Half Man, Half Goat: Can Arbitration Agreements Bind the DOL?

The one on the left is now 6-foot-5. The one on the right? Whereabouts unknown.

When my kids were younger, we used to play a guessing game. The questioner would think of someone, real or imaginary. The object was to figure out who. We’d go around the table, and each person gets one question that could only be answered with yes or no, then they’d get one guess. Then it goes to the next person to ask one and guess one.

The best strategy was to ask broad questions first: Is the person real? Is the person alive? Then narrower: Have I ever met the person? Is it someone in our family? It usually took about 10 questions for someone to figure it out, even if the answer was obscure or fictional.

The running gag in our house, though, was that sometimes the answer would be “half-man, half-goat.” I don’t remember how that started, but it’s still a thing in our house. Is it half-man, half-goat? Yes.

This creature has many of the great powers inherent to goats (can butt heads without feeling pain, eats paper cups), but it can’t do everything a goat can do because it’s also saddled with being half-man.

Arbitration agreements can be like that too, especially when included in independent contractor agreements. Arbitration clauses can require independent contractors to arbitrate all disputes, including misclassification claims. One of the great powers of an arbitration clause is the power to require claims to be resolved individually, with each party waiving the right to file class or collective actions. Another great power is to keep the proceedings mostly confidential, in contrast to a court proceeding, which is open to the public.

But one thing arbitration agreements can’t do is bind governmental agencies. A recent decision from the Ninth Circuit Court of Appeals reminds us that if the Department of Labor (DOL) claims that a business is misclassifying its independent contractors, that dispute is not subject to arbitration. The DOL can escalate the dispute to court.

The Ninth Circuit ruling reminds us that the DOL is not a party to the arbitration agreement and, therefore, cannot be bound by it. Government agencies also have different interests than private litigants. When the government files suit, it can aim to deter similar misconduct and “vindicate a public interest.” Like a bureaucratic superhero.

This outcome is no surprise. In 2002, the Supreme Court ruled that the EEOC was not bound by an arbitration agreement and could pursue relief outside of arbitration for the same reason. The same rule applies for the DOL.

The lesson here is to remember that arbitration agreements can be valuable in many ways, but they’re also a bit (just a bit) like playing with only half a goat. They can’t do it all. When drafting independent contractor agreements, arbitration clauses can be helpful, but they can’t prevent all lawsuits–especially those filed by a government agency.

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© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Don’t be a goat: Know the joint employment law before going to trial

Joint employment goatI took a picture of this goat right before it tried to eat a small paper cup. The paper cup had food in it, but the paper cup was not the food. This confusion is understandable because, well, it’s a goat. The bar is set low for a goat.

The bar needs to be set higher when retaining counsel to defend against claims of joint employment. A recent California case shows what happens when your lawyer doesn’t understand the proper test for joint employment.

In the lawsuit, a staffing agency employee had been retained to work in a supervisory role as a line lead in a production department. We’ll call the place where she worked the “contracting company.” The worker was accused of bullying, then she accused another worker of harassment, and the contracting company terminated its her relationship with her. We don’t know whether the staffing agency terminated her direct employment, but that’s not important for now. The point is that the contracting company terminated its relationship with her.

She then sued the contracting company for having terminated her role there, accusing the contracting company of sexual harassment and retaliation. Because her direct employer was the staffing agency, she would have to prove that the contracting company was her joint employer. That’s because you can only allege employment discrimination claims against an employer. In other words, to bring a claim of employment discrimination against the contracting company, she had to prove that she was an employee of the contracting company.

Under California anti-discrimination law, a right to control test is used to determine whether a business is a joint employer. The test looks at how much control the business had over how the worker did her work. Because she was a line lead and a supervisor for the contracting business, there were plenty of facts that could support a finding of joint employment.

The lawyers for the contracting business either didn’t understand the joint employment test or they knew their goose was cooked, so they tried a different approach. Instead of arguing that the contracting business did not have a right to control her work, they argued that the jury should look at who had more control — the staffing agency or the contracting business. They argued that the staffing agency hired her and paid her, so it must have had more control over the essential terms of her employment. The staffing agency, they argued, was therefore her real (and only) employer.

The jury bought this argument, finding that the contracting company was not a joint employer because it exerted less control than the staffing agency.

But this argument was too clever by half. That’s not the test. So last week, a California Court of Appeals reversed the judgment, sending the case back for a new trial. You’ve got to use the proper test.

The test for joint employment is not about who had the most control. It’s just about who had the right to exert certain types of control. If more than one business exerts the right kinds of control, there can be more than one employer. That’s the whole point of joint employment.

Here’s an analogy that may be useful. Suppose a worker has a manager, who reports to a general manager. Both the direct manager and the general manager have control over the worker, even though the direct manager has more day-to-day and direct control. But they both are managers, and both have the right to control how the worker does the job. It’s not about which of the two managers has more control. They both manage the employee. Jointly.

To effectively defend against claims of joint employment, it’s necessary to understand the legal test for joint employment. Here, the contracting company argued the wrong test and scored a hollow victory at trial. In goat-speak, they overlooked the food and ate the paper cup. Now they’ll have to do it all over again, costing the contracting company a boatload in additional legal expenses for a second trial.

The lesson here is: Know the law, and know the tests. It’s hard to mount a real defense against joint employment if you don’t.

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© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Independent Contractor Misclassification Claim Fails, in Part, Due to Plaintiff’s Goat Farm

Goat independent contractor misclassification

The face that sunk a lawsuit?

In my house, we sometimes have bizarre but short conversations about job functions.  A recent example:

Lindsay: I think I want to do a job that helps people.

Andy: Doesn’t every job help people?

Me: Not executioner.  

This post is about a case involving directional drilling consultants.  And while that sounds like the job title of a scene director in the porn industry, it’s actually a job involving subterranean oil and gas exploration.  Directional drilling consultants (DDs) advise drilling companies how to aim their directional drills when drilling a well that starts down a vertical path, then switches to horizontal.  This allows the company to drill discretely in areas away from home.  Like Josh Duggar.  

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Court Rules that New Jersey is a Goat (sort of): a Note on Forum Selection Clauses

goat independent contractor misclassification forum selection clause Mary Kay caseThe Monty Hall puzzle is a brain teaser based on the game show, Let’s Make a Deal. The contestant is presented with three doors and must choose one. Choose the correct door and win a car. Choose either of the wrong doors and win a goat. (Note to rural readers: The puzzle is a first-world conundrum and assumes you’d prefer the car.)

Once the contestant chooses, the host opens one of the doors with a goat and asks the contestant whether he wants to stay with his original choice or choose the other unopened door. As explained here, the contestant should always switch doors, since switching provides a 2/3 chance to win. The math here is not intuitive, but read about it and you’ll understand.

The gimmick relies on the fact that the host knows what’s behind each door and will only reveal a door that hides a goat. The host never reveals a car.

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