Five fisherman from Sri Lanka died last month after drinking the unknown liquid they found in bottles floating about 300 miles offshore. The fisherman reportedly believed the bottles contained foreign liquor.
Ceylon Todayreports that efforts are underway to inform nearby fishing trawlers about the dangers of drinking from floating bottles. It’s a good thing the authorities are doing that because, otherwise, the most common sense thing to do when finding unidentified liquids is to drink them.
Better planning would have saved their lives. You can also plan better when negotiating your staffing agency agreements. Here’s a clause you can include that won’t save lives but will save money.
Overtime Multiplier Caps
When a non-exempt temp works more than 40 hours in a week, the worker must receive overtime pay of 1.5x. But that doesn’t mean you need to pay the same markup rate to the agency for that extra .5x premium.
Here’s what you can do instead.
Suppose you pay a 40% markup on the hourly rate the agency pays to its workers. For a worker receiving $10/hour, you pay the agency $14, The agency gets $4 in revenue for one hour of work provided.
But suppose the same worker works 50 hours in a week. The extra ten hours are paid to the worker at $15/hour, which means the agency gets $6 in revenue for those hours. Here’s the math: 15 x 1.4 = $21, less the $15 that goes back to the worker = $6.
Why should the agency get $6 instead of $4 for the same hour worked? It’s a windfall. You can cap that with an Overtime Multiplier Clause.
The clause would say, essentially, that for straight time, the agency gets a 40% premium. For overtime hours, the markup is the same 40% on the straight time (the 1.0x), then the overtime premium (the extra 0.5x) is reimbursed with no markup on the premiums portion of the pay (the 0.5x).
The worker gets $15, but you pay the agency $19 for that hour, not $21.
In future posts, I’ll address other money-saving clauses you can add to your staffing agency agreements.
In the meantime, remember not to drink from any bottles you may find floating at sea.
Commas are important. See, for example, Let’s Eat, Grandma and the Rachael Ray magazine blurb proclaiming that Rachael Ray finds inspiration in cooking her family and her dog. (The latter, sadly, turned out to be a fake. The real magazine blurb had the commas.)
If I had put a comma in the title above, after How Long, you may have thought this post was intended for Pro Football Hall of Famer Howie Long. It’s not. Howie played 13 seasons with the Raiders but almost certainly does not read this blog.
This post, instead, is intended for anyone who wants to know how long you can retain an independent contractor before that person becomes an employee.
Before I can provide a helpful answer, I’ll need some information first. (Just the basic facts, can you show me where it hurts?)
Question: Is the worker a 1099 independent contractor or a staffing agency’s W2 employee?
We need to know which legal issue to address. If the worker is a 1099 independent contractor, then the issue is independent contractor misclassification. In other words, is the worker really an employee, entitled to the various benefits and protections that the law gives to employees?
But if the worker is employed by a staffing agency and treated by the agency as the agency’s W2 employee, then the worker is already entitled to the benefits and protections of employment. The issue here would be joint employment. Is your business a joint employer?
If your question is about joint employment, an earlier post here addresses that question.
On the other hand, if the worker is a 1099 independent contractor, duration of assignment can be one of many factors that indirectly increases the risk that the worker is really an employee. Factors in the independent contractor classification analysis can include:
Is the assignment indefinite in duration, or instead for a specific project or fixed term?
Can the assignment be terminated at any time for any reason, or does early termination require cause or some other specified event?
Does your business have W2 employees who are performing the same or similar work?
If the assignment is indefinite or can be terminated at will, those are factors that weigh toward employment status. If the worker is performing the same function as employees, then the worker is going to look like an employee, and more so the longer this goes on.
But if the contractor is (1) engaged for a specific project or fixed term, and (2) the work is not something your employees are also doing, then duration is not necessarily a concern. A true independent contractor can be retained for a project that lasts many months or even years. We see this sometimes with implementation of electronic systems, like HRIS or enterprise software. Or there might be a third party contractor you’ve engaged for years to provide a repeating, project-based service that is entirely unrelated to your business, like your plumber or window washer or event photographer.
But if the work relates somewhat to your business, you may have a problem if the long duration is because of mission creep (not Mission CREEP). If the worker finished one project and then is given another and another, that starts to look like indefinite retention, which points toward employment.
If the worker is a 1099 independent contractor, duration of assignment might increase the misclassification risk, but the risk will depend more on how the other questions are answered. Duration is not directly a factor, but a longer duration may be an indication that other factors are starting to point in the direction of employment.
Further analysis would be needed.
The other question you may have is why I haven’t yet referenced the 1974 single by Ace, “How Long (Has This Been Going On),” which will now be stuck in your head the rest of the day, you’re welcome. Turns out, I learned here, that the song is not about romantic infidelity. Vocalist Paul Carrack wrote the song upon learning that bassist Terry “Tex” Comer had been secretly recording with two other bands.
When Sly and the Family Stone released “I Want to Take You Higher” in 1969, it was originally a B-side. The song took off, though, and became a Top 40 hit anyway.
The song is an upbeat ode to how music can make you feel good. Fun fact: It was used as the theme song in the Canadian children’s show, Hilarious House of Frightenstein, to introduce the show’s disc jockey, the Wolfman, who is either a fictional part-wolf part-man or a human DJ who achieved vocational excellence (and got his own TV show!) despite an untreated case of hypertrichosis.
The Family Stone wasn’t the only band that would like to take you higher. Jackie Wilson went to Billboard #1 in 1967 with “(Your Love Keeps Lifting Me) Higher and Higher.” In 1990, Damn Yankees asked, “Can you take me high enough?” in their song, “High Enough.” And, not to be outdone, Duran Duran, in 1995, released two covers of the Family Stone song, calling the second, “I Want to Take You Higher Again.”
Why all this talk about higher? Because when you’re working with a third party labor provider that provides high-demand, skilled labor, sometimes you’ll want to take their hire. (Heh heh).
The right to direct hire is often addressed in the vendor agreement. Maybe you’ll pay a finder’s fee if you direct hire within the first 3-6 months. But I was asked a more intriguing question last week that I thought was worth a blog post. (Thanks, P! You know who you are.)
Here’s the scenario, which is most likely to arise in the competition for highly skilled workers, like computer programmers: We want to direct hire, but we don’t control the market. If the third party labor provider pays a premium for in-demand roles, they might pay more per hour than we pay. That would make it hard for us to direct hire to worker.
Which leads to this question: How do we cap the wage paid by the third party labor provider (so we can offer the direct hire a raise, not a pay cut), without dictating the wages paid by the third party, which would create joint employment risks?
Excellent question! The answer is to do it indirectly. Here’s how.
Suppose you want the option to direct hire a chimneysweep but wouldn’t dare pay more than $50/hour for a chimneysweep (other than Dick Van Dyke himself, but only in his prime). Chimneysweeps are in high demand and so third party labor providers may be paying their chimneysweeps $50/hour too so they can get the best ones. It’s a competitive labor market, you know.
You don’t want to tell the third party labor provider what to pay its chimneysweeps. Dictating the wages of a third party worker is a strong indicator of joint employment.
Instead, you should agree to pay the agency $50/hour for its chimneysweeps. Then you know they are paying the chimneysweeps less than $50/hour because the agency has to be making a profit. The markup is probably 35-45%, so you could even pay the agency up to about $65 per hour and be confident the chimneysweep is not taking home more than $50/hour.
Then, if you wanted to direct hire the chimneysweep for which you are paying the agency $60-65/hour, that sweeper is likely only being paid about $42-45/hour and so his sweeping prowess could be yours for the low low price of roughly $50/hour or less. That’s how I would approach this problem.
I don’t think any bands are singing about this issue directly, but if I told you they were really singing “I Want to Take Your Hire,” you just might hear it that way next time you listen.
The world’s largest passenger elevator is inside the Jio World Center building in Mumbai, India. It can hold 235 people and is designed to cater to large gatherings, such as weddings or convention attendees.
The elevator has glass windows, offers panoramic views of the gardens below, and features a crystal-studded ceiling. It has two sofas so passengers can relax while ascending the maximum five floors at the slow but deliberate rate of 1 meter per second.
Thinking big doesn’t just work when building elevators. It also works when building independent contractor agreements.
Here’s what I mean.
When lots of contractors are being retained, an important feature to include in independent contractor agreements is the requirement to arbitrate disputes on an individual basis, with a waiver of class claims. Under the Federal Arbitration Act (FAA), arbitration agreements and class action waivers are generally valid and enforceable.
But there’s that pesky transportation exemption in Section 1 of the FAA, which says that the FAA does not apply to transportation workers. The Supreme Court recently issued its decision in Bissonette v. LePage Bakeries, holding that to determine whether the transportation worker exception applies, you need to look at what the worker does, not what industry the worker is in. But this post isn’t about Bissonette. It’s about a Ninth Circuit decision issued a few weeks earlier.
The Ninth Circuit ruled that the transportation exemption applies only to individual workers, not to entities. Why does that matter? Well, is your independent contractor agreement with an individual or an entity?
If it’s with an individual, and the worker is engaged in transportation work related to interstate commerce, the transportation worker exception of the FAA might apply, which means the FAA and all of its protections for mandatory arbitration agreements would not apply.
But, according to the Ninth Circuit, if your arbitration agreement is with a business entity, then the transportation worker exception does not apply, since it is inapplicable to business-to-business disputes. That means the FAA does apply.
Engaging small businesses, even single member LLCs, can offer a number of advantages when trying to protect independent contractor status. This recent Ninth Circuit decision offers another advantage, better protecting the parties’ ability to require arbitration of disputes and waivers of class claims.
So when engaging independent contractors, remember to think bigger than the individual. If you can contract with an entity, even a single member LLC, you might be better off — for lots of reasons, even if none of them come with a sofa or panoramic views.
Police in Wejherowo, Poland arrested a 19-year-old man for stealing a horse. The man was caught after neighbors reported that he was trying to lead a horse up the stairs to his third floor apartment.
Why would someone do that? Apparently he was trying to conceal the horse and thought his apartment would make a good hiding place. (After all, who would look in a third-floor walk up for a missing horse?) But getting the horse to the apartment was the man’s undoing.
He didn’t think through his plan. Don’t be like that man. Today’s post is to help you think through your plan in advance, but in the context of retaining non-employee labor, not stealing a horse.
I generally recommend having three types of agreements in your stable of documents. (Heh heh, see what I did there?) Each serves a different purpose and contains different features, even though there is often some overlap.
1. Independent Contractor Agreement. This should be crafted for use with solo independent contractors (1099s), regardless of whether there’s a single member LLC or a sole proprietorship.
The goal here is limit the risk of misclassification, that is, a finding that the worker is really your employee.
The agreement should identify and memorialize the facts that support IC status, such as that the company retains no right to control how the work is done, where it’s done, when it’s done, steps, sequence, etc.
If there are lots of ICs doing the same thing, individual arbitration agreements with class waivers can be highly useful to include too, as they reduce the downside risk of misclassification.
2. Vendor Outsourcing Agreement. This document is for when a function is entirely outsourced, such as in the hospitality industry, where it is common to outsource the housekeeping function.
There are two goals here.
One goal is to memorialize the facts that will help avoid a finding of joint employment. These workers should be managed independently of your company’s employees and should not be directly supervised by your managers.
The second goal is make it difficult for a disgruntled worker of the vendor to allege joint employment, and there are various tools in the toolbox to help accomplish this objective.
3. Staffing Services Agreement. This document is to be used when a third party provides staff augmentation services or other workers who are commingled with your employees or supervised by your managers. In this scenario, there’s a reasonable risk of joint employment.
We want to use the contract to build defenses.
First, we want to lay the groundwork for a claim against the vendor if the vendor fails to pay its employees in accordance with the law.
Second, we want to throw obstacles in the way of anyone who might want to bring a joint employment claim. Individual arbitration agreements with class waivers are helpful in that regard.
If you’re working with a staffing agency, the form they provide you is not likely to help limit your legal risks. It’s always better to start with your own form.
Don’t Horse Around
Agreements provided by your vendors are unlikely to provide you with any meaningful protections. Different agreements have different purposes, and these three agreements should each be used in different situations.
It doesn’t work to use a staffing agreement with outsourced employees, and it doesn’t work to use an independent contractor agreement with outsourced labor employed by the vendor. Those workers aren’t independent contractors at all; they’re employees of the vendor. The legal risk you’re trying to address is whether you’re a joint employer. That’s a very different legal question than whether the worker is misclassified.
So be sure to use the right kind of agreement for the right kind of situation.
That means planing ahead and having the right forms on hand, ready to go. As our friend in Wejherowo learned the hard way, you’ve got think all the way through your plan in advance.
The 1980s British band the Thompson Twins were not twins. They didn’t even look alike. Instead their name came from a comic strip called The Adventures of Tintin, which featured detectives named Thompson and Thompson, who were also not twins.
I don’t know why the comic strip seemed like a good name for a band. I’ve always thought a good name for a band would be Cantaloupe. Not saying I’m right. My point is just that there’s a lot of room here for a difference of opinion on band names.
The only reason I remember the Thompson Twins is that in 1983, they released a song called “Hold Me Now.” (I have a picture, pinned to my wall…) The song received a lot of air time, then faded to a distant memory, only to be revived when it pops up on one of the 80s music channels. Or in this blog post.
“Hold Me Now” is also the theme for today’s post. We’re not going so far as to recommend “Lovin’ Touchin’ Squeezin’.” That could border on sexual harassment. Instead, think just a friendly hug.
We’re talking, of course, about joint employment.
The usual strategy with joint employment is to avoid it all costs. Avoid supervising staffing agency temps. Do not direct their work. Don’t hire, fire, schedule, discipline, or maintain personnel records.
And that’s the right strategy when it’s possible to avoid joint employment. But sometimes avoiding it isn’t possible.
Often staffing agency temps are used to fill gaps where you don’t have enough employees. Sometimes they’re seasonal, and sometimes temp-to-hire. But if they’re intermingled with your regular employees, doing the same work, reporting to the same supervisor, and taking the same direction on how to perform the job, you’re probably already a joint employer.
Is that bad? Not necessarily.
Joint employment is not illegal. With one exception (below), joint employment is not a problem unless the primary employer — the staffing agency — doesn’t do what it’s supposed to do. If the agency doesn’t pay minimum wage or overtime, for example, or miscalculates the regular rate of pay, then both joint employers are 100% liable for the violation. An aggrieved plaintiff can recover from either party.
So if you’re already a joint employer, the goal should be to prevent the harms. That’s when you might want to embrace joint employment. Once you are a joint employer, you’re a joint employer. You can’t be more or less; it’s binary.
If you’re already a joint employer, you can lean into it. Make sure that agency workers are clocking in and out at the proper times. Make sure they don’t work off the clock. Make sure they take a proper meal break. Make sure they are being paid a minimum wage and overtime. You can even ask them to confirm that they’re being paid correctly and that they have no pay dispute with the agency. They’ll probably appreciate the show of concern.
If you’re already a joint employer, you can also direct and control their work, the same way you direct your own employees. Exerting more control will not change the result. Exerting more control may also help you ensure quality standards and enhance the customer experience.
But again, this strategy is only appropriate if you’re already a joint employer.
I wrote above that there is one exception to joint employment, for the most part, not being a problem if the staffing agency does what it’s supposed to do as an employer.
The exception is the National Labor Relations Act. If you’re a joint employer under the NLRA, you will have an obligation to bargain with a primary employer’s union. A joint employer must respect the right of its employees to engage in protected concerted activity. Employees may strike or picket a joint employer, the same way it can strike or picket a primary employer.
The advice you usually hear is to avoid joint employment. But that’s not necessarily the right strategy for everyone. Sometimes, it’s ok to give it a nice embrace.
1982 was a great year for music. Not only did it give us “867-5309 (Jenny)” by Tommy Tutone and “Tainted Love” by Soft Cell, but if you look a little harder, you’ll also notice that several releases that year contained important hidden messages about joint employment.
On one hand, you had the opposers, like “I Can’t Go For That (No Can Do),” in which Hall & Oates were staying away from every action that could lead to a finding of joint employment. Wanna hear a little known fact I just made up? Here were the original opening lines from the song:
Easy, ready, willing, overtime Where does it stop, where do you dare me to draw the line? You sent me staffing temps, now you want me to exert control Don’t even think about it, say no go
Rick Springfield offered some tips about keeping outsourced workers separated from your primary workforce. When you supervise, schedule, direct, and hire/fire someone else’s employees, you’re increasing the likelihood of joint employment. (More info here.) Tip for management: “Don’t Talk to Strangers.”
Hey temp worker, are you feeling left out because we won’t hire/fire, schedule, control your work, set your pay, or maintain your employment records? You’ll get no sympathy from Quarterflash. “Harden My Heart.”
On the other hand, there’s a counter-intuitive approach toward joint employment that I sometimes advocate. If you already know you’re a joint employer based on the facts, then you might choose to embrace it. In other words, avoid the harms. Make sure the workers properly record their time, take their meal and rest breaks, and don’t work off the clock. (Read more here.)
You’ve got to pretty sure you’re already a joint employer to adopt the “Open Arms” strategy, advocated by Journey and supported by Fleetwood Mac in “Hold Me.”
I’ll write more about the Embrace Joint Employment strategy in upcoming posts. It’s a question I am asked about a lot, probably because it’s the opposite of what everyone is generally told.
So maybe Kenny Loggins was right when he advised “Don’t Fight It”?
After a stolen SUV crashed in Wisconsin and its four occupants fled, one made the unfortunate decision to hide in a golf course port-a-potty. A golfer watched the events unfold and decided to take action, flipping the port-a-potty on its side, door facing down, to trap the car thief inside. (Oh, crap!) Police then arrived on the scene and arrested the now-stink-covered occupant.
Today’s tip is to help you avoid a stinky situation when requiring vendors to background check their workers.
When working with staffing agencies or other vendors supplying labor, you’ll often want to require background checks. But you have a few competing interests, so it matters how you impose this requirement.
First, you probably don’t want to do the background check yourself. For joint employment reasons, you don’t want to play a role in hiring and selection and, for practical reasons, you don’t want to adjudicate background check results on all of the vendor’s candidates. Require them to do the initial screening.
Second, it would be easy to provide the vendor with a list of automatic exclusions, but you don’t want to go there either. Background checks laws generally require an individualized analysis to be done. Avoid creating a “no hire” matrix.
So how can you make sure the vendor conducts an appropriate review of the results and doesn’t send you a worker with a concerning criminal history?
Here’s the strategy I prefer:
1. Require the vendor/staffing agency to perform the background check.
2. Require that they adjudicate the results.
3. But, also require that if they want to place anyone with a prior conviction for theft or violence, they must first notify you and provide a copy of the report and any additional information provided by the candidate.
4. Require that the vendor/staffing agency follow all background check laws.
5. Require that the vendor/staffing agency obtain consent from each candidate to share the results of any background check with your company. They should incorporate that concept into their consent document.
Here’s why I like this process:
First, as a practical matter, a vendor with this arrangement is very unlikely to send you anyone with convictions for theft or violence. They’ll prescreen those out because they know that’s a concern for you.
Second, if the vendor wants to advance someone with one of these convictions, it means one of two things: (a) there may be mitigating factors with this candidate that would support allowing the person to work, or (b) the vendor is being lazy, sending everyone through without running the first level adjudication you’ve required.
If (a), that’s good information. Conduct a second level adjudication. Consider mitigating factors. See how the candidate responds to a pre-adverse action notice. Avoid automatic exclusions and consider whatever facts the candidate provides.
If (b), you need to have a talk with the vendor because they’re not performing the first level adjudication that you’ve required. If you didn’t have this kind of notice process, you might never have known the vendor was being lazy in the adjudication process.
There are several decision points in drafting this kind of clause, but the points listed above are the main items to cover. Variations in drafting may focus on the timing of the convictions, the types of convictions to identify, whether to include drug testing or motor vehicle records checks, and which party performs various tasks related to pre- and post-adverse action notifications.
You’ll also want your contract to make clear that any decision you make that a candidate cannot be placed at your company is not a decision about their overall employment status with the agency. The agency can do what it wants with the person’s employment. All you’re saying is that the agency can’t assign that person to work for you.
By including a process like this in your agreements with staffing agencies and other vendors that supply laborers, you can stay on the right side of the background check law, manage joint employment risks, and still have the opportunity to block candidates who have a criminal history that creates unacceptable risk.
It’s too bad that future background check results for the car thief who got stuck in the port-a-potty won’t include that level of detail. Not that it would make a difference in screening out someone who steals cars, but it would be a fun detail to know. Yuck!
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.
Raise your hand if you remember songs by Laura Branigan? How about “Gloria”? Or this lyric? You take my self, you take my self control?
The song “Self Control” is about stepping into the nightlife, with a bit of seedier, seductive angle. The lyrics, though, remind us of another reason not to exert control over an independent contractor’s employees.
Suppose you retain a contractor to replace the roof on your building. The contractor has legitimate employees, and one falls through a weak spot on the roof. That’s a worker’s comp claim, and you’re not liable for some kind of premises liability claim, right?
The answer may depend on whether you’ve exerted control over the contractor’s employees.
Let’s look at California law, but the same principle can often be applied elsewhere. (Check your state’s law.) Under the Privette doctrine, a property owner who hires an independent contractor is liable to the contractor’s employee for injuries sustained on the job only if (1) the owner exercises control over any part of the contractor’s work in a manner that affirmatively contributes to the worker’s injuries, or (2) the employee is injured by a concealed hazard that is unknown and not reasonably ascertainable by the contractor.
The keys points in avoiding premises liability claims are, therefore:
Don’t exert control over how your contractors’ employees do their job, and
Make sure any hazards are marked or disclosed.
You could have other problems if the contractor misclassifies its workers and treats them as individual subcontractors. But avoiding control can also help you avoid joint employer liability in that situation.
The bottom line here when dealing with contractors’ employees is to avoid Laura Branigan’s idea of the nightlife: Don’t take their self, don’t take their self-control.
Who Is My Employee? 