Tag Archives: Agreements

06.23.25
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Higher or No Hire? Don’t Forget This Minnesota Law When Working with Staffing Agencies

I searched in Apple Music for songs titled “Higher,” and it’s a pretty common song title. There are songs called “Higher” by Creed, Tems, Citizen Cope, TEC, burns Boy, Rihanna, DJ Khaled, Lemaitre, Chris Stapleton Michael Buble, Eminem and more. I stopped the list because you get the idea. If you want “Higher,” just search for songs, and you’ll have many to choose from.

But if instead you want “Hire,” and you’re in Minnesota, your options are much fewer. Or, actually, your options are much fewer if you want “No Hire.” Let me explain.

A Minnesota law enacted last summer bans service providers, including staffing agencies, from doing anything to “restrict, restrain, or prohibit” the hiring of its employees or independent contractors. That means a clause prohibiting direct hire is no longer allowed. The law also bans clauses that would prevent soliciting such workers for direct hire.

The law took effect July 1, 2024, and it applies to earlier contracts too, rendering these clauses void.

There are a few limited exceptions, such as for vendors providing professional business consulting for computer software development. But that’s a pretty narrow lane to try to drive your truck through. Reminds me of some tunnels I drove through in Northern Italy last fall. Not much room to maneuver. Especially when there’s a bus in the tunnel. They shouldn’t let buses in those tunnels.

A possible workaround is to impose direct hire fees, but those fees may be seen as “restrict[ing]” or “restrain[ing]” hiring. It’s unclear whether Minnesota courts will view direct hire fees as an unlawful restriction or restraint under this new law.

If your business provides or uses staffing services in Minnesota, check your contract. Same thing for contracts with other vendors who supply labor, such as consultants. If the contract prohibits direct hire of the vendor or staffing agency’s employees, that clause is probably now void.

And there are no good songs about laws that void contract clauses. I checked.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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06.09.25
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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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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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04.21.25
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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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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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04.07.25
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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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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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12.16.24
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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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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.14.24
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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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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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09.23.24
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Better Than Stealing a Car: Updates to Illinois Temp Worker Law Should Help Businesses Using Temp Labor

A Florida car thief may want to reconsider his career choice.

A Miami Beach man walked back to his Corvette after a Starbucks run, only to find a wannabe thief trapped inside. The thief became trapped inside because the car has electrical locks and no manual door handle. The car requires a key to unlock the doors.

The thief begged the car’s owner for help, but without success. The car’s owner videotaped the ridiculousness and called the police. That’s bad news for the thief.

Business owners in Illinois had much better news recently, when Gov. Pritzker signed amendments to the state’s temporary worker law. The law was last amended in 2023, when it created new burdens for businesses using staffing agency temp labor. (See here and here.)

The main problem business owners had with the 2023 amendment was that staffing agencies were required to pay temps “not less than the rate of pay and equivalent benefits” of comparable employees at the business where they were providing services. The only way staffing agencies could ensure compliance with this requirement was to obtain wage and benefit data from its client. Obviously, businesses did not want to provide that information. (A court decision struck down the “equivalent benefits” requirement.)

Under the 2024 amendment, a staffing agency can now comply with the pay requirements in two ways.

First, it can match the straight-time hourly rate of a comparator employee who works directly for the client, as before.

Second, they can now determine compensation without the need for comparator data from the client business. Under the amendment, the staffing agency can instead comply with the pay requirements by paying its workers based on Bureau of Labor Statistics data.

The pay requirements do not apply until a temp worker has worked 720 hours at the client business within a 12-month period.

The change to the law means that businesses retaining staffing agencies in Illinois will no longer be required to provide wage and benefits information about its comparator employees. The client, not the staffing agency, gets to choose whether to provide the data and, if the client chooses not to provide it (which I expect will most often be the case), the agency must use the BLS formula.

There are other changes to the law too, including amended benefit requirements, notice requirements, and the right of temp workers to decline to cross a picket line.

Staffing work might not pay great, but laws like the Illinois temp worker law seek to ensure a minimum level of pay for temp workers. The Miami Beach car thief may want to look into steady work like that instead, if he ever gets out of the Corvette.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.08.24
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Drink Up With This Tip to Save money in Your Staffing Agency Relationships

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 Today reports 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.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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06.03.24
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I Wanna Take Your Hire: How to Control a Third Party’s Wages without Becoming a Joint Employer

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.

 

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.04.24
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Don’t Horse Around: Here Are Three Agreements You Should Have on Your Shelf

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.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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