New Joint Employment Decision: Poo Paint or Just Poo?

poo rainbow

Sitting outside this weekend I was thinking about things I wish I had when my kids were toddlers, things that would have helped to keep them occupied. The first things that came to mind were all electronic — iPhone, iPad, Netflix. But then I came upon this. And it’s good that I didn’t know about it a decade ago.

https://www.poopaint.net/home-1

From the website:

Inspiration found in a bathroom stall!
PooPaint allows kids to wipe using toilet paper that feels as if they were playing with a colouring book.
Making potty time into a positive and fun experience!

Yes, my friends, it’s a coloring book for poo, like color by numbers but with only one color — brown. Or maybe for some, a beautiful mahogany. Square 3 is an exact reproduction of Cleveland winters: fill in the whole page, leaving gray at the top for sky.

Anyway, the case I want to talk about today is a joint employment case from the Sixth Circuit Court of Appeals. For potential joint employers, the decision is like potty time with poopaint — “a positive and fun experience!” For workers, it’s just poo.

In this case, a physical therapist assistant named Thomila worked in a nursing home. The operator of the nursing home contracted with a third party to provide staff.  The third party did the hiring, firing, controlled pay, provided benefits, supervised the workers, and scheduled them.

Thomila worked for the third party. At one point Thomila accused her supervisor, also a third party employee, of sexually harassing her. The third party investigated and fired him. So far, so good.

But then the nursing home operator — which apparently liked the supervisor — decided that Thomila was no longer a “good fit” for the nursing home and asked the third party to remove her. It did.

Thomila sued the nursing home operator, claiming that its request to remove her (after she complained of sexual harassment) was retaliation in violation of Title VII. Although she was employed by the third party, she claimed that the nursing home operator was a joint employer and therefore could be liable under Title VII’s anti-retaliation rule.

But the case was thrown out on a motion for summary judgment. The court ruled that the nursing home operator was not a joint employer under the test used for determining joint employment under Title VII.

The test for joint employment under Title VII is whether the alleged joint employer has the ability to:

  • Hire and fire,
  • Discipline,
  • Affect compensation and benefits, and
  • Direct and supervise performance.

(At least, that’s the test in the Sixth Circuit, which includes OH, MI, TN, and KY. You’d think the test would be the same everywhere since this is a federal law, but it sometimes varies a bit.)

Anyway, back to Thomila. The third party controlled all of these things, so the nursing home operator was not a joint employer. Since it was not a joint employer, it has no duty to Thomila under Title VII. The anti-retaliation provisions in Title VII did not apply. Case dismissed.

Thomila tried one other claim too, and this may have been her stronger argument. She alleged that by firing her, the nursing hone operator interfered with her access to employment opportunities. That’s a separate kind of claim. But the court ruled that the nursing home operator was not liable under that claim either, since the third party had offered Thomila other placement opportunities (but all were out of state). On this claim, the decision was 2-1, with the dissenting judge arguing that the interference claim should have been allowed to go forward. The interference claim does not require a finding of joint employment.

The lesson here for employers is that the test for joint employment is technical. The facts matter a lot. The risk of joint employment can be minimized if the relationship is carefully structured so that the third party retains control over the factors listed above. The contract should be drafted carefully, detailing who is responsible for what.

A poorly drafted contract is not worth the paper it’s written on. Kind of like that specific kind of paper advertised here as “Inspiration found in a bathroom stall!” And that should not be the kind of paper you’re looking for when drafting your contracts.

So draft wisely and, for “a fun and positive experience!“, choose your paper carefully.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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NSFW? Not Quite. But 18 States Say DOL’s New Joint Employment Rule Is Inappropriate.

Zippy Michigan

Zippy sunbathes in the nude.

Some things sound inappropriate, but they’re not. For example, I sometimes post naked pictures on my blog. But only of my dog. She’s immodest and doesn’t seem to mind. (Her fur coat doesn’t count.) So, you see, that’s not inappropriate.

What about the DOL’s new joint employment test, which went into effect in March? Was that inappropriate? Eighteen Democratic state attorneys general seem to think so, and they’ve filed a federal lawsuit to try to undo the rule. For those of you keeping score at home, they claim the new rule violates the Administrative Procedures Act and is not consistent with the Fair Labor Standards Act.

Last week, a federal judge in New York rejected the DOL’s motion to dismiss the lawsuit, meaning the case moves forward. The DOL argued that the states lacked standing to challenge the new rule. Lack of standing means they can’t sue because they’re not harmed by the new rule.

But the judge found that the states “plausibly alleged” that they have standing to sue. He noted that the new rule could reduce the total amount of wages paid to employees in their states, which could lead to a reduction in tax revenues. The loss of tax revenues and the anticipated increased expense in enforcing state wage and hour laws would be enough. The states can proceed.

The ruling does not address whether the lawsuit has any merit, just that it may proceed.

While no one would claim the new rule is NSFW, these states argue that the content of the new rule and the way it was passed was inappropriate. But like the naked photo above, you need to see the full picture before drawing any conclusions about what’s proper and what’s not. 

For now, the DOL’s new rule remains in effect.  That means it’s more difficult to establish joint employment than it was before. It’s also difficult, by the way, to get a dog to wear a hat. But we did it. And Zippy looks ready for college football season. 

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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When 500 Isn’t Necessarily 500: How to Count Employees Under the Families First Law

As you know by now, the Emergency FMLA and Emergency Paid Sick Leave provisions in the Families First Coronavirus Relief Act apply only to employers with fewer than 500 employees. But lots of questions have arisen about how to count.

For those who need help counting, here’s a helpful resource:

But for those of you counting employees instead of bats, let’s try this instead.

Question #1:  Do temps count? 

Answer:  Are we talking about feelings here? Because if we are, then everyone counts. You’re a winner! And you’re a winner! And you’re a winner!

Ah, but do they count toward the 500-employee threshold under Families First? Well that depends on whether they are joint employees of your business and the staffing firm.

As of last year, the answer for staffing agency temps was most often yes. But in January 2020, the DOL changed the test for how to determine whether someone is a joint employee under the Fair Labor Standards Act (FLSA). While there are different tests for determining joint employment, the one that matters for the Families First law is the FLSA test.

You can read more about the new DOL test here.

Question #2: Do part-timers count?

Answer: Yes. Count all part-time and full-time employees. Part-timers are people too. See, Feelings, Morris Albert (1975). Skip to 0:45 if you want to skip the instrumental intro.

Fun fact: In the late 80s, when you were arguing with your friends over which is the best Duran Duran song (answer: none), French songwriter Loulou Gaste successfully sued Albert for plagiarism, persuading a jury that Albert based the song on Gaste’s 1957 chart-topper “Pour Toi.”

Question #3: Do you aggregate employees across multiple subsidiaries?

Answer: Generally no. The default is that each subsidiary is its own employer. Divisions of a single subsidiary are aggregated.

But there are some situations when subsidiaries are aggregated. A conglomerate consisting of several different subsidiaries can a “single integrated employer,” in which case, you add the numbers together. We determine “single integrated employer” status by looking at four main factors:

  • Common management;
  • Common ownership;
  • Centralized control over labor relations and personnel; and
  • Interrelation of operations.

The more there exists common control, there more likely there is a single employer. There are many subfactors that also go into the analysis, and the most important factor tends to be centralized control over labor relations and personnel.

This is a difficult analysis, and there can be consequences to being a single integrated employer that go beyond Families First. If you think this applies to your company, proceed cautiously and seek legal advice.

Question#4: If I’m stuck home because of coronavirus, where can I find more helpful videos featuring The Count?

Answer: Ummm … this is where I sign off.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Gator in Your Basement? Nope, That’s Just the NLRB Sharpening Its Joint Employer Test

NBLRB joint employer new regulation 2020

“Be careful as you go down the stairs, officer. An alligator lives in my basement.”

Police in Madison Township, Ohio, last week found a 5-foot gator penned in the basement of a family home. The family said that “Alli” was a pet they’ve raised for 25 years, since purchasing him as an adorable little tot at a reptile shop. (My, how they grow.)

The family accepted responsibility and avoided legal liability because they allowed to police to remove the animal.

A larger battle over responsibility and legal liability was also decided last week, but this battle was over the meaning of “joint employment” under the National Labor Relations Act (NLRA).

Here’s a quick Q&A to get you up to speed on the new regulation.

What happened?

On February 26, 2020, the National Labor Relations Board (NLRB) published a new regulation that changes the rules for determining whether a business is a joint employer under the NLRA.

What do you mean by joint employer?

When one business hires another business to provide services, the business providing the services is the primary employer. We see this often in staffing agency arrangements. The staffing agency is the primary employer. The primary employer is responsible for treating its workers as W-2 employees and doing all the things an employer is supposed to do.

If the business receiving the services exercises sufficient control over the workers, it can be deemed a “joint employer” of those workers. The workers would have two employers simultaneously.

Why should I care if I am a joint employer under the NLRA?

Being a joint employer creates rights and obligations under the NLRA on issues such as collective bargaining, strike activity, and unfair labor practice liability:

  • If the employees are represented by a union, the joint employer must participate in collective bargaining over their terms and conditions of employment.
  • Picketing directed at a joint employer that would otherwise be secondary and unlawful is primary and lawful.
  • Each business comprising the joint employer may be found jointly and severally liable for the other’s unfair labor practices.

Does the new rule make it harder or easier to be deemed a joint employer?

Much harder. The new rule significantly narrows the circumstances when a business can be deemed a joint employer.

What’s the new test?

Under the new regulation, a business can only be a joint employer of another employer’s employees only if it exercises “substantial direct and immediate control” over the “essential terms and conditions” of the workers’ employment.

What are essential terms and conditions?

Wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

Can you give me an example of how that works?

No.

Please?

Ok. I was just messing with you.

Let’s look at wages. You retain a staffing agency. You negotiate a cost-plus arrangement. You negotiate the rate you’ll pay the staffing agency per worker per hour, but the staffing agency determines the rate of pay each worker will receive. That’s not substantial and direct control because the staffing agency sets the wages of the worker.

Let’s consider discharge. You want to remove a staffing agency worker from the project. You instruct the agency to remove the worker. That’s not substantial control over whether the worker is discharged from employment. It’s up to the agency what to do with the worker next — reassign the worker, discharge the worker, tar and feather, etc.

How does this affect background checks and other terms in my contract with the primary employer?

Commonplace and routine clauses, like requiring the agency to perform background checks, are not evidence of joint employment.

In a dispute over whether there’s joint employment, who has the burden of proof?

The party asserting that an entity is a joint employer has the burden of proof.

Is the NLRB’s new joint employer regulation the same as the DOL’s new joint employer regulation?

Of course not. That would make this way too easy, and you wouldn’t need your lawyers as much.

In January 2020, the Department of Labor published a new regulation that sets up a new test for determining whether an entity is a joint employer under the Fair Labor Standards Act (FLSA). There are similarities in the tests. Both tests require the actual exercise of control for there to be joint employment. Previously, the mere right to exercise control was enough. But the tests are different.

You can read more about the DOL test here.

So now there are two tests for joint employment — one under the FLSA and one under the NLRA?

Ah, so naive. Who’s coming up with these questions, anyway?

Nope, there are lots of tests for determining who is a joint employer; and the tests differ based on which law we’re looking at — and based on who’s looking at it.

The DOL announced its new regulation for determining joint employer status under the FLSA, but unless you’re in a DOL audit, that doesn’t mean much. No court has adopted the new regulation yet, and we don’t know whether courts will defer to the regulation or disregard it. There will be litigation over whether the DOL has the right to redefine “joint employer” and limit the scope of a statute (the FLSA) passed by Congress.

The states have their own tests for determining joint employer status under state employment laws. Some states might defer to the regulations, but many states won’t.

But the NLRB regulation is here to stay, right?

Maybe, maybe not. In late 2018, the D.C. Circuit Court of Appeals ruled that the NLRB has no right to redefine “joint employment,” since the question of whether someone is an employee under the NLRA is governed by the common law test of agency — essentially, a right to control test.

But the NLRB chose to disregard that decision and issued its new regulation anyway.

But how can the NLRB enforce a new regulation defining “joint employer” when a federal court has said it can’t do that?

Because the NLRB will just do it anyway. There are 12 federal circuit courts of appeal, and they often disagree. The NLRB has a longstanding practice of ignoring rulings by the federal courts of appeal, except as to the specific case and the specific parties before that specific court. The NLRB takes the position that it must follow rulings by the Supreme Court, not the federal circuit courts of appeal.

So what’s the real status of the new NLRB regulation?

The NLRB will apply this new regulation in all of its proceedings. The new regulation takes effect April 26, 2020, which is 60 days after its publication in the Federal Register.

If NLRB rulings are appealed to a court, it remains to be seen whether some courts will apply the new regulation. The D.C. Circuit Court of Appeals probably will not.

Is the new regulation permanent?

It’s intended to be. There are at least three ways it could be undone.

  • Future NLRB members with a more pro-worker orientation could enact a new regulation that changes the definition.
  • Congress could pass a statute that redefines joint employer status. The statute would override the regulation.
  • The Supreme Court could rule that the NLRB has no authority to create a joint employer test.

Until one of those three things happens, the new test will stick around for a while, like a pet alligator. The Board will apply the new test to NLRA issues.

What happened to the alligator?

It has been relocated to an animal sanctuary in Myrtle Beach, South Carolina. Despite its new residence, the gator was deemed ineligible to vote in last Saturday’s primaries.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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What Is Joint Employment? New DOL Rules Take Effect in 60 Days

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This week’s post is Family Feud Style. Name Three Things That Sound Like They Would Be “Joint Employment” But Are Not:

  1. Long-haired, easy-going product tester at the local wacky tobacky dispensary
  2. Note taker at an orthopedist’s office
  3. The guy on radio ads for non-approved supplements claiming to relieve joint pain who says, really really fast, “These statements not approved or validated by the FDA.”

Each of those jobs has something to do with joints, but that’s not what the Department of Labor (DOL) means when it addresses “joint employment.”

Under the Fair Labor Standards Act (FLSA), more than one person can be an employee’s employer, and when there’s joint employment, both employers are fully liable for any minimum wage or overtime owed to the employee. So, when is a person a joint employer?

On Sunday, the DOL issued new rules for determining when someone is a joint employer under the FLSA. The new rules take effect in 60 days. Here’s what you need to know.

Four-Part Balancing Test

When an employee’s work is for the benefit of both the W-2 employer (such as a staffing agency) and another business, the determination of whether the second business is a “joint employer” is made by evaluating whether the second business:

  1. Hires or fires the employee;
  2. Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  3. Determines the employee’s rate and method of payment; and
  4. Maintains the employee’s employment records.

It’s a balancing test, and no single factor is dispositive.

Actual Control Is Required; Reserved Control Is Not Enough

The new regulations focus on actual control, not merely the right to exert control. This is different from the common law test.

Under the new regulations, the potential joint employer must actually exercise control. Merely reserving control can be relevant, but only if the business actually exercises control in at least one of the four ways. Standard contract language reserving a right to act is not sufficient to demonstrate joint employment.

Different Test for Independent Contractor vs. Employee

The test for joint employment will now be different from the test for Independent Contractor vs. Employee. To determine whether someone is an employee or an independent contractor under the FLSA, the key question is whether the worker is economically dependent on the potential employer. But according to the new regulations, once the worker is someone’s employee, economic dependence is not relevant to determining whether there is a second “joint” employer.

Ordinary Sound Business Practices Are Not Evidence of Joint Employment

The regulations also provide assurance to businesses that wish to impose rules to preserve brand standards, ensure compliance with the law, or instill sound business practices. Those types of actions, according to the DOL, are not evidence of joint employment.

For example, the following actions by a potential joint employer do not make a finding of joint employment more likely:

  • Operating as a franchisor or entering into a brand and supply agreement, or using a similar business model;
  • Requiring the primary employer to comply with specific legal obligations or to meet certain standards to protect the health or safety of its employees or the public;
  • Monitoring and enforcing contractual agreements with the primary employer, such as mandating that primary employers comply with their obligations under the FLSA or other similar laws;
  • Instituting sexual harassment policies;
  • Requiring background checks;
  • Requiring primary employers to establish workplace safety practices and protocols or to provide workers training in matters such as health, safety, or legal compliance;
  • Requiring the inclusion of certain standards, policies, or procedures in an employee handbook;
  • Requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation, or the monitoring and enforcement of such requirements, including specifying the size or scope of the work project, requiring the employer to meet quantity and quality standards, and imposing deadlines;  
  • Imposing morality clauses;
  • Requiring the use of standardized products, services, or advertising to maintain brand standards;
  • Providing the employer a sample employee handbook or other forms; 
  • Allowing the employer to operate a business on its premises (including “store within a store” arrangements); 
  • Offering an association health plan or association retirement plan to the primary employer or participating in such a plan with the primary employer; or 
  • Jointly participating in an apprenticeship program with the primary employer.

FLSA Only

The new regulations apply to the FLSA only. Other agencies may impose different standards. The National Labor Relations Board (NLRB) is expected to issue its own regulations shortly to address when there is joint employment under federal labor law; and the Equal Employment Opportunity Agency (EEOC) is expected to consider issuing its own new standards for determining whether joint employment exists under federal anti-discrimination laws.

Standards issued by the NLRB or the EEOC maybe similar or may be materially different.

Reliance On The New Rules Provides a Defense

These new rules will apply to DOL investigations of FLSA compliance matters. It remains to be seen whether the federal courts will apply these rules too, but—importantly, the rules provide for Portal-to-Portal Act reliance.

That means employers are entitled to rely on these regulations as a defense to any joint employment claim. The regulations provide several examples of scenarios in which joint employment does and does not exist. Employers should review those scenarios and model their relationships accordingly.

More Information

Additional resources from the DOL can be found here:

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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A Grub’s Life: Joint Employer Test or Single Employer Test. What’s the Difference?

This product kills and prevents grubs. That’s good if you have a garden, bad if you’re a grub. But in either case, there’s quite a difference between preventing grubs — that is, keeping them away but allowing them to live a happy grublike existence elsewhere, like in your neighbor’s garden — and killing the grubs.

Nuance, my friends. Small differences matter, especially to the grub.

Today’s post is about how the joint employer question is different than the single employer question.

Here’s the difference. Suppose Mary is employed by the We-Provide-Services Company. Company B retains the We-Provide-Services Company to do something or other. Mary sues both We-Provide-Services and Company B, claiming discrimination of some sort. If the We-Provide-Services Company and Company B are unrelated independent businesses, the issue is whether they are joint employers. There’s a test for that.

If the We-Provide-Services Company and Company B are related, such as through common ownership, intermingled managers, or a subsidiary or joint venture relationship, then the issue is whether they are a single employer for purposes of assessing who is liable for any bad acts toward poor Mary. There’s a test for that too, but it’s a different test.

The single employer test looks at four factors that try to assess how closely related or intermingled the companies are.

The joint employment test focuses instead on Company B’s relationship to Mary, not it’s relationship with Mary’s direct employer, the We-Provide-Services Company. (Courts in the Fourth Circuit look at this issue differently, as explained here, but this is the general rule.)

A recent case from North Dakota helps to illustrate the difference — and the confusion.

The issue related to whether a contractor’s employee was also an employee of the party that retained the contractor. The two businesses were unrelated, so this is a question of joint employment.

The lawyers on both sides, however, missed the nuanced difference. Both sides briefed the issue by presenting the judge with the single employer test and arguing about how the facts fit its four factors.

This kind of mistake is not uncommon, and judges do it too. There’s so much nuance in the laws related to Who Is My Employee?, and lots of lawyers and judges don’t understand the intricacies. Fortunately, this federal judge understood the difference. The judge’s opinion discusses the fact that the lawyers argued the wrong test, and he instead applied the facts to the proper test — a common law agency test. He called it a hybrid right to control/economic realities test, but as a practical matter, the factors were a recitation of the common law right to control test.

The point is: Be aware of the nuanced differences in circumstances that require the use of different legal tests to determine Who Is My Employee?

Which test you use can make a big difference. Even if you’re not a grub.

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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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Announcement: Good Morning to our New Contingent Workforce Practice Team

Baker Hostetler Continent Workforce TeamI recently finished reading Elton John’s autobiography, Me. I’ve always been a big fan, particularly of the early 1970s albums and not the hits. Albums like Tumbleweed Connection, Honky ChateauCaptain Fantastic and the Brown Dirt Cowboy, and Don’t Shoot Me I’m Only the Piano Player have always been among my favorites.

I learned in the book that in 2012, Elton turned over his early 1970s collection to the Australian dance trio Pnau, letting them sample excerpts of these songs in unexpected ways. The result was Good Morning to the Night, a remix album that I had never heard of, but I listened and it blew my mind. Some of the tracks are dance mixes, which are generally not my thing but here it works, in a way I never could have imagined. Another track creates a Pink Floyd feel. Highly imaginative.

I’m excited to announce a new development too, but there is no accompanying dance track or remix.

Last week, BakerHostetler announced the formation of our new Contingent Workforce practice team, which is co-led by me and Mark Zisholtz. We assembled a team that consists of more than 20 Baker lawyers from various practice areas, including tax, employee benefits, government contracts, and corporate transactions. All of these areas of law can come into play when addressing contingent workforce issues .

I invite you to review the Contingent Workforce practice team’s web pages. The web design includes subpages focused on specific services we provide to userssuppliers, and gig economy & technology platforms. On the right side of the web page, you will also find links to two useful tools. The Playbook offers a practical approach for businesses looking for information on how to comply with California’s new independent contractor misclassification law, Assembly Bill 5; and Five Things You Should Know About Joint Employment provides useful tips and facts.

I also recommend Good Morning to the Night. It’s different and unexpected, especially if you know and love the early ‘70s Elton John songs that were not chart-toppers. You can thank me later. And check out the new Contingent Workforce web pages!

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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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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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In Contract Labor Agreements, This Simple Clause Can Be Your Pillow

Joint employment contract clauseFor humans, some things are essential. Like a good pillow. For non-humans, the anti pillow sometimes works too. Not sure how. But the non-human in this picture generally sleeps like this.

For businesses contracting for labor, some things are essential too. One clause you are likely to have in contract with a supplier of labor is the right to remove a bad apple from the project.

The bad apple clause typically reads something like this: “We have the right to remove any individual supplied by contractor from the project for any reason at any time.”

That’s useful, but does it create an argument that your business is taking control over the individual’s employment in a way that could make your business an employer (or joint employer) of an individual you remove?

Here’s a simple fix to improve your contracts and limit the viability of that argument:

“We have the right to remove any individual supplied by contractor from the project for any reason at any time. We do not, however, have any right to control the individual’s employment status with contractor. Contractor retains the sole right to make all decisions regarding the hiring, termination, and other conditions of employment for all individuals assigned to the project or removed from the project.”

Consider the addition of that extra sentence or two to be a fluffy pillow.  It will help you sleep better if faced with a misclassification or joint employment claim.

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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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A New Smell: Ninth Circuit Rejects ABC Test for Determining Joint Employment

Joint employment dogsWhere I play tennis, there’s a lake with a beach that is open all summer. Like most places in the Midwest, it closes for the season on Labor Day. The weekend after Labor Day, they open it up for everyone to bring their dogs to run around, jump off the high dive (I wish!), and sniff each other’s butts. Because dogs are not typically allowed at the lake, these dogs are unfamiliar with each other, so there’s even more butt-sniffing than you might normally see at a canine networking event. 

My daughter captured this gem of a photo — a five-dog sniffing train.

An unfamiliar smell wafted our way from the Ninth Circuit Court of Appeals last week too. And this was a more pleasant scent for California businesses than usual.

The case was a joint employment case involving a franchisor. A local franchisee was accused of miscalculating overtime and failing to provide sufficient meal and rest breaks. The plaintiff-employees settled with the franchisee but continued to go after the deeper pockets, the franchisor. They made several arguments.

Two were of the most interest to me.

First, they argued that the Dynamex ABC Test should be used to determine whether the franchisee’s employees were also the franchisor’s employees. The Court rejected this argument, holding that the Dynamex ABC Test applies only to the question of whether someone is an independent contractor or an employee. To determine whether someone is a joint employee, a different test is used.

Second, they argued that under California’s broad definition of employ, the franchisor “permitted” the franchisee’s employees to work and therefore was a joint employer and jointly liable for the franchisee’s mistakes.

The Ninth Circuit rejected that argument too. To determine whether someone is a joint employer under California wage and hour law, the Court said you look at three alternative definitions of employ: control, “suffer or permit to work,” and the common law S.G. Borello balancing test. If any of these three tests is met, there’s joint employment. The “suffer or permit to work” definition is the broadest and is the one that is most likely to tag a company with joint employer status.

The Court determined that even that broadest of definitions could not be met. The franchisor had no control over day-to-day operations, hiring, firing, scheduling, or worker pay.

For California businesses, the key takeaways from this case are (1) that the ABC Test is used only to determine independent contractor misclassification, not to determine joint employment, and (2) that the test for joint employment is relatively easy to meet but it’s not automatic, even for a franchisor.

The Court acknowledged that the nature of a franchisee-franchisor relationship necessarily involves franchisor control over the product, but that does not mean it controls the employees. It is the franchisor’s relationship with the franchisee’s employees that must be looked at to determine whether there is joint employment.

We have seen plenty of decisions from of the federal and state courts in California that have threatened to expand joint employment and threatened the franchise business model. But this decision smells good, even if a bit unexpected — like an unfamiliar but friendly dog at the beach.

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

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

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