different folks?

Today’s post is a variation on that theme: Different states for different fates.

When drafting independent contractor agreements, choice of law matters. Choose carefully and thoughtfully. And remember three things:

First, state laws differ significantly on several subjects that might be relevant to your IC agreement — for when someone is considered an employee, for when non-competes can be enforced, for when non-solicitation agreements can be enforced, and for other terms that are likely to be in your contractor agreements. Don’t choose the law of a state that is less likely to enforce the clauses you want to include. If you can avoid California law for example, do yourself a favor and avoid California law.

Second, the state you choose needs to have some nexus to the parties or their relationship. Examples of a nexus that can justify use of a state’s law may be that one party is based there, or the work is being performed there, or (maybe) that one party is incorporated there. But there needs to be some connection.

Third, for worker classification disputes, the law of the state where the work is performed might apply anyway, since if a worker works in State A and the laws of State A would consider that person to be an employee, the parties cannot agree to contract out of the law of State A. But don’t concede so easily. Aim to apply the law of a favorable jurisdiction, even if there’s a chance that a court or arbitrator might disregard the choice of law clause in a classification dispute. Besides, there are going to be many other clauses in your agreement for which you’ll want the most favorable state law to apply.

For employment relationships, it is unlawful in some states (and unenforceable in others) to require application of the law of a state where the work is not performed, but it’s much less clear when and whether such laws apply to non-employment relationships.

The bottom line: Be strategic and thoughtful when inserting a choice of law provision in an independent contractor agreement. Depending on what law is applied to a particular issue or contract clause, the result and enforceability of that term may be different. Or diff’rent.

And the wrong choice of law could mean a knock-out punch for a clause you’d like to enforce.

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04.21.25

by Todd Lebowitz

Holy Bat Trap: Here’s How to Protect IP Created by Contractors

Two London police officers had to get creative to break up a gambling ring that was profiting off tourists on Westminster Bridge. The gambling rings would target tourists by setting up rigged games. Police would break up the games, but the wrongdoers learned to tell when the police were coming.

Cue the dynamic duo!

Police officers dressed as Batman and Robin mingled with the crowds, then struck when the time was right. Or as Mr. Kim might say, Sneak attack.

Companies retaining independent contractors can avoid needing to sneak attack if they set certain ground rules up front. One of these important ground rules relates to ownership of IP.

Intellectual property created by a non-employee is not automatically a work made for hire under US copyright law. Instead, an assignment of inventions clause is needed.

Ensuring that your own the contractor’s creations and the IP rights can be critical to getting the benefit of why you retained the IP. Consider the contractor who writes computed code or creates copy for your website. You want to own that IP.

(Or sometimes, like with an IC photographer, you might want to license it and allow the photographer to retain the copyright. But either way, you need to consider these issues in advance.)

But don’t wait until the protectable IP has been created to seek the assignment. Do it up front, in your independent contractor agreement.

Use a present assignment clause. The clause should say that any works created by the contractor and any IP rights arising out of those works are automatically assigned by the contractor upon creation, with no further affirmative act needed to effectuate the assignment. Do not merely say that the IP will be assigned, because that requires future action.

If you plan ahead with a proper assignment clause, you can avoid later trying to chase down the contractor for an assignment of the IP, which may already have been embedded into vital company property, such as computer code. Chasing down a contractor later might be easier than breaking up a gambling ring, and you might not even have to dress up as a superhero or his trusty sidekick.

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04.07.25

by Todd Lebowitz

Time Travel?! Check Your Contracts for “Services” Definitions.

I saw this tourist bus in New Zealand. So they finally figured it out. This company combines time travel and leisure, which I assume means that these tourists enjoyed a two-week vacation then returned home on the day they left.

Or maybe they were visiting from the future, which if true, I would have a lot of questions for them.

On a recent business transaction I worked, time travel might have helped the seller. Allow me to explain. The thing to remember is that words matter, just like there is a sharp difference between leisure time travel and leisure time travel. I choose to believe this touring company specialized in the latter.

The seller’s business was to offer technical specialists to its clients as consultants. The specialists had skills and expertise that the clients lacked. The consultants would advise the seller’s client. So far, so good. That’s a good business model.

But what we found as we read the contracts caused some concern. In all arrangements with clients, the seller’s function was the same — to identify and loan out technical specialists, while treating them as seller’s employees. Seller was operating as a quasi-staffing agency.

Even though the arrangements were the same each time, there was some sloppiness in how the “Services” were defined. In what I would call the Staffing Contracts, the seller’s agreements with its clients properly described the Services as identifying technical experts, loaning them out, and treating them as seller’s employees for employment and tax purposes.

But some of the agreements were what I would call Consulting Contracts. In the Consulting Contracts, the seller’s Services were described as providing the technical expertise desired by the client.

What’s the difference? Well it’s as big as the different between leisure time travel and leisure time travel. Suppose the individual consultant gives bad advice and makes a mistake that causes the client to lose money. The client then looks to the seller for indemnity and relief.

In a Services Contract, the client is entitled to no relief for a consultant’s bad advice. The seller did what it contracted to do. It provided the talent. But in a Consulting Contract, the seller contracted to provide consulting services. If the consulting services were provided in a negligent manner or resulted in a loss by the client, the seller might be liable for those damages.

The lesson here is to be careful when defining Services. If you are loaning out talent, be sure to define the Services narrowly.

Poor drafting may result in confusion and unexpected liability. If you find yourself in this situation, try to amend the contract, and see if you can make the amendment retroactive, time-travel style.

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03.24.25

by Todd Lebowitz

Lessons from a Blobfish: How to Avoid an Unexpected Retaliation Claim When Deciding Who to Engage

From mid-January to mid-February, I spent four weeks working remote from New Zealand’s South Island. It’s an astoundingly beautiful place, and I loved the experience. One experience I apparently missed out on, however, was seeing the now-famous blobfish.

The gelatinous blobfish lives at depths of 2,000-4,000 feet, a visit to which was not on my itinerary. But if it had been, I might have seen the 2025 Fish of the Year, as named by New Zealand’s Mountain to Sea Conservation Trust.

Its odd appearance is apparently caused by bringing the fish to the surface. In its deep sea habitat, the pressure causes it to look rather like a normal fish. So if you were deep in the sea, you might not have treated the blobfish any differently than its neighbors.

A recent federal court decision serves as a good reminder about the dangers of treating someone differently — in a way you might not have expected.

A recruiting firm was working with a candidate who had been threatening to sue her former employer for discrimination. The recruiting firm advised her against it and, when she sued anyway, it dropped her as a client.

But recruiting, staffing, and other firms can work with whomever they want, right? Generally yes, but they cannot decline to engage someone for an unlawful reason.

Title VII of the 1964 Civil Rights Act allows employees to assert their legal rights opposing discrimination and protects them against retaliation. The protection against retaliation extends beyond the company being sued. Another potential employer — or recruiting firm, or staffing firm, or even a company considering engaging the person as an independent contractor — cannot retaliate against that person for having asserted protected legal rights.

The lesson for recruiting, staffing, and other firms is this: Do not turn someone away for the sole reason that the person sued a former employer. That may be in violation of federal law.

In the federal case described above, the court denied a motion to dismiss by the recruiting firm, holding that the firm could potentially be liable for retaliation if the reason it declined to work with the individual was because she had asserted her federal protected rights under Title VII.

Like the blobfish, this seems like an ugly outcome for businesses. But also like the blobfish, if you go a little deeper, everything appears somewhat normal. If an individual was truly discriminated against, that person should not be punished for being a victim. That’s the theory anyway. We all know there are lots of meritless discrimination lawsuits. The anti-retaliation protections of Title VII extend to claims brought in good faith, even if the plaintiff doesn’t win.

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03.17.25

by Todd Lebowitz

How do Trump’s DEI Orders Affect Independent Contractor Retention?

In Canadian folklore, the Wendigo is an evil creature that can possess humans and turn them into cannibals. Wendigos cannot control their bloodlust and will even eat their loved ones, according to facts.net. The term “Wendigo Psychosis” has been used to describe a psychiatric condition in which patients experience intense desires to eat human flesh.

And that brings us to Trump’s executive orders on DEI.

On Friday, the Fourth Circuit Court of Appeals lifted a nationwide injunction that stalled enforcement of Trump’s DEI orders. The injunction was lifted for technical legal reasons, not because of policy reasons. In fact, two of the three judges wrote concurring opinions to show their support for DEI initiatives, even though they agreed the injunction should be lifted.

In one concurrence, Judge Albert Diaz expressed his frustration that they were unable to address the real substantive issue, referring to DEI initiatives (which he favors) as“a monster in America’s closet.” But hopefully not a Wendigo.

So how do the DEI orders affect independent contractors, and what should businesses do?

First, every business should be conducting an overall DEI audit right now. Programs and initiatives that overtly favor one group need to go. Scholarships and internships available only to certain racial or ethnic groups should be changed. Hiring quotas or targets must be removed. There’s a lot of gray area too, and there are a lot of things we are doing for clients in this area, but this post isn’t about DEI audits, so I’ll stop there.

Second, here’s what to look for with contractor relationships:

Check your supplier retention policies.
Eliminate any requirements to retain a certain percentage of minority or women-owned businesses.
Remove contractor (or supplier or vendor) selection criteria that consider race or sex.
Make sure that your supervisors who make retention decisions are not evaluated based on their performance in reaching targets to retain contractors based on race or sex.
Check supplier and vendor contracts for staffing criteria that favor or disfavor any protected group.

The attack on DEI is real, and companies who rightly remain committed to ensuring fair opportunities for all need to evaluate how they are seeking to achieve these goals. The government has an appetite for consuming companies whose DEI initiatives go too far. Like the Wendigo.

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Image from https://www.giantbomb.com/wendigo/3005-21605/images/

01.13.25

by Todd Lebowitz

Did Joni See It Coming? Two Companies Forced to Reclassify All Gig Workers as Employees

They paved paradise and put up a parking lot.

When Joni Mitchell wrote “Big Yellow Taxi,” she had just arrived in Honolulu. She was inspired by the view outside her hotel window, with beautiful green mountains in the distance and, closer to the hotel, a “parking lot as far as the eye could see.” Ugly.

For business owners, the beautiful green mountains are successful business operations, with the business having been built the way you wanted and cultivated over a number of years. Paving over that paradise with a parking lot is the government coming in and forcing you to change how you do business. Ugly.

That’s what is happening to companies that rely on independent contractors but aren’t deliberate enough in how they set up their IC relationships. Looking back at 2024, here’s what I mean, with two specific examples.

Two companies with nationwide operations were forced to convert all independent contractors to employees, at least those working in California.

WorkWhile and Qwick provide gig workers to fill empty shifts. Qwick operates in the hospitality industry, and WorkWhile operates across multiple fields, including manufacturing, hospitality, and general labor.

The companies treat the gig workers as independent contractors. The City of San Francisco sued each company on behalf of the State. The lawsuits alleged that the gig workers were misclassified and should have been treated as employees under California law.

In 2024, both companies settled. Each agreed to pay a seven-figure settlement and to reclassify all gig workers as employees. (Press releases are here and here.)

Before the lawsuits, both companies had operated their businesses this way for years. They didn’t get sued and didn’t have to reclassify the contractors — until they did.

This case is a good reminder of two important rules.

1. Just because you have been doing it this way for years doesn’t mean it’s lawful.

2.The fact that you haven’t been sued means only that you haven’t been sued yet.

Before the lawsuits were filed, the companies had options.

They could have been proactive about changing the facts of the relationships and the contracts. They could have molded the facts the way they wanted without government oversight, in a way that would better insulate them from misclassification claims. This would have been difficult in California, with its strict ABC Test, but not impossible. But it would have taken hard work and a willingness to make changes proactively.

Or they could have converted their contractors to employees, but done it on their own terms, without the government telling them how they have to operate their business.

Now, as part of their settlements, these companies are forced to allow the government to monitor and dictate how they interact with these workers.

Don’t it always seem to go / that you don’t know what you’ve got ‘til it’s gone?

Once the government is monitoring how you do business, you’ve lost the flexibility to adapt and build on your terms. It’s too late. The time to act is before you get audited, investigated, or sued. See Rule #2.

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01.06.25

by Todd Lebowitz

Get Skinny in 2025: Adopt a Handbook Just for Temps

Everyone has New Year’s Resolutions. Except me. My wife asks me every year, and every year I politely decline. She doesn’t like when I do that.

Some people pledge to lose weight, to get skinnier. This post is about getting skinny with your handbook for 2025—just for temps.

Do you provide your employee handbook to staffing agency temps? Should you?

Generally, I would say no, you should not. The handbook is filled with information about benefits that apply only to your direct employees, not temps. The handbook also probably directs and controls what your workers do, in ways that could make you a joint employer.

Instead, consider rolling out a skinny handbook just for temps.

There are a few polices that should apply to staffing agency temps, and it’s to your benefit to make clear—in writing— that these policies apply. It can be about 6-8 pages. That’s all you need.

Outline for Handbook for Temps

1) Equal Employment Opportunity

Anti-Discrimination
Anti-Harassment
Complaint Procedure
No Retaliation

2) Site Safety

Drug and alcohol
Weapons
Workplace Threats and Violence
Accidents, Emergencies, Reporting of Injuries
Searches, Screening

That’s it. You can include a welcome message too if you’d like. Maybe add a call-off procedure. Check whether references to “employees” should be changed to “workers” or something similar that doesn’t sound like you are conceding joint employer status.

Creating a skinny handbook for temps should take no more than 2-3 hours. If you want to start the year with a quick accomplishment that will add value, this is a good one. And you can even claim it as your New Year’s Resolution.

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12.16.24

by Todd Lebowitz

Don’t Get Jailed Because of Your Fat Friend: More Tips on Arbitration Agreements and Joint Employment

A South Korean man was sentenced to one year in prison for binge eating and getting too fat.

It isn’t always illegal to get fat in South Korea, but it is if you do it to dodge mandatory military service, which is what this guy did. His friend, who created the weight-gain plan, was sentenced to six months for aiding and abetting. Yes, really. And his defense was that he didn’t think his friend would go through with it.

One criminal eater, but two men end up in the pokey. Getting in trouble for what someone else does sounds exactly like joint employment.

One issue that often arises in litigation is whether arbitration agreements apply to all defendants in a joint employment dispute. If a plaintiff has an arbitration agreement with his main employer but sues two companies as joint employers, can the second company rely on the first company’s arbitration agreement to get the whole case moved to arbitration?

Sometimes yes, but courts are split. It’s going to depend on the relationship between the parties and how the arbitration agreement is drafted. Let’s quickly address each of those points.

1) Courts are split.

In a recent California case, a grocery store employee sued his employer and a related entity for wage and hour claims. He argued that both were joint employers. He had an arbitration agreement only with the primary employer.

The California Court of Appeal (2d district) ruled that the arbitration agreement required the claims against both parties to go to arbitration. The plaintiff was not allowed to allege that the parties were so interrelated as to be joint employers, but too distinct for both to be covered by the arbitration agreement. The outcome may have been swayed by the close corporate relationship between the defendants. The outcome could be different if the alleged joint employers were unrelated, such as in a staffing agency relationship.

A few years earlier, however, the California Court of Appeal (1st district) reached the opposite conclusion, finding that a non-signatory to an arbitration agreement could not enforce it.

2) It depends on how the agreement is drafted.

The best way to avoid this problem is to draft arbitration agreements to take the joint employment risk into account. Be thoughtful when defining the scope of covered claims and covered entities.

The agreement should apply to claims against the primary employer and related entities, as well as managers, supervisors, etc. Also consider adding third-party beneficiaries.

If employees will be providing services to another entity, such as in a staffing agency relationship, make sure those services are covered.

If your company is receiving the services and another company is the primary employer, check to see whether there’s an arbitration agreement in place, and review its scope.

If I am representing the company receiving the services, I like to require that as a condition of being allowed access to the property (or receiving confidential information, or whatever else), each individual must sign an arbitration agreement that covers claims against the company receiving the services. These can be short, one-page arbitration agreements. If drafted correctly, they do not suggest that there is any employment relationship.

Takeaways

Individual arbitration agreements with class waivers are a great way to avoid class action exposure and keep disputes out of public courts — but only if their scope is broad enough to cover the claims and parties.
If you are the company receiving services, ask the primary employer whether there are individual arbitration agreements in place and ask to see them.
Require anyone providing services, even if not your employee, to sign a contract agreeing to arbitrate claims, and make it a condition of being allowed to work on the property.
And most important of all, never help a skinny Korean get fat to avoid military service.

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10.14.24

by Todd Lebowitz

Blending In: California Passes Freelancer Protection Law, Joining Other Locales

Don’t tell anyone, but there is a motorcycle toward the front of this photo. I know, it blends right in and is hard to see because it’s camouflaged. But look carefully and you’ll see it.

I saw it recently while in Bellagio on our vacation to Italy. Yes, I have better photos, but this one helps me make a point about blending in.

The California legislature has decided to blend in too, adopting a freelancer protection bill that is similar to laws already in place in New York State, Illinois, and several cities.

California’s Freelance Worker Protection Act takes effect 1/1/2025.

The law has no bearing on the determination of whether someone is an employee or independent contractor. But if the worker is a contractor and other criteria are met, then the requirements of the law must be followed by the party retaining the independent contractor.

If you’ll be retaining a freelancer in California, here’s what you need to know. As a reward for reading to the end, I’ve included some tips and a better photo.

Applies if:

Retention of individual IC or single member entity,
Retained to provide “professional services” (as defined in Labor Code sec 2778), and
$250 in services to be provided within 120 days

But not applicable if:

The hiring party is an individual and the work is for the hiring party’s personal benefit or benefit of the family (e.g., n/a to babysitter, dog walker)

Requirements:

Written contact that includes:
- Name and address of each party
- Itemized list of services and value
- Rate and method of compensation
- Date when payment is due or mechanism for determining when payment is due
- Date when IC must submit invoice to allow for timely payment
Payment to IC is due on the date specified in contract or, if no date is specified, then 30 days after work is completed
Once work is completed, hiring party cannot require freelancer (a) to accept less in payment, (b) to provide more goods or services, or (c) to grant more IP rights than agreed to in the contract

Other provisions:

The law does not limit existing contract law or prevent an IC from enforcing a verbal contract or recovering under promissory estoppel
Waivers are void
Retaliation prohibited
Civil action permitted; recovery to include attorneys fees and costs
Damages:
- If IC requested and was denied a written contract, then additional $1000
- If hiring party failed to timely pay, then 2x unpaid portion
- Damages equal to value of contract for other violations
Hiring party must provide IC with a copy of the contract
Hiring party must retain contract for 4 years

Tips:

Clarify intellectual property rights in contract; don’t leave that until later or assume there is a handshake understanding of who will own the IP
Specify a due date for payment or a process for determining when payment is due
Define when the work is completed, and define it in a way that requires specifications to be met. This is to protect against poor workmanship and to try to preserve the right to pay less for a shoddy output.

And here’s a more representative photo from the Italy vacation. This is at Alpe di Suise in the Dolomites.

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09.16.24

by Todd Lebowitz

Try These Steps to Reduce IC Misclassification Risks, in the Long Run

Don Henley used to hurry a lot, he used to worry a lot, he used to stay out till the break of day.

But you don’t need to carry on that way. — at least when it comes to reducing your company’s risk of independent contractor misclassification. Here are four steps you can take that will proactively reduce risk, in the long run:

1. Review & Modify Actual Practices

Courts answer the question of Who Is My Employee? By reviewing the actual facts, not what the parties intend or what the contract says. Make sure the facts on the ground are consistent with economic independence of the contractor and a lack of control by the hiring party. Change the facts when you can.

2.Create a Vendor Qualification Questionnaire

Require vendors to make a set of written representations that support their status as independent contractors. Then rely on this set of representations when deciding whether to retain each contractor. These representations also help to pin down a contractor who later claims to be an employee.

3.Create a Gatekeeper Process

Sometimes contractors are retained by operations people who don’t know the first thing about misclassification and related legal risks. A gatekeeper process requires all retentions of independent contractors to flow through a designated person who can issue-spot and evaluate whether the proposed retention is consistent with independent contractor status. The gatekeeper has the discretion to approve or deny requests to retain a contractor.

4.Draft Customized Contracts

Any independent contractor agreement you find on the internet is pure garbage. Contracts should be customized:

To memorialize the specific facts that support independent contractor status in the relationship
To prohibit the exercise of control by the hiring party over various aspects of the relationship
To impose indemnity obligations and insurance requirements, and
To make it more difficult for a contractor to challenge the independent contractor classification

Taking proactive steps like these can help you to answer this question in the affirmative, when facing an independent contractor classification challenge: Who is gonna make it? We’ll find out, in the long run.

Who Is My Employee?

Exploring Independent Contractor Misclassification & Joint Employment Issues

Category Archives: Tips

Different Strokes: Be Careful With Choice of Law Clauses in IC Agreements

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Holy Bat Trap: Here’s How to Protect IP Created by Contractors

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Time Travel?! Check Your Contracts for “Services” Definitions.

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Lessons from a Blobfish: How to Avoid an Unexpected Retaliation Claim When Deciding Who to Engage

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How do Trump’s DEI Orders Affect Independent Contractor Retention?

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Did Joni See It Coming? Two Companies Forced to Reclassify All Gig Workers as Employees

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Get Skinny in 2025: Adopt a Handbook Just for Temps

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Don’t Get Jailed Because of Your Fat Friend: More Tips on Arbitration Agreements and Joint Employment

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Blending In: California Passes Freelancer Protection Law, Joining Other Locales

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Try These Steps to Reduce IC Misclassification Risks, in the Long Run

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