Last spring in Poland, a menacing brown object appeared in a tree. Locals grew concerned about the mysterious beast and closed their windows. After a few days it was still there, and a call was placed to the local animal welfare society.
The authorities responded to the call and arrived on the scene to investigate. The citizens were relieved to learn it was not a bird of prey, a dangerous rabies-infested rodent, or a trapped pet. It was a croissant.
Somebody probably threw it into the tree while trying to feed birds.
The locals were likely embarrassed, but better safe than sorry. When in doubt, take steps to avoid problems. Be proactive.
Here are five tips to start off the new year the right way, with or without arboreal baked goods:
4. Create a gatekeeper system so that managers and procurement team members cannot retain non-employee labor without first going through a designated individual. You can’t guard against the risks you don’t even know about.
5. Check your website for references to independent contractor relationships. Don’t refer to your contractors as “our whatevers” or “our team of whatevers.”
Remember, to those who say they haven’t been sued for misclassification, I say you haven’t been sued yet.
A Syracuse man was rescued from inside the walls of a historic theater last month after spending two days trapped, naked. The man apparently had entered the building’s crawlspace (why?) and fell from the ceiling into a gap between walls in the men’s restroom. No word on why he was au naturale.
But I’m sure he was glad to be freed from this unexpected situation. He should have planned better — like by not hiding in a crawlspace or, if he had a really, really good reason to hide there, by at least wearing clothes.
You can protect your business from unexpected situations (different ones), such as by making sure your staffing agency agreements include valid arbitration clauses with the staffing agency’s workers. The goal here is to avoid being left naked and stuck, if faced with a joint employment claim.
In a recent Oklahoma case, two staffing agency workers sued the staffing agency and the company where they provided services, alleging a failure to pay overtime.
The company where they worked filed a motion to compel arbitration, arguing that the arbitration agreement the workers signed with the staffing agency should cover all claims against both defendants. The district court initially ruled that the arbitration agreement was only between the worker and the staffing agency, and so it could not be relied upon by the other company. Motion denied.
But the Tenth Circuit disagreed, finding that the non-signatory company could enforce the agreement because the plaintiffs’ claims “allege substantially interdependent and concerted misconduct” against the two defendants. The plaintiffs were therefore “estopped from avoiding their duty to arbitrate their claims arising out of their employment relationship.”
That was good news in this case, but I wouldn’t count on that result every time. This case turned on Oklahoma estoppel law. But with proper planning, you can achieve the same result.
First, in your agreement with staffing agencies, require the agencies to have all individuals assigned to perform services at your company sign an individual arbitration agreement.
Second, make sure it’s not just any old arbitration agreement, but one that includes customized terms. For example:
Require the worker to acknowledge that signing is a condition to being placed at your company.
Make sure the scope of covered claims is broad enough to include claims that are not just against the staffing agency.
List your company as a third party beneficiary with authority to enforce the agreement.
Make the obligation to arbitrate bilateral and binding on your company, even though your company will not sign the agreement. In other words, if you agree to perform services at the company, the company will agree to arbitrate any claims against you.
There are a few more tricks of the trade, but these are some of the key items. Keep the agreement short, and use simple language.
With some careful advance planning, you can avoid being left naked and stuck if faced with a joint employment lawsuit filed by staffing agency workers.
In Return of the Living Dead, a warehouse owner accidentally reanimates some cadavers, who then become unkillable zombies. While not based on a true story, the 1985 film does have some parallels in real life (if you squint real hard and just go with it).
As discussed last week, copyright claims can also return from the dead when the author is an independent contractor. This week we discuss what can be done to avoid this zombie copyright scenario.
In the case of Horror Inc. v. Miller, the Second Circuit ruled that screenwriter Victor Miller could reclaim the copyright to Friday the 13th after 35 years, since he wrote the script as an independent contractor.
The case highlights a serious risk when retaining a writer as an independent contractor instead of as an employee. If a work is not a “work made for hire” under the U.S. Copyright Act, the author can reclaim a copyright 35 years after having transferred the rights away.
Horror, Inc. argued that Miller was an employee when he wrote the script, which made it a “work made for hire.” The court disagreed, but the rights holder should have had another argument in its back pocket – one that would have been much cleaner and could have changed the result of the case.
Employment is just one path for designating something a “work made for hire.” Another path toward the same designation is to have a “specially commissioned work.”
If Miller’s contract to write the movie had indicated that the movie was a specially commissioned work for use as part of a motion picture, it would not have mattered whether he was an employee or an independent contractor. The “specially commissioned work” designation would have made the work a “work made for hire” without getting into the messiness of employment, which would mean that Miller could not reclaim any rights after 35 years. This circular from the copyright office explains the “specially commissioned work” rule.
There are important lessons from this case for anyone seeking to engage a writer, whether it’s a freelancer or a script writer.
First, think through the implications of employee vs. independent contractor, not only in the context of employment law but also copyright law.
Second, consider a belt-and-suspenders approach. Even if the writer is your employee under labor law, the writer might not be your employee under U.S. Copyright Act — at least according to the Horror, Inc. case. Consider Plan B. You maybe able to designate the work a “specially commissioned work” or use one of the other definitions of a “work made for hire,” assuming that the facts fit within the definition.
But there are pitfalls to the second approach too. The California Labor Code says that if a work is a “work made for hire,” then the relationship between the writer and the acquirer is automatically employment, at least under certain provisions in the Labor Code. See Cal. Unemp. Ins. Code Section 686 and Cal. Lab. Code Section 3351.5(c).
If the California Economic Development Department (EDD) performs a misclassification audit, it will likely ask for all independent contractor agreements, and if a deliverable has been designated as a “work made for hire,” that may serve as conclusive proof of misclassification, with back assessments owed for failure to pay unemployment taxes.
You can get around the whole “work made for hire” issue by assigning the work, but that leaves the door open for the writer to reclaim the copyright after 35 years. And we’re right back where we started.
The independent contractor vs. employee decision has important implications in copyright law that are often overlooked. The Horror, Inc. case is a good reminder of some of the surprises that may arise many years later.
In 2017, the Fyre Festival failed spectacularly after all sorts of social media influencers touted it as the must-attend party of the year. Documentaries on Hulu and Netflix tell the story in all its gory detail, and you can see the videos that hyped the event that wasn’t.
Despite that epic fail, the use of social medial influencers continues to be a powerful form of marketing. But when contracting with a social media influencer, beware. There are legal traps for the unwary.
For those of you who missed the social media influencer webcast on September 28, here are five tips to help prevent your social media influencer from being misclassified as your employee.
1. Whenever possible, contract with the influencers’ loan out company instead of the influencer as an individual. This is especially important if the influencer is a member of SAG-AFTRA and union pension and health contributions may be in play.
2. Limit control over things you don’t need to control. Yes, you can put parameters around the influencer’s messaging to protect the brand, and it’s ok to require the influencer to follow the FTC Guides, to avoid use of nudity or profanity, to avoid discriminatory or harassing language, and similar reasonable guardrails. But don’t get sloppy and start requiring the influencer to use your equipment or work from your facility. Be careful about open-ended contracts that are terminable at will. Don’t overreach in exerting control over when and where the. work is performed. Consider all of the Right to Control Test factors.
3. Remember that the law decides whether it’s employment, regardless of what the parties agree. And the Right to Control Test is not the only game in town. The Economic Realities Test will apply for determining worker status under federal wage and hour law and some state laws. More troubling, ABC Tests in California, Massachusetts, and other locations raise the bar significantly and make it much harder to maintain an independent contractor relationship. If the law says that it’s employment, then it’s employment. The labels you put in your contract don’t matter.
4. Avoid terminology that sounds like employment. “Retain” the influencer, not “hire.” “Terminate the contract,” instead of “fire.” Pay a “fee,” not a “wage.”
5. Pay by the project, not by the hour, whenever possible. Method of pay is a factor in many of the classification tests, and payment by the hour is one factor that’s suggestive of an employment relationship.
For more tips about how to properly engage a social media influencer, including how to make sure you follow advertising laws and avoid misclassification risks, tune in to the webcast.
I just got back from running in a 200-mile relay, Muskegon to Traverse City, with a group of college friends. I ran three legs of 4, 4, and 5 miles. I had the easiest set of three legs among the 12 runners, but I’m happy just to have finished. It was great to see everyone, and I was able to disconnect from work life for a few days.
So, what I’m saying here is, I had a better weekend than the guys I’m about to write about. And for them, there’s no running away from their problems.
In yet another exotic dancer case to hit the news, the performers at King’s Inn Premier Gentlemen’s Club in Massachusetts are about to score a $292,000 settlement in a claim that they were misclassified as independent contractors. A hearing to approve the settlement is scheduled for this week.
There seem to be a lot of exotic dancer cases in the annals of independent contractor misclassification, and the clubs seem to lose their fair share of these cases. This case, like most of the dancer cases, is a wage and hour case. The dancers claimed they were denied a minimum wage and overtime pay, in violation of the Fair Labor Standards Act (FLSA). The club claimed the dancers were independent contractors and therefore were not covered under the FLSA.
But why do you care about a strip club exotic dancers case? Two reasons:
Second, any settlement of an FLSA lawsuit must be approved, and it becomes public record.
You can read more about the first point here, in a collection of posts about this test and how it is used to determine whether someone is an employee.
The second point deserves a bit more attention, though. Most types of litigation can be settled in a private settlement agreement. An FLSA case cannot be. The law requires the settlement of an FLSA case to be approved by a judge, and there is a public hearing at which the settlement terms are considered.
Once you get sued for an FLSA violation, it’s very hard to get out of it with anything resembling confidentiality. This is the kind of claim you want to avoid in the first place.
How do you avoid an FLSA claim when you have independent contractors?
Be proactive. Evaluate your relationships using the Economic Realities Test and see if they hold up.
Review your contracts and see if they can be adjusted to better memorialize the facts that support independent contractor status.
Consider obtaining representations from the contractors up front to determine whether they really do operate independently.
Don’t wait until its too late to take action. You can’t just run away from an FLSA case.
More than 67% of US marketers will use some form of social media influencer marketing this year, according to emarketer.com. While I can’t vouch for the numbers, I do believe that putting numbers in my attention-grabbing lede makes you want to keep reading and, besides, we all know it’s a lot so does the exact number really matter anyway?
While top social media influencers include Cristiano Ronaldo, Justin Bieber, and Ariana Grande, there are also niche social medial influencers with more targeted audiences, such as the gluten-free or plant-based foods crowd.
Whatever your social media marketing strategy, engaging a social media influencer involves legal risks. Some of these risks are pretty intuitive, such as laws relating to testimonials. You need to learn those rules and follow them. Other risks are a bit more hidden, and that’s where I come in.
While your relationship with a social media influencer is intended to be an independent contractor relationship, you need to avoid exerting so much control that you risk the influencer being deemed your employee. Yes, the Right to Control Test applies here too.
You need to protect your brand, and your contract with a social media influencer should do that. But where do you draw the line? You need to install guardrails to protect the integrity of your brand, but if you exert too much control, it’s possible to convert your social medial influencer to your employee, entirely by accident.
You can register here for free. 1.0 CLE credit is available.
Free Useless Tip: One surefire way to avoid independent contractor misclassification is to use a social media influencer that’s not human, and there are several. Dogs, cats, and even a South Korean avatar have all built loyal social media followings. In the webinar we’ll be focusing on the use of human influencers, but you’re welcome.
Sometimes injuries can be reasonably expected, sometimes not.
A good example of when injuries can be expected is the annual Bagwal festival in northern India. This year’s festival was described by Indian media as “a low-key affair” with only 77 of the 300 participants sustaining injuries. Wait, what?
At Bagwal, participants divide into four clans and hurl stones at each other to please a deity. According to this report, “The fight continues until a priest determines that enough blood has been shed in honor of the goddess Maa Barahi and demands to stop the fight.”
A good example of when injuries are not expected is when you retain an independent contractor to perform some sort of work on your property. Sometimes there are known hazards on the property. Sometimes there are no reasonable safety precautions that can be taken to minimize the hazard. For example, suppose you retain a contractor to fix a known safety risk.
The question: When an independent contractor gets injured by one of those known hazards, who is liable?
The California Supreme Court recently addressed this question in a case with significant ramifications for business owners, property owners, and independent contractors.
The answer: The contractor is liable, not the property owner — but this assumes the contractor is properly classified as an independent contractor.
The rationale: Like in many states, California law presumes “that a hirer of an independent contractor delegates to the contractor all responsibility for workplace safety.” This doctrine, known in California as the Privette doctrine, means that a hirer is typically not responsible for injuries suffered by an independent contractor.
The Privette doctrine makes sense. It arose out based on four basic assumptions:
Hirers have no right to control an independent contractor’s work.
Contractors can factor in the cost of safety precautions and insurance in the contract price.
Contractors are able to obtain workers’ compensation coverage to cover any on-the-job injuries.
Contractors are typically hired for their expertise, which includes knowing how to perform the contracted work safely.
There are two exceptions:
A hirer may be liable when it exercises control over any part of the contractor’s work and negligently exercises that control in a way that contributes to the injury.
A landowner who hires an independent contractor may be liable if the landowner knew, or should have known, of a concealed hazard on the property that the contractor did not know of and could not have reasonably discovered, and the landowner failed to warn the contractor of the hazard.
In Gonzalez v. Mathis, the court was asked whether a third exception should be recognized when injuries “result from a known hazard on the premises where there were no reasonable safety precautions it could have adopted to avoid or minimize the hazard.”
The court declined to recognize this exception, holding that in this situation, the contractor is liable, not the hirer. Rules may vary in other states.
What should businesses do to protect themselves, in light of this ruling?
Make sure your contractors are properly classified as independent contractors under the applicable legal test. California uses an ABC Test for making this determination. Other California laws, such as Labor Code 2750.5 and 2810.3 complicate the analysis.
Make sure your contractors are licensed and insured. Licensing by the Contractors State Licensing Board is required in California for anyone who contracts to perform work on a project that is valued at $500 or more for combined labor and materials costs.
Do not exercise control over your contractors. Defer to their expertise.
Disclose known hazards, especially those that are not readily visible.
And if you’re looking for repair work to be done at or near a Bagwal festival, don’t forget warn your contractor about the risk of flying stones.
I just finished reading The Longest Day, the 1959 book by Cornelius Ryan that tells the story of the D-Day landing from Allied, French, and German perspectives. The book covers June 6, 1944 and the days leading up to it, but it doesn’t get into what happened next. To facilitate supply lines into Europe right after D-Day, the British built two artificial harbors off the Normandy coast. Mulberry Harbours A and B allowed for the transport of up to 7,000 tons of vehicles and supplies to the mainland each day.
A harbor is a place where ships can seek shelter from the open ocean. Switching our focus to peacetime and the law, a “safe harbor” is the legal term for a provision that protects against liability if you meet certain conditions. No ships are required. Know the required conditions, and you can find shelter from a legal storm.
Two states recently passed laws that create safe harbors against claims of independent contractor misclassification.
Businesses using independent contractors in West Virginia and Louisiana should update their contracts immediately to take advantage of these new statutes.
Each state’s law provides a list of conditions that, if met, will make someone an independent contractor, providing a safe harbor against claims that these workers are misclassified and should be employees. The LA law creates a presumption of contractor status; the WV law is conclusive.
One of the conditions in WV, for example, is that the written contract “states…that the person understands” a list of five specific facts. The contract needs to “state” these five things. The WV law has other requirements too.
The LA law requires that 6 of a possible 11 conditions are met to fall within the safe harbor.
Other states are considering similar laws. Missouri and North Carolina are considering similar bills. Oklahoma was headed down the same road during the last legislative section but has not yet passed a bill.
Businesses using independent contractors in these states should amend their agreements to take advantage of these safe harbor opportunities.
At a time when the federal government is pledging to crack down further on independent contractor misclassification, it’s important to have contracts that are built to withstand classification challenges by any governmental body. Even under federal law, which doesn’t have these safe harbors, these recitations can be helpful when trying to meet the Right to Control and Economic Realities Tests used in federal law and in most states.
Your agreements with independent contractors provide an opportunity to build your defense against claims of misclassification. They should not be treated as a mere formality.
You want to be able to point to your agreements as Exhibit 1 in your defense against a misclassification claim. Play offense, not defense. Adding the WV and LA clauses — and even the proposed NC and MO clauses — can go a long way toward protecting your independent contractor relationships.
You might not be into reading books about World War II and that’s ok. But please read your contracts carefully. Now is a great time to amend and improve independent contractor agreements.
This month I have been focused on summer clean up. We moved back into our house after six months of unintentional reconstruction, thanks to failed plumbing supply line on the second floor that created an impromptu shower and bath throughout the first floor of our house. Welcome home from vacation, late December 2020.
But now I’m back and getting organized. Cleaning house. Moving forward.
Late summer can also be a good time to clean house and eliminate unnecessary legal risks. With the White House about to release a new rule on joint employment, now is the time to review your staffing agency agreements.
You’ll want to check for these three things:
The Monster with Three Eyes. You need these three components to protect against joint employment claims, no matter what test applies.
A clause like this one, to allow you to remove unwanted workers without exerting the type of control that would make you their employer.
Awareness of FMLA risks. Know what to watch with temps-to-hire, and don’t forget about this often-overlooked rule.
Did you know that Monaco’s flag looks the same as the flag of Indonesia? The differences are subtle. The Indonesian flag is wider, with a width-to-length ratio of 2:3, compared to Monaco’s 4:5; and Monaco flies a slightly darker shade of red. The flag above is Monaco’s. Fans of Indonesia, don’t be fooled by that pushy sales clerk at the flag store.
Now take your screen and flip it 180 degrees. That’s the flag of Poland. Its proportions are 5:8.
Sometimes, things look the same, even when they’re not. True with flags. Also true with “contract workers.”
When a client starts talking about its “contract workers,” the first thing I want to know is what they mean. Are you talking about 1099 independent contractors? Staffing agency workers employed by a staffing agency? Or your own W2 employees with contracts to work for specific period of time?
Each is as different as Monaco and Indonesia.
If discussing 1099 independent contractors, we’re talking about workers that no one is treating as an employee. The legal risk here is independent contractor misclassification. In other words, are laws being broken by not treating these workers as employees?
If discussing staffing agency workers, we’re talking about someone else’s W2 employees. The issue here is not whether these workers are anyone’s employees. We already know they’re the staffing agency’s employees. The legal issue here is whether these workers are joint employees. In other words, are they employees of both the staffing agency and your company?
If discussing your own W2 employees with contracts for a definite period, we’re probably discussing contract terms and we’ll probably need to see the contract. These are employees but not employees at-will.
The flags of Monaco and Indonesia may look the same, but the countries and their laws are very different. Same thing here. These three types of “contract workers” are as different as a European principality with a population of less than 40,000 and a Southeast Asian chain of islands with a population larger than every country on earth except China, India, and the United States.
Yes, Indonesia really does have the world’s fourth largest population. Fun fact! (And one of the world’s most common flags, tied with Monaco and Poland, as you now know.)
If you’re asked about “contract workers,” be sure you know what you’re being asked about. Any of these three types of worker can be called “contract workers,” but they’re very different, and the legal issues involved are very different too.