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.

Never Been Sued? Congratulations! Here’s Why You Should Re-Evaluate Your Use of Independent Contractors Now.

IMG_1072Have you ever heard someone say, “The definition of insanity is doing the same thing over and over and expecting a different result“? That’s just wrong. No, it’s insanely wrong. (Irony! Actual definition, click here).

  • If you flip a coin 5 times and it comes up heads each time, is it insane to think it might come up tails next time?
  • If you play golf in a lightning storm five times and never get hit, is it insane to think you might get a nice electrical jolt next time?
  • If you root for the Browns to win a football game and they never do, is it insane to think they never will? [Note to self: Delete that. Bad example. It is true that they might never win a game. Shameful admission: I am a Browns fan.]

My consistent advice to companies that use independent contractors is to be proactive. Review your policies, practices, and documents now — before you get sued or audited. Many take this advice. Those who do not generally give two reasons:

  1. We don’t want to spend the money now; and
  2. We’ve always done it this way and have never been sued.

Folks, that kind of thinking is: n. extreme foolishness; folly; senselessness; foolhardiness.

Here are a few quick facts:

  1. Every company that has been sued for independent contractor misclassification had never been sued before the first time it was sued.
  2. Every company that has been audited for independent contractor misclassification had never been audited before the first time it was audited.

Continue reading

Can an Intern be an Independent Contractor? (Answers revealed in James Bond movies)

IMG_1068Among James Bond films, Rotten Tomatoes ranks Never Say Never Again 18th out of 26, with a mediocre 63% rating. (Bond movie quiz at the end of this post, for patient readers.)

It’s a cliche saying, I know, but my first reaction when asked this question was, “I’d never say never, but it’s hard to imagine a scenario where that would work.” (That was also my second reaction and my third. Let’s just say that’s my reaction.)

Let’s run this through the gauntlet. Remember, it’s not your choice whether an intern is an independent contractor or an employee. The law decides that for you, based on the nature of the relationship.

Test #1: Economic Realities Test. Under federal wage and hour laws, an independent Continue reading

Today’s Tip: Avoid Telling Contractors How to Perform the Work (with Stones lyrics)

IMG_1066The great scholar Mick Jagger reminds his followers that you can’t always get what you want, but if you try sometimes well you might find you get what you need. This is good advice, not just for Mr. Jimmy (who did look pretty ill), but also for companies who use independent contractors.

In a true independent contractor relationship, the hiring entity knows what it needs. It needs results, but the details about how, when, and where to work toward those results are left to the contractor’s discretion. There is no oversight or supervision.

The more direction a company provides a contractor on how to perform the work, the more likely the contractor is misclassified and the relationship will be deemed employment. You might want to control these things, but if they are not necessary to get what you need, then you should try sometimes and you might find you can get what you need without exerting extra control over the contractor. Continue reading

Trump’s Tax Plan Is Great News for Independent Contractors! Here’s Why.

IMG_1063President Trump’s tax plan, released last week, is great news for independent contractors. Contractors may be able to cut their tax rates by half (or more) by creating an entity, instead of contracting as an individual. Indirectly, this would help companies who use contractors as well. Here’s why:

Benefit to Individuals:

For individuals, the proposal would reduce personal tax rates modestly. An individual being paid as an independent contractor will likely see a reduction in marginal tax rates, but the range is likely to remain somewhere between 25% and 35%, depending on income level.

For individuals being paid through their homemade entities, however, the proposal could result in substantial savings. Currently, pass-through entities like LLCs pay taxes at the rate of the individual. The sole owner of an LLC would pay taxes on the LLC’s profits at the individual’s personal income tax rate, likely between 25% and 35%.

Under the proposal, however, pass-through entities such as LLCs and partnerships would instead be taxed on pass-through business income at 15%. That’s a sizable savings compared to 25-35%.

If this proposal passes, individual independent contractors will have a strong financial incentive to incorporate. Creating an LLC is relatively inexpensive. If it leads to Continue reading

Avoid this ADA Trap When Using Staffing Agency Workers

ADA staffing agency reasonable accommodation ambulance-2166079_1280ADA Quick Quiz: Your company uses staffing agency workers. A staffing agency worker discloses a medical need and asks for a reasonable accommodation — maybe a computer screen reading program, or an ergonomic chair, or a modified work schedule.

1. Which company must have the interactive conversation to determine what reasonable accommodation is appropriate?

(A) Your company
(B) The staffing agency
(C) Both

2. Which company is obligated to provide the reasonable accommodation?

(A) Your company
(B) The staffing agency
(C) Both

3. Which company is obligated today for the reasonable accommodation?

(A) Your company
(B) The staffing agency
(C) Both

Answers: Continue reading

Unpaid Internships: Six Tips For Avoiding Minimum Wage Requirements

student unpaid internship frog-1339892_1920It’s summer intern hiring season. Can your interns be unpaid? If you pay them something, can you pay a small stipend that amounts to less than minimum wage?

Wage and hour laws dictate when a summer intern must be paid like a regular employee, with a required minimum wage and eligibility for overtime. Seasonal amusement and recreational establishments (such as summer camps or some amusement parks) may qualify for a special exemption, but this post is focused on more conventional year-round businesses.

Here are six tips for maintaining unpaid internship status: Continue reading