Weigh This Way: Baking Company Wins, Appeals Court Agrees that Distribution Route Drivers are Independent Contractors

About six months ago in Cambridge, Ontario, Sonny Ayres was born, the fifth child of parents Britteney and Chance. But Sonny was no ordinary baby. He weighed 14 1/2 pounds. (Yes, for the benefit of those moms reading this and looking aghast, he was delivered by c-section.)

According to Guinness (the book, not the beer), the heaviest recorded birth was 22 pounds, in 1879 in Seville, Ohio. That baby lived just 11 hours.

A different kind of weighing was at issue in a recent decision by the Third Circuit Court of Appeals, determining independent contractor status.

The issue was whether three plaintiffs who owned Pepperidge Farm distribution routes should have been considered employees under Pennsylvania’s wage and hour laws. The district court granted summary judgment for Pepperidge Farm, ruling that they were not employees, and the drivers appealed.

The drivers argued that the court should not have granted summary judgment because the job of weighing the evidence is supposed to be left to the jury. But, as the Third Circuit explained, it is the judge’s role to weigh the relevant legal factors. The judge can apply the undisputed facts to the relevant legal factors and can make a legal determination whether each factor supports employment or independent contractor status. And that’s exactly what the Third Circuit did here.

Applying a ten-factor Right to Control Test, the court determined that 8 of 10 factors supported independent contractor status, and so the plaintiffs were properly classified as contractors, not employees.

The plaintiffs argued that Pepperidge Farm set parameters and expectations for the distribution routes, thereby exerting control. The Third Circuit, however, explained that setting parameters and expectations is consistent with either independent contractor or employee status. The control factor tilts toward employee status when the hiring party sets parameters and expectations and directs the time, place, and manner of performance.

In this case, the right-to-control factors supported independent contractor status because the drivers determined the time, place, and manner for performing deliveries. The drivers bought and sold routes, organized their own distribution businesses, hired their own employees, set their own hours, and made deliveries when and how they chose.

This case is a good reminder of what type of control is relevant in the right-to-control analysis and what type of control is not. Some control is exerted over every relationship, whether it’s independent contractor or employment. The trick is knowing which type of control can be exerted without tipping the scales.

Pepperidge Farm prevailed in this case because it did not reserve or exercise the kind of control that supports employee status. And for that, we say Weigh to Go!

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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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This Will Not Do! Health and Safety Rules May Create Joint Employment under New NLRB Rule

Ginsberg’s Theorem is a parody of the laws of thermodynamics. Generally attributed to the poet Allen Ginsberg, it goes like this:

  1. There is a game.
  2. You can’t win.
  3. You can’t break even.
  4. You can’t even get out of the game.

That’s the conundrum businesses now face when trying to comply with both the NLRB’s new joint employer rule and OSHA requirements (or general safe workplace practices).

Last week we looked at the new NLRB rule on joint employment. This week I want to focus on the most troubling part of that rule — the NLRB’s decision to include “Working conditions related to the safety and health of employees” as an “essential term and condition of employment” for purposes of determining joint employer status.

Businesses often have site-wide, plant-wide, or company-wide health and safety requirements. If you enter this building, you must follow the health and safety rules that apply in this building. For example, you must wear steel-toed shoes to enter the manufacturing floor. Or, you must not enter this high-voltage area without permission. Or, you must walk only on designated pathways to avoid the risk of being hit by a forklift.

Some of these rules are driven by OSHA compliance, some by other governmental regulations, and some by a general desire not to cause grievous injury to other human beings.

Those motivations may now cause your business to be joint employer. The reasoning goes like this:

  1. You have a site-wide safety rule, and anyone in the facility must comply.
  2. Employees of vendors work onsite.
  3. Employees of vendors must comply.

Under the new NLRB joint employer rule, the exercise of control over “working conditions related to the safety and health” of a vendor’s employees would automatically create a joint employment relationship.

More absurd, merely reserving the right to exert control over health and safety conditions would create a joint employer relationship, even if such control is never actually exercised. In other words telling a vendor, if your employees enter our facility, they will will have to follow our site safety rules, would also seem to make you a joint employer.

The NLRB’s position ignores reality and creates a conundrum for businesses: If you comply with health and safety laws, or if you take steps to protect human beings from injury, and those humans are not your employees, the NLRB would now apparently say you’re a joint employer. Beware of showing feelings, showing feelings of an almost human nature.

Queue Pink Floyd “The Trial” from The Wall:

Good morning, Worm your honor
The crown will plainly show
The prisoner who now stands before you
Was caught red-handed showing feelings
Showing feelings of an almost human nature
This will not do
Call the schoolmaster

What to do?

Could the NLRB and OSHA be teaming up to jointly enforce this conundrum? Well, yes.

It just so happens that the NLRB and OSHA have teamed up, and on October 31 — less than a week after the NLRB released its final rule on joint employment — the two agencies jointly released a Memorandum of Understanding (MOU). In the MOU, the agencies commit to sharing information and working together to enforce their respective laws, including notifying workers who make OSHA complaints of their NLRA rights, and notifying workers who make NLRA complaints about health and safety of their OSHA rights.

So what are businesses to do?

The answer can’t be to ignore health and safety rules or to waive these rules for non-employees. But the NLRB needs to recognize that exercising control over health and safety conditions does not — or should not — convert a company into a joint employer. Certainly this aspect of the rule will be tested in court, as it seems to go well beyond the bounds of the common law definition of joint employment, and the common law test is supposed to be the joint employer test under the NLRA.

One option for businesses to consider is to tie site-wide health and safety rules to legal requirements whenever possible. Compliance with the law is not supposed to be the type of control that is taken into account under the common law joint employer test. But that approach creates a conundrum too. Be careful that you don’t go too far and say that the law requires something when, in reality, it doesn’t.

Another option might be to revise how site-wide health and safety rules are drafted. Try to try to thread the needle, protecting everyone onsite, but not explicitly setting working conditions for vendor’s employees. It might be possible to draft this way; it might not be. But it’s worth looking at your policy language.

In the meantime, let’s keep an eye on how this new factor is interpreted by administrative law judges and the Board when actual disputes are adjudicated. Let’s also see if court challenges to the new joint employer rule will knock out this troubling provision.

This will not do. Call the schoolmaster!

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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This Will Not Do! Health and Safety Rules May Create Joint Employment under New NLRB Rule

Ginsberg’s Theorem is a parody of the laws of thermodynamics. Generally attributed to the poet Allen Ginsberg, it goes like this:

  1. There is a game.
  2. You can’t win.
  3. You can’t break even.
  4. You can’t even get out of the game.

That’s the conundrum businesses now face when trying to comply with both the NLRB’s new joint employer rule and OSHA requirements (or general safe workplace practices).

Last week we looked at the new NLRB rule on joint employment. This week I want to focus on the most troubling part of that rule — the NLRB’s decision to include “Working conditions related to the safety and health of employees” as an “essential term and condition of employment” for purposes of determining joint employer status.

Businesses often have site-wide, plant-wide, or company-wide health and safety requirements. If you enter this building, you must follow the health and safety rules that apply in this building. For example, you must wear steel-toed shoes to enter the manufacturing floor. Or, you must not enter this high-voltage area without permission. Or, you must walk only on designated pathways to avoid the risk of being hit by a forklift.

Some of these rules are driven by OSHA compliance, some by other governmental regulations, and some by a general desire not to cause grievous injury to other human beings.

Those motivations may now cause your business to be joint employer. The reasoning goes like this:

  1. You have a site-wide safety rule, and anyone in the facility must comply.
  2. Employees of vendors work onsite.
  3. Employees of vendors must comply.

Under the new NLRB joint employer rule, the exercise of control over “working conditions related to the safety and health” of a vendor’s employees would automatically create a joint employment relationship.

More absurd, merely reserving the right to exert control over health and safety conditions would create a joint employer relationship, even if such control is never actually exercised. In other words telling a vendor, if your employees enter our facility, they will will have to follow our site safety rules, would also seem to make you a joint employer.

The NLRB’s position ignores reality and creates a conundrum for businesses: If you comply with health and safety laws, or if you take steps to protect human beings from injury, and those humans are not your employees, the NLRB would now apparently say you’re a joint employer. Beware of showing feelings, showing feelings of an almost human nature.

Queue Pink Floyd “The Trial” from The Wall:

Good morning, Worm your honor
The crown will plainly show
The prisoner who now stands before you
Was caught red-handed showing feelings
Showing feelings of an almost human nature
This will not do
Call the schoolmaster

What to do?

Could the NLRB and OSHA be teaming up to jointly enforce this conundrum? Well, yes.

It just so happens that the NLRB and OSHA have teamed up, and on October 31 — less than a week after the NLRB released its final rule on joint employment — the two agencies jointly released a Memorandum of Understanding (MOU). In the MOU, the agencies commit to sharing information and working together to enforce their respective laws, including notifying workers who make OSHA complaints of their NLRA rights, and notifying workers who make NLRA complaints about health and safety of their OSHA rights.

So what are businesses to do?

The answer can’t be to ignore health and safety rules or to waive these rules for non-employees. But the NLRB needs to recognize that exercising control over health and safety conditions does not — or should not — convert a company into a joint employer. Certainly this aspect of the rule will be tested in court, as it seems to go well beyond the bounds of the common law definition of joint employment, and the common law test is supposed to be the joint employer test under the NLRA.

One option for businesses to consider is to tie site-wide health and safety rules to legal requirements whenever possible. Compliance with the law is not supposed to be the type of control that is taken into account under the common law joint employer test. But that approach creates a conundrum too. Be careful that you don’t go too far and say that the law requires something when, in reality, it doesn’t.

Another option might be to revise how site-wide health and safety rules are drafted. Try to try to thread the needle, protecting everyone onsite, but not explicitly setting working conditions for vendor’s employees. It might be possible to draft this way; it might not be. But it’s worth looking at your policy language.

In the meantime, let’s keep an eye on how this new factor is interpreted by administrative law judges and the Board when actual disputes are adjudicated. Let’s also see if court challenges to the new joint employer rule will knock out this troubling provision.

This will not do. Call the schoolmaster!

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Feeling At Risk? You Might Be, Now That NLRB Issued New Joint Employer Rule

I took this picture on Friday of a window washer at the Hilton across the street.

Late last week, the NLRB issued its new joint employer rule. I’ve listed three takeways below. Don’t be left hanging. Click here for the full Alert.

1) The National Labor Relations Board has issued a Final Rule that changes the test for determining who is a joint employer.

2) The Final Rule rescinds the Rule enacted in 2020 and adopts a test that will vastly expand the circumstances under which a company is a joint employer of the employees of another company.

3) The new rule may cause absurd results, including creating joint employment from the application of worksite safety rules to everyone onsite, including a vendor’s employees. The new rule requires joint employers to participate in the collective bargaining process.

The full Alert explains in more detail. If you are not subscribed to BakerHostetler employment law alerts, let me know and I’ll add you to the distribution list.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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NLRB’s Proposed New Joint Employment Rule: Same But Different

[Reposting with revised link to the article, not behind paywall]

When I was 5 years old, and my sister was 3, the rule was that we had to be in our rooms by 8 p.m.

We followed that rule, but in our own way. We’d put on our pajamas, say good night and go into our rooms. But then we would lie down on the carpet at the very edge of our rooms, with our bodies still in the room and our heads in the hallway so we could talk.

In the strictest sense, we followed the rule. But we did it in our own way, to serve our own purposes. In essence, we chose to define what it means to be in our rooms.

The same sort of rulemaking is happening at the National Labor Relations Board on the subject of defining joint employment.

Click here to read the rest of this article, published 9/12/2022 in Law360.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved. This article originally published on Law360, 9/12/2022.

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Are Independent Contractors Entitled to Military Leave? Eggcellent question!

Worker protection laws are a bit different in China.

According to this report, a Chinese company forces its employees to eat raw eggs as punishment if their work does not meet expectations. When one intern complained, the HR Manager allegedly responded, “What law is preventing you from eating a raw egg?”

Even if the company’s motivational techniques could be challenged under Chinese labor law, Chinese legal experts caution that the intern is probably not the right person to complain. His unpaid internship apparently doesn’t make him an employee under Chinese law. And there it is: The age old question of Who Is My Employee? is a thing in China too.

Back in the U.S., we know that the employee vs. independent contractor question makes all the difference in whether several types of employment, tax, and benefits laws apply. But what about military leave law?

Under the Uniformed Services Employment and Reemployment Rights Act (USERRA), employees are guaranteed reinstatement and other job protection rights after taking military leave. And employers must grant military leave when requested.

Do the same protections apply to independent contractors?

According to federal regulations, the answer is no — so long as the contractor is properly classified as a contractor.

Under USERRA, independent contractor status is evaluated using a Right to Control Test. The regulations say these six factors should be considered:

1.       The extent of the employer’s right to control the manner in which the individual’s work is to be performed;

2.       The opportunity for profit or loss that depends upon the individual’s managerial skill;

3.       Any investment in equipment or materials required for the individual’s tasks, or his or her employment of helpers;

4.       Whether the service the individual performs requires a special skill;

5.       The permanence of the individual’s working relationship; and,

6.       Whether the service the individual performs is an integral part of the employer’s business.

No single factor is controlling, but all are relevant for determining whether an individual is an employee or an independent contractor.

As with so many other laws, it’s not enough just to assume USERRA doesn’t apply because a worker is classified as an independent contractor. The workers has to be properly classified as an independent contractor, according to the test that applies to that particular law.

Getting it wrong means failure to comply with military leave law. That sounds unpatriotic and unfair. And it could leave you with egg on your face.

[Note to self for future blog post idea: Can you require independent contractors to eat raw eggs in the U.S.?]

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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The Ohio Supreme Court Just Made It Much Harder to Win a Misclassification Dispute

In the middle of the Bering Sea sit two islands, Little Diomede (U.S.) and Big Diomede (Russia). They sit less than three miles apart, but Big Diomede is 21 hours ahead. That’s because the International Date Line straddles the two. This would make scheduling play dates nearly impossible, but fortunately no one lives on Big Diomede. Little Diomede is home to about 115 brave (and very isolated) souls.

The Diomedes are a great example of being close but still so far away. The Ohio Supreme Court gave us another example in a worker misclassification dispute earlier this month. Ohio companies should pay close attention to this surprising — and bad — decision.

In this case, the Bureau of Workers’ Compensation (BWC) had determined that an underground-cable installation company had misclassified its workers as independent contractors rather than as employees.

The BWC looked back 5 years and handed the company a bill for $350,000 in back assessments for failing to pay into the workers compensation system. Companies pay into the system for employees, but not for contractors. The company appealed, arguing that under Ohio’s Right to Control Test, the installers were properly classified as contractors, meaning the back assessments were not warranted. The company provided evidence showing that the Right to Control factors tilted in favor of contractor status.

The Ohio Supreme Court reviewed the evidence and did not disagree with the company. You’d think, therefore, that they’d reverse the BWC decision, and the company would be relieved from paying the back assessments.

Nope.

The company was close, but oh so far from winning its appeal. That’s because the deck is stacked heavily against companies when it comes to challenging the BWC on worker classification determinations.

The Ohio Supreme Court ruled that, under Ohio law, so long as there is “some evidence” that could support the BWC’s conclusion, the BWC’s decision was untouchable. This is insane.

In every case involving a balancing test — like the Right to Control Test used here — there will be at least some evidence supporting employee status and some evidence supporting contractor status. The point of the test is to weight the competing factors and see which direction the scales tilt.

But according to this ruling, Ohio law grants the BWC an absurd level of deference. The decision appears to say that a court must accept the BWC’s conclusion, even if the scales tilt the other way, so long as there is “some evidence” to support the BWC’s findings.

For Ohio businesses using independent contractors, this ruling means trouble. The BWC is, of course, incentivized to find misclassification because it means more money for the state. After this ruling, companies appear to have little recourse for challenging the BWC, even when the BWC is wrong.

Ohio companies should immediately evaluate their misclassification risks. If a contractor gets hurt and brings a workers comp claim, the BWC will look for misclassification. If the BWC finds it, the BWC will not only grant workers comp coverage for the injured contractor, it will issue back assessments against the company for failing to pay into the workers comp system — with a look back of five years.

Back assessments can also be triggered by an audit.

Same for unemployment. An unemployment claim by a contractor can lead to the same result, with Ohio Job & Family Services making the misclassification call. Back assessments would issue in that scenario too for failing to pay into the unemployment fund.

This ruling goes against the whole point of having a balancing test. I might have expected this level of deference from California or New York, but not Ohio. This ruling was issued by a Republican-majority Supreme Court.

Like the Diomedes Islands, what appears close can be so far away. Your business might be able to show all the reasons why your contractors are properly classified, but it doesn’t even have to be a close call for you to lose. If BWC finds misclassification and there’s merely “some evidence “ to support its conclusion, you might as well be arguing your point in Russian, the language of all zero inhabitants of Big Diomede.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Bad Call, Ref: Lawsuit Fails When Ref Sues the Wrong Party

Some athletic lads from the University of Illinois High School yearbook, 1921

When referees and umpires make bad calls, they can be truly memorable.

Remember when the University of Colorado beat Missouri on Fifth Down to win a 1990 NCAA football game? Or when the Saints were denied a shot at the Super Bowl in 2019 on a missed pass interference call? Or the blown safe at first call that ruined Armando Galarraga’s 2010 perfect game with two outs in the 9th?

In a lawsuit decided last week, a high school basketball ref made another bad call, resulting in dismissal of her claim.

Ginger Girard, a high school ref in Connecticut, sued the International Association of Approved Basketball Officials and the local Board, claiming that they engaged in employment discriminated by not giving her good ratings. She claimed the poor ratings were because of her gender, not her performance, and that the poor ratings caused her to lose financial opportunities.

But to bring a claim of employment discrimination under federal law, you have to sue your employer. The court ruled that the Association and the local Board were not the ref’s employer. She took a shot but didn’t even hit the rim. Case dismissed.

The ref then asked for the legal equivalent of instant replay, appealing to the Second Circuit Court of Appeals. But she airballed it again.

The Court of Appeals applied a Right to Control Test, finding that the Association and the Board did not control how she reffed games. (It’s worth noting that that the court used a 13-factor test, which is different from the Supreme Court’s 7-factor test, which is different from the IRS’s former 20-factor test, which is different from how several other courts define the relevant Right to Control Factors. To know your test, you’ve gotta know your court.) The Court of Appeals also pointed out that when she was retained to referee games, the participating schools paid her, not the Association or the Board. She sued the wrong party.

Refs make mistakes, and refs’ lawyers can whiff too. Whether on the court or in the court, you’ve got to know your opponent. Figuring out Who Is My Employee can make all the difference between victory and defeat.

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

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Lost Chicken, Very Friendly: 2020 IRS Tips on Independent Contractor Status Are Now Available

Years ago, I signed up for the Next Door app, thinking it might be helpful to hear about things going on in my neighborhood. Most of the posts I see are useless — Can anyone recommend a good restaurant? Is it gonna snow tonight? Does Solon have any good proctologists?

I was ready to unsubscribe but just hadn’t gotten around to it. But then, last week, I got the post that made it all worthwhile:

36204067-6829-41E5-8647-D9C3FF88FABC

I should have clicked “Thank,” because I really do want to thank D. from South Central Solon for that post. The best part, of course, is the armchair psychoanalysis of Lost Chicken’s personality: “Very friendly.” (Lost Chicken also scores high for empathy and teamwork.)

Also known for being “Very friendly” is the IRS. New for 2020 is the Employer’s Supplemental Tax Guide, also known by its catchier, more taxlike moniker, Publication 15-A. Please don’t take my copy. You can get your own here.

Publication 15-A includes a section on independent contractor misclassification. It reminds employers that the IRS uses a Right to Control Test, which evaluates factors related to behavioral control, financial control, and the type of relationship of the parties. The specific factors are listed.

To improve readership, the IRS offers several helpful hypotheticals to illustrate the Independent Contractor vs. Employee conundrum, using memorable characters such as Vera Elm, an electrician; and Helen Bach, an auto mechanic. (But I see Helen Bach as more of a resurrected doomsday cult leader. I’m going to assume that the person who wrote this hypothetical pulled one over on the supervisor who approved it. Well played, IRS writer. Well played.)

Publication 15-A provides other helpful tips for employers at tax time. Get yours now, while supplies last. I’m going to offer a few extra copies on the Next Door app.

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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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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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