A Brazilian woman brought her Uncle Paolo to a bank branch so he could sign a loan document for her. Uncle Paolo was in a wheelchair and couldn’t seem to grip a pen, despite the woman’s best efforts to get him to cooperate.
But Uncle Paolo had good reason not to grip the pen and sign. You see, Uncle Paolo was dead. The woman brought the deceased to the bank in a wheelchair, thinking that — well, I don’t know she was thinking.
The bank called the police, and the woman was arrested. Uncle Paolo, reportedly, is still dead. The best part? There’s video.
Also still dead is the NLRB’s recent joint employer rule, struck down by a federal judge on March 8th.
Congress just took action to try to make it deader.
On April 10, the Senate voted 50-48 to invalidate the NLRB rule, following a 206-177 vote by the House.
President Biden has indicated he would veto the resolution, but the fact that the resolution received support from moderate Democrats, not just Republicans, may be a sign of how far out of touch the NLRB’s rule really was. Two Democratic Senators and eight Democratic members of Congress voted for the resolution.
Assuming the district court decision survives on appeal, the NLRB rule will remain dead, and the Congressional vote doesn’t make any difference anyway. That’s because dead is dead.
No quips or musical references today. Just hard news, and here it is. If you do not already subscribe to BakerHostetler labor and employment alerts but would like to, drop me an email.
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.
I could think of a few songs called “Hold On” – Yes and Wilson Philips were the two that first came to mind. But I had no idea how popular a song name that was.
According to Wikipedia, there are at least 17 albums called Hold On and 311 songs with that name. Who knew?
“Hold on” is the theme of today’s post because that’s what a federal court in Texas decided to do with the NLRB joint employer rule. Judge H. Campbell Barker pushed back the effective date of the rule from Feb. 26 to March 11.
But that doesn’t mean the rule will go into effect March 11.
In the meantime, the judge is considering the arguments presented by both sides and may invalidate the rule entirely. I believe the delay is to buy time to draft a thorough opinion. Whatever the ruling is, it will be appealed to the Fifth Circuit.
For now, employers should review their agreements with vendors supplying labor (e.g., staffing agencies, outsourced functions) and use this opportunity to button them up. Here are ten things that should be in your staffing agency agreements but probably aren’t.
Employers should also review the degree of control they exercise over outsourced labor. On one hand, staffing workers who are intermingled with regular employees and supervised by employer managers are likely in a joint employment relationship already. But with outsourced workers, steps should be taken to avoid joint employment. The new NLRB rule would make it harder to avoid joint employment, and employers should take steps to minimize control over outsourced workers.
Before reading this post, please enjoy this adorable video of a porcupine eating an apple.
The porcupine seems harmless and cute, but remember – it’s still a porcupine. Those quills are sharp, and they can impale small would-be predators.
And speaking of impale: A Congressional resolution, if passed, would impale the NLRB’s joint employer rule. The effort has enough support that it could bear fruit. Like the tasty apple in this video.
On January 12, the House passed H.J. Res 98, which would nullify the NLRB’s new joint employer rule. The resolution passed, 206-177, with eight Democrats voting in favor.
The Senate is considering an identical companion bill, S.J. Res 49, which has the support of at least one Democrat. Senator Manchin is a co-sponsor.
Under the Congressional Review Act, Congress can nullify an agency regulation with a simple majority of votes in each house. Sixty votes are not needed in the Senate.
But if the bill passes, President Biden can still veto it, and he has indicated that he would.
Meanwhile, the rule continues to face challenges in federal court. If Congress does not nullify the rule, a court might enter an injunction to prevent it from taking effect. Having reviewed the arguments presented to a federal judge in Texas last week, I think there’s a strong chance the rule will be set aside, at least temporarily.
Remember: The NLRB joint employer test is supposed to be a common law right-to-control test. The scope of the new rule is substantially broader and would create joint employment relationships automatically, including in situations where the common law balancing test would not result in a finding of joint employment.
We can expect a ruling from the court this week, since the NLRB joint employer rule is scheduled to take effect next Monday, February 26.
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”?
This is a venomous Eastern Brown Snake, native to Australia. Stay away.
Tennis star Dominic Thiem knew what to watch for in his match this past weekend in Brisbane. It was on-court hazard he couldn’t ignore.
Play was interrupted when a “really poisonous snake” slithered onto the court near the ballkids. The intruder, an Eastern Brown Snake, “has the unfortunate distinction of causing more deaths by snake bite than any other species of snake in Australia.” The snake’s venom causes “progressive paralysis and uncontrollable bleeding,” which is not one of the on-court hazards typically of ballkidding.
(I don’t know if ballkidding is the real word for this, but it should be. Or ballkiddery maybe. I also learned from the snake bite article that the proper term for being bit by a venomous snake is “envenomation,” which is a word I hope to use elsewhere in a sentence sometime in 2024. So there’s a New Year’s resolution. [@Lisa, take note, I made one, even though you {correctly} say I am no fun because I won’t play the New Year’s Resolution game.])
The Eastern Brown Snake is not present in the U.S., so we don’t have to watch for any in 2024.
But here are several other things that could bite you in the behind in 2024 if you’re not paying attention:
1. New DOL test for independent contractor misclassification. The DOL issued its proposed new rule in October 2022 and targeted the fall of 2023 for release of a new final rule. The proposed rule would identify seven factors to consider when evaluating whether someone is an employee under the Fair Labor Standards Act (FLSA). The final rule will likely be very similar. We’re still waiting, and the final rule could be released at any time.
2. The new NLRB test for joint employment takes effect Feb. 26, 2024. Unless it doesn’t. The new rule is being challenged in both a federal district court in Texas and the U.S. Court of Appeals in D.C. Either court could quash the rule. The new rule will substantially expand who is a joint employer under the NLRA, even for worksites without unions.
3. Increased state and local enforcement activity. States and localities are filing their own lawsuits alleging worker misclassification. The New Jersey Attorney General recently filed a major lawsuit. The California Attorney General and California localities have been pursuing misclassification lawsuits too. Remember this: As much as I advocate for individual arbitration agreements with class waivers, they have no effect on enforcement actions brought by a state or local government. These lawsuits pose a substantial risk, and the governments love to issue one-sided accusatory press releases when they file the lawsuits.
4. The feds are doing this too. The DOL is bringing its own enforcement actions and publicizing them.
5. State and local laws that affect independent contractor classification and joint employment. We’re seeing legislative activity in three main areas:
(a) laws to change the tests; (b) laws that provide a safe harbor for independent contractor classification if certain protections are provided to the workers (Cal. Prop 22, this proposed Mass. state law); and (c) Freelancers laws that impose various requirements when retaining a solo independent contractor (currently: NY, IL, Los Angeles, Minneapolis, Seattle, NYC, Columbus).
6. State laws that criminalize worker misclassification. Take a look at recent legislation passed in NY State and Rhode Island.
7. State laws governing the use of temporary workers. Look for more states to enact laws like the Illinois Day and Temporary Worker Services Act (amended in Aug. 2023) and the New Jersey Temporary Workers’ Bill of Rights (enacted in Aug, 2023). These laws force companies that use staffing agencies to disclose the wages and benefits being paid to direct employees.
8. California’s AB 5 is still being challenged. This is the law that codified the ABC Test for most independent contractor relationships. But it also included a grab bag of miscellaneous and arbitrary exceptions. A full en banc Ninth Circuit has agreed to rehear Olson v. State of California, which challenges the constitutionality of AB 5.
Wishing you a happy, healthy, and litigation-free 2024.
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!
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? 