Irma, Harvey and Force Majeure Clauses: What Does It All Mean?

What is Force majeure hurricane legal law irma harvey contracts IMG_1108Your contracts with staffing agencies and consultants probably include a bunch of legalese boilerplate mumbo jumbo at the end, which no one ever reads. One of those standard clauses is a “force majeure” clause. That’s French for “Skim over this clause.”

Companies affected by Irma and Harvey, however, may have good reason to check their contracts for these clauses. “Force majeure” means, literally, superior force.

These clauses typically say that So-and-so is excused from performing under the contract in the event of uncontrollable circumstances, such as war, terrorism, hurricanes, voodoo curses, other Acts of God, or anything caused by Pedro Cerrano and Joboo’s Cult (Major League) [Ed. Note: “Hats for Bats!”].

These clauses excuse non-performance that would otherwise be a breach, if the breach is caused by these types of conditions. Suppose you have a hotel in Tampa. You kept the hotel open during Irma because your building is sturdy and can provide respite to residents in evacuation areas. South Floridians who drove north fill your hotel, and it’s sold out. Your housekeeping and restaurant services are outsourced and provided by a separate services company. The services company is required to supply labor sufficient to staff the hotel’s housekeeping and restaurant functions. The day before the hurricane, however, no one shows up to work.

Did the services company breach the contract? Under normal circumstances, probably yes. With a hurricane bearing down on the area, however, the force majeure clause may excuse the failure to perform. A failure that might otherwise constitute a breach may be excused under a force majeure clause.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Tip for Master Services Agreements: Protect Your Business Opportunities

Master servbice agreement protect business opportunities non-circumvention clause staffing agency agreement IMG_1095If you google “Quotes about Opportunity,” you’ll find 1273 quotes on Goodreads.com. Everyone’s interested in opportunities. But when it comes to business relationships, don’t let others take yours.

When servicing a customer, businesses often call upon use subcontractors for help. That can be a win-win, so long as the subcontractor does not try to poach the relationship once that deal is done.

Consider protecting the opportunities you present to subcontractors with a non-circumvention clause. The concept here is that when your business has introduced a subcontractor to a customer to work on a project, the subcontractor should not be allowed to circumvent your business and provide the same service directly to that customer, effectively cutting you out.

Non-circumvention clauses should be drafted carefully and narrowly. The prohibition should be limited in scope to (a) services your business can provide directly and (b) services that the subcontracor provided through your arrangement, as a result of your introduction. Don’t overreach. The prohibition should be limited in time, as well.

Protect the opportunities you create. Or the 1274th quote might be about opportunities lost. (Goodreads.com also has 903 quotes about regret.)

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Avoid These FMLA Traps with Joint Employment

nurse - FMLA leave and joint employment-359321_1920The Family and Medical Leave Act (FMLA) is already one of the hardest employment laws to comply with. Add joint employment into the mix, and the level of difficulty further increases.

Here are some pointers for handling FMLA issues when joint employment is likely to exist:

Issue 1: Is there Joint Employment?

To determine whether two companies are joint employers under the FMLA, the Economic Realities Test is used. This is the same test used under the Fair Labor Standards Act (FLSA). (See this post for a recent development that threatens to expand the definition of joint employment under the FLSA.)

The DOL has advised that in most staffing agency relationships, there is joint employment.

Issue 2: How Does Joint Employment Affect An Employee’s FMLA Eligibility?

In this post, we addressed how service time as a temp counts toward the one-year and 1250-hour requirements for an employee’s FMLA eligibility. The same holds true for current staffing agency workers, with a few additional items to remember.

One of the requirements for FMLA eligibility is the existence of 50 employees within a 75-mile radius. So you thought counting was easy? Here are two rules to remember:

  • Staffing agency workers count for both the staffing agency and the company for whom services are being provided.
  • When applying the 75-mile radius rule, the staffing agency worker’s worksite is the location from which work is assigned, unless the worker has been working at a location for more than a year, in which case the physical worksite is used.

Issue 3: Who Is Responsible for What?

The DOL has published this handy dandy Fact Sheet, which describes the FMLA obligations of “primary” and “secondary” employers. In staffing agency relationships, the staffing agency is the primary employer, and the company receiving the services is the secondary employer.

Responsibilities of the primary employer (the staffing agency):

  1. Provide FMLA Notices;
  2. Provide FMLA leave to eligible employees;
  3. Maintain group health insurance benefits during the leave;
  4. Restore the employee to the same job or an equivalent job upon return from leave;
  5. Keep all records required under FMLA for its primary employees.

The primary employer is also prohibited from interfering with a jointly-employed employee’s exercise of or attempt to exercise his or her FMLA rights, or from firing or discriminating against an employee for opposing a practice that is unlawful under the FMLA.

Responsibilities of the secondary employer:

  1. Restore an employee to the same or equivalent job upon return from FMLA leave;
  2. Keep identifying information and payroll records for any jointly-employed employees; and
  3. Comply with all the provisions of the FMLA for its regular, permanent workforce.

A secondary employer is also prohibited from interfering with a jointly-employed employee’s exercise of or attempt to exercise his or her FMLA rights, or from firing or discriminating against an employee for opposing a practice that is unlawful under the FMLA.

Are we having fun yet?

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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When an Employee Double-Dips On a Paycheck, Who Pays?

Remember this?

Suppose the chip is a check, and the employee tries to cash it twice? Who would you rather be, Costanza or Timmy?

Staffing agency clients are increasingly pointing to a fraud committed by disloyal short-term employees. They cash a paycheck on their mobile app, then deposit the paper check a second time for duplicate payment. The check clears twice. Who must pay?

While this problem can arise in many scenarios, including with regular W-2 employees, it seems to be occurring more frequently with staffing agency employees, PEOs, temps, and other short-term workers. So let’s take a look.

I found a few good blog posts covering this subject (for those wanting more detail, try here or here), but here’s the bottom line:

The Check 21 Act, passed in 2004, addresses what happens when a bank allows its customers access to a mobile deposit app. When a customer electronically deposits a check, the bank creates an electronic image of that check, called a “substitute check.” This is what you sometimes see when you view your statement online. It’s negotiable, like a live check.

The original live check, however, still exists too. A fraudster who acts quickly enough can sometimes cash both. Under the Check 21 Act, the bank that creates the “substitute check” — the bank that allowed its customer access to the mobile check cashing app — is the bank that bears responsibility for any loss from the twice-cashed check.

This makes sense. Because that bank’s customer is the fraudster who double dipped, that bank is also in the best position to recoup the funds from the double-dipper.

Staffing agencies, payroll agencies, or PEOs who issue a twice-cashed check are sometimes asked to make good on the same payment twice. They shouldn’t be. If the double dipping occurred through an electronic “substitute check,”, they can point to the Check 21 Act, specifically 12 USC §5004, and argue that the double-dipper’s bank is properly accountable.

Note:  The Check 21 Act only applies to electronic double dipping. If an employee claims to have lost an original live check and obtains a substitute, then cashes both checks, different rules apply.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Joint Employment Is Like Taking Steroids By Accident

athlete-joint employment - staffing agency - 1840437_1920It seems like every month another professional athlete is caught using a prohibited substance. The typical script (after getting caught) is to blame the maker of a supplement. “I should have more carefully checked the label,” or “I had no way of knowing what was in that synthetic elephant urine.”

Fair or unfair, every athlete knows that he/she is responsible for what goes into the athlete’s body, whether the juicing was intentional or not.

The same rule applies to companies who use staffing agencies.

When workers are deemed to be joint employees, both the staffing agency and the company that benefits from the services are responsible for failures to follow employment law. It doesn’t matter who made the mistake.

Under the FLSA, for example, employers must pay non-exempt employees a minimum wage, must pay for all hours worked, must pay overtime, and must properly calculate overtime rates. Sometimes this is hard. Two traps that ensnare even the most sophisticated employers are the challenge of accounting for off-the-clock work (checking email by cell phone, for example), and calculating the base hourly rate when there are bonuses and other forms of compensation provided.

Joint employment means joint liability. If the staffing agency responsible for paying employees makes an error, both companies are on the hook. That means a company can be responsible for hundreds of thousands of dollars in damages  — including back pay, attorneys’ fees, and liquidated damages — for errors it had no control over.

When the potential exists for a finding of joint employment, be careful when selecting  vendors who supply workers. Here are three tips:

  1. Be sure any vendors who supply workers are reputable, competent, professional, and reliable. (Four tips in one! you’ll thank me later)
  2. Be sure they stand behind their obligations with a suitable (and specific) indemnity clause.
  3. Be sure they are sufficiently insured.

Remember, under the FLSA (and many other laws), your company may be jointly liable for a staffing agency’s mistakes — even if you had no control over their pay practices.

Using staffing agency workers is like taking a performance supplement. It may enhance the bottom line and improve overall performance, but any funny business is your responsibility.

It doesn’t matter who put the horse steroid in your protein powder. If you ingest it, you are responsible for it.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Avoid this Common But Disastrous Mistake in Staffing Agency Agreements

staffing services mistake-1966448_1920

A client once asked me to review the Employment Agreement of a candidate they were considering hiring. The candidate had recently been terminated but his Employment Agreement contained a 12-month non-compete, and my client’s job offer seemed pretty clearly to be for a competing job.

But the terminating employer made once huge mistake. When it meant to terminate employment, instead it terminated the agreement … and with it, the non-compete.  Oops!

I see the same mistake in Staffing Agreements and Professional Services Agreements all the time.

These agreement are usually intended to serve as Master Service Agreements (MSA), with additional work orders to govern the actual services to be provided. These MSAs contain very important clauses that are intended to survive, even after the services have stopped. Examples of clauses intended to survive the termination of services include indemnification, insurance coverage, preservation of confidential information, and right to audit.

The mistake I see over and over, however, is the inclusion of a termination clause that allows for termination of the agreement, not merely termination of services.

Continue reading

Why Your Standard Agreements with Staffing Agencies Are Risky Business (Starring Tom Cruise)

broken-glass-joint-employment-agreementIt’s Valentine’s Day. You and your sweetie want to get away for the weekend. Your high school offspring will stay home. They seem responsible, promise not to break the law, and promise if they break anything they will pay for it. So you’re good, right?

Come on, wake up. Have you seen Risky Business? American Pie? House Party (very underrated movie, by the way)? Continue reading