by Todd Lebowitz

Why Does the Concept of Joint Employment Exist? (There are Good Reasons!)

At Michino-Eli Yamada, a diner in Japan, you can order oyster-infused soft serve ice cream, topped with soy sauce.

While that sounds like a truly awful blend of flavors (and a waste of perfectly good soft serve), the diner is getting plenty of press for its creativity.

There seems to be some competition in Japan for ruining the soft serve experience. There’s another restaurant offering a miso ramen bowl with a cone of soft serve floating in the bowl. Photo here.

I’m a fan of adding rainbow sprinkles to my soft serve, but adding oysters or miso ramen is an unfair outcome.

And that brings us to today’s topic, about another seemingly unfair outcome. Let’s talk about why the concept of joint employment exists. Because to a business accused of being a joint employer, joint employment often feels like an unfair outcome.

Why should your business be responsible for payroll and overtime errors committed by a different employer, such as a staffing agency? Since you’ve asked so politely, I’ll tell you why.

Suppose a staffing agency worker is due overtime pay but the staffing agency employer didn’t pay it. Maybe it’s a tiny staffing agency that lacks the funds. Maybe the primary employer would go bankrupt if hit with a wage and hour lawsuit. In that case, the worker is legally due overtime pay but will be out of luck.

There are two possible results here: One is that the worker loses out on the overtime pay. The second is that a joint employer — the company that benefitted from that worker’s labor — pays.

Who is in a better position to incur the loss? Who is in a better position to prevent the loss? The answer to both questions is the business receiving the benefit of the services — the joint employer.

It’s a policy decision that the business benefiting from the services should pay the missing overtime instead of the worker not receiving the money due.

So what can a potential joint employer do about it? Fortunately, several things.

First, select a reputable staffing agency, one that you are confident will pay its workers as the law requires. Tiny staffing firms might be cheaper, but the reason they might be cheaper is because they lack the infrastructure and sophistication to comply with legal requirements.

Second, use a comprehensive staffing agency agreement. A good staffing agency agreement should include several components, including creating contractual obligations for the staffing agency to pay overtime and minimum wage and to comply with other aspects of the law. A good agreement will also include carefully-drafted indemnity provisions.

Click here to see “Ten Things That Should Be in Your Staffing Agency Agreement But Probably Aren’t.”

There are good policy reason why the concept of joint employment exists. There are also lots of steps potential joint employers can take to limit their risk of liability.

There are no good reasons, though, for oyster-flavored soft serve. I’m not budging on that point.

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07.13.26

by Todd Lebowitz

“Take This Job and Shove It”? That Still Doesn’t Make You an Independent Contractor

Who remembers the song, “Take This Job and Shove It”? This 1977 release by Johnny Paycheck spent 18 weeks on the country music charts and, while I didn’t listen to country music growing up (and still don’t, to be very clear), this one somehow got some airplay on whatever stations I was listening to in the early 80s.

The song complains about a factory job where that foreman, he’s a regular dog, and the line boss, he’s a fool. Doesn’t seem like this guy’s much of a team player.

Some employers would want to cut this guy’s hours and make him part-time. Or maybe the factory work has slowed and become more seasonal, and maybe a guy with this attitude is only needed for three months a year.

When companies are hiring for short-term, part-time, seasonal, or as-needed roles, they sometimes make the mistake of classifying these workers as independent contractors. Please don’t do that.

Work that your company controls and supervises, especially non-exempt work, is likely to be employment, not independent contractor work, even if both parties agree to an independent contractor relationship.

It is perfectly ok to hire someone as a short-term employee, a part-time employee, a seasonal employee, or an as-needed employee with fluctuating hours. These are still employees.

Employees can also have multiple jobs. Having multiple jobs doesn’t mean the jobs aren’t employment. The seasonal ticket taker at Cedar Point who also works the cash register on night-shift at Popeye’s is an employee of both, even if the work at each company is sporadic, seasonal, part-time, or as-needed.

Don’t make the mistake of misclassifying a worker as an independent contractor merely because the work is not regular, full-time employment. There are lots of situations in which independent contractor status is appropriate, but if the work resembles employment in every way except its regularity, it’s still going to be employment under the law.

Mr. Paycheck died in 2003. He ain’t workin’ here no more.

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06.08.26

by Todd Lebowitz

Dogs, Guns, and Arbitration: How the Flowers Foods Supreme Court Decision Affects Independent Contractor Agreements

A dog in Nebraska shot a woman in the arm last month in a convenience store parking lot.

Police were called to the scene after a shotgun blast from a parked truck struck a woman walking by. The culprit turned out to be a dog, who triggered the blast when moving around in the truck. There was a loaded shotgun in the truck, and the dog had not been properly trained in the responsible use of firearms.

The woman was not seriously injured. It is unknown whether the dog expressed remorse or is otherwise a very good boy.

The lesson here, of course, is to think ahead. And that applies both to firearm-loving dog owners and to businesses using independent contractors.

On May 28, the Supreme Court issued an opinion clarifying the scope of the transportation exception to the Federal Arbitration Act (FAA). The FAA does not apply to transportation workers engaged in interstate commerce. In Flowers Foods v. Brock, the Court held that a driver may fall within the exception even if he does not cross state lines or interact with a vehicle that does. So long as the driver’s task is in the flow of interstate transportation of goods, then the worker could fall within the exemption, which means the FAA would not apply and the worker might be able to sidestep an otherwise-valid arbitration agreement.

A previous Supreme Court decision held that the transportation worker exception can apply to independent contractors.

So where does this leave businesses that enter into arbitration agreements with independent contractors who transport their goods?

There are several unresolved legal questions, but as things stand now, businesses should strive to enter into business-to-business agreements. They should contract with entities to transport goods, not individuals. If the entity is a small entity, such as a single member LLC, the agreement should contain clauses that place full responsibility for directing and controlling the work on the small entity. Even if the larger business directs the small entity, any direction to the individual worker should come from the small entity to its worker.

The Supreme Court has not yet addressed whether the transportation exception would apply in this situation, but this seems to be the best approach for now. (Even if the FAA doesn’t apply, state arbitration law might still be sufficient to save the arbitration agreement.)

Businesses who engage independent contractors to transport goods should be extra vigilant in ensuring that all business contracts are with entities, not individual independent contractors, if they want their arbitration agreements to have a reasonable shot at being enforceable.

It’s easy when engaging an independent contractor to assume that both parties are happy with independent contractor status, as opposed to employment, but misclassification lawsuits tend to arise when the relationship goes south, not when everyone is happily engaged. One of the main benefits of having a well-written independent contractor agreement is to address what happens if there are disagreements later, including unforeseen disputes.

When the parties want those disputes to be resolved through arbitration, they need to draft the agreement in a way that it will be enforceable. For contracts that involve transportation of goods, the FAA transportation exception must be taken into consideration when drafting.

Advanced preparation when entering into the contract is critical to protecting the right to arbitrate later. It’s all about looking ahead and being prepared. Come to think of it, advanced preparation and thinking ahead are valuable in just about any context — including when leaving a dog alone with a shotgun.

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06.09.25

by Todd Lebowitz

Different Strokes: Be Careful With Choice of Law Clauses in IC Agreements

The phrase “Different strokes for different folks” originated in the 1960s and seems to have been popularized by Muhammad Ali. Describing his knock-out punches against Sonny Liston and Floyd Patterson, he said, “I got different strokes for different folks.”

In 1979, Ali appeared in the sitcom “Diff’rent Strokes,” which was probably named for the Ali quote and which was actually spelled that way and I can’t find anything that explains why. I guess when it comes to punctuation, different strokes for different folks?

Today’s post is a variation on that theme: Different states for different fates.

When drafting independent contractor agreements, choice of law matters. Choose carefully and thoughtfully. And remember three things:

First, state laws differ significantly on several subjects that might be relevant to your IC agreement — for when someone is considered an employee, for when non-competes can be enforced, for when non-solicitation agreements can be enforced, and for other terms that are likely to be in your contractor agreements. Don’t choose the law of a state that is less likely to enforce the clauses you want to include. If you can avoid California law for example, do yourself a favor and avoid California law.

Second, the state you choose needs to have some nexus to the parties or their relationship. Examples of a nexus that can justify use of a state’s law may be that one party is based there, or the work is being performed there, or (maybe) that one party is incorporated there. But there needs to be some connection.

Third, for worker classification disputes, the law of the state where the work is performed might apply anyway, since if a worker works in State A and the laws of State A would consider that person to be an employee, the parties cannot agree to contract out of the law of State A. But don’t concede so easily. Aim to apply the law of a favorable jurisdiction, even if there’s a chance that a court or arbitrator might disregard the choice of law clause in a classification dispute. Besides, there are going to be many other clauses in your agreement for which you’ll want the most favorable state law to apply.

For employment relationships, it is unlawful in some states (and unenforceable in others) to require application of the law of a state where the work is not performed, but it’s much less clear when and whether such laws apply to non-employment relationships.

The bottom line: Be strategic and thoughtful when inserting a choice of law provision in an independent contractor agreement. Depending on what law is applied to a particular issue or contract clause, the result and enforceability of that term may be different. Or diff’rent.

And the wrong choice of law could mean a knock-out punch for a clause you’d like to enforce.

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04.21.25

by Todd Lebowitz

Holy Bat Trap: Here’s How to Protect IP Created by Contractors

Two London police officers had to get creative to break up a gambling ring that was profiting off tourists on Westminster Bridge. The gambling rings would target tourists by setting up rigged games. Police would break up the games, but the wrongdoers learned to tell when the police were coming.

Cue the dynamic duo!

Police officers dressed as Batman and Robin mingled with the crowds, then struck when the time was right. Or as Mr. Kim might say, Sneak attack.

Companies retaining independent contractors can avoid needing to sneak attack if they set certain ground rules up front. One of these important ground rules relates to ownership of IP.

Intellectual property created by a non-employee is not automatically a work made for hire under US copyright law. Instead, an assignment of inventions clause is needed.

Ensuring that your own the contractor’s creations and the IP rights can be critical to getting the benefit of why you retained the IP. Consider the contractor who writes computed code or creates copy for your website. You want to own that IP.

(Or sometimes, like with an IC photographer, you might want to license it and allow the photographer to retain the copyright. But either way, you need to consider these issues in advance.)

But don’t wait until the protectable IP has been created to seek the assignment. Do it up front, in your independent contractor agreement.

Use a present assignment clause. The clause should say that any works created by the contractor and any IP rights arising out of those works are automatically assigned by the contractor upon creation, with no further affirmative act needed to effectuate the assignment. Do not merely say that the IP will be assigned, because that requires future action.

If you plan ahead with a proper assignment clause, you can avoid later trying to chase down the contractor for an assignment of the IP, which may already have been embedded into vital company property, such as computer code. Chasing down a contractor later might be easier than breaking up a gambling ring, and you might not even have to dress up as a superhero or his trusty sidekick.

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04.07.25

by Todd Lebowitz

Time Travel?! Check Your Contracts for “Services” Definitions.

I saw this tourist bus in New Zealand. So they finally figured it out. This company combines time travel and leisure, which I assume means that these tourists enjoyed a two-week vacation then returned home on the day they left.

Or maybe they were visiting from the future, which if true, I would have a lot of questions for them.

On a recent business transaction I worked, time travel might have helped the seller. Allow me to explain. The thing to remember is that words matter, just like there is a sharp difference between leisure time travel and leisure time travel. I choose to believe this touring company specialized in the latter.

The seller’s business was to offer technical specialists to its clients as consultants. The specialists had skills and expertise that the clients lacked. The consultants would advise the seller’s client. So far, so good. That’s a good business model.

But what we found as we read the contracts caused some concern. In all arrangements with clients, the seller’s function was the same — to identify and loan out technical specialists, while treating them as seller’s employees. Seller was operating as a quasi-staffing agency.

Even though the arrangements were the same each time, there was some sloppiness in how the “Services” were defined. In what I would call the Staffing Contracts, the seller’s agreements with its clients properly described the Services as identifying technical experts, loaning them out, and treating them as seller’s employees for employment and tax purposes.

But some of the agreements were what I would call Consulting Contracts. In the Consulting Contracts, the seller’s Services were described as providing the technical expertise desired by the client.

What’s the difference? Well it’s as big as the different between leisure time travel and leisure time travel. Suppose the individual consultant gives bad advice and makes a mistake that causes the client to lose money. The client then looks to the seller for indemnity and relief.

In a Services Contract, the client is entitled to no relief for a consultant’s bad advice. The seller did what it contracted to do. It provided the talent. But in a Consulting Contract, the seller contracted to provide consulting services. If the consulting services were provided in a negligent manner or resulted in a loss by the client, the seller might be liable for those damages.

The lesson here is to be careful when defining Services. If you are loaning out talent, be sure to define the Services narrowly.

Poor drafting may result in confusion and unexpected liability. If you find yourself in this situation, try to amend the contract, and see if you can make the amendment retroactive, time-travel style.

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03.31.25

by Todd Lebowitz

Turtle in Your Pants? Here’s a Whole Bunch of Ways Misclassification Can Cost You

A man was detained at Newark International Airport earlier this month for concealing a live turtle in his pants.

The turtle was detected as the man passed through TSA screening. When questioned about the bulge in his groin area, the man said he was just happy to see the TSA agent. No, that’s not what happened at all. Instead, the man reached into his pants and pulled out a 5-inch long red-ear slide turtle.

It is unclear whether the turtle was a pet and whether the man was charged. But he did miss his flight. So let this be a lesson to all of us.

Meanwhile, in California, an in-home healthcare agency learned the hard way that it was concealing a much larger problem. And this problem cost it $2.3 million in fines.

As explained in this news release from the Department of Industrial Relations (DIR), the agency had been classifying its in-home healthcare aides as independent contractors, not employees.

After receiving a complaint, the DIR investigated and found that under California law, the aides should have been treated as employees. The Labor Commissioner issued citations under a relatively new section of the California Labor Code, making this the first enforcement action in which the civil penalties for misclassification were collected as damages for the affected workers, rather than as a penalty paid to the state. (How generous, California!)

This enforcement action is an important reminder of three things.

First, when the work performed is within the company’s normal course of business, the workers are probably going to be deemed employees under California’s ABC Test (unless one of several exceptions applies). California law makes it very difficult to retain solo workers as independent contractors if you retain them to perform a core business function.

Second, in-home health care is an industry in which misclassification maybe widespread, especially when applying California law. The business of in-home healthcare is to provide in-home healthcare. It’s difficult to say that those who do the work are not employees.

Finally, this action illustrates the breadth and depth of penalties a company can face for misclassifying its workers. The $2.3 million in penalties here included:

$422,033 in unpaid minimum wages*
$424,809 in unpaid overtime wages*
$165,162 in meal and rest period premiums*
$27,400 in wage statement penalties
$108,094 in waiting time penalties for delayed final wages
$550,000 in penalties for willful worker misclassification
$81,673 in penalties for no workers’ compensation insurance for the misclassified employees
$422,033 in liquidated damages
$18,950 for other civil penalties

When a company treats its workers as contractors, it’s not following the laws that would apply to employees. If, by law, the workers were misclassified, then there are a whole lot of employment laws that the company was almost certainly not following. That makes for a lot of damages.

The advice here is the same as always. Companies using indepednent contractors should be proactive in evaluating these relationships and whether they can survive a legal challenge. There are almost always things that a company can do to better solidify its workers’ status as independent contractors. The best time to act is before an investigation or lawsuit begins.

Complacency is no defense. The fact that you’ve been doing it this way for years and haven’t been sued only means that you haven’t been sued yet.

In other words, if there’s a turtle in your pants, there’s a good chance you get caught at some point, so you better have a good explanation prepared in advance.

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03.24.25

by Todd Lebowitz

Lessons from a Blobfish: How to Avoid an Unexpected Retaliation Claim When Deciding Who to Engage

From mid-January to mid-February, I spent four weeks working remote from New Zealand’s South Island. It’s an astoundingly beautiful place, and I loved the experience. One experience I apparently missed out on, however, was seeing the now-famous blobfish.

The gelatinous blobfish lives at depths of 2,000-4,000 feet, a visit to which was not on my itinerary. But if it had been, I might have seen the 2025 Fish of the Year, as named by New Zealand’s Mountain to Sea Conservation Trust.

Its odd appearance is apparently caused by bringing the fish to the surface. In its deep sea habitat, the pressure causes it to look rather like a normal fish. So if you were deep in the sea, you might not have treated the blobfish any differently than its neighbors.

A recent federal court decision serves as a good reminder about the dangers of treating someone differently — in a way you might not have expected.

A recruiting firm was working with a candidate who had been threatening to sue her former employer for discrimination. The recruiting firm advised her against it and, when she sued anyway, it dropped her as a client.

But recruiting, staffing, and other firms can work with whomever they want, right? Generally yes, but they cannot decline to engage someone for an unlawful reason.

Title VII of the 1964 Civil Rights Act allows employees to assert their legal rights opposing discrimination and protects them against retaliation. The protection against retaliation extends beyond the company being sued. Another potential employer — or recruiting firm, or staffing firm, or even a company considering engaging the person as an independent contractor — cannot retaliate against that person for having asserted protected legal rights.

The lesson for recruiting, staffing, and other firms is this: Do not turn someone away for the sole reason that the person sued a former employer. That may be in violation of federal law.

In the federal case described above, the court denied a motion to dismiss by the recruiting firm, holding that the firm could potentially be liable for retaliation if the reason it declined to work with the individual was because she had asserted her federal protected rights under Title VII.

Like the blobfish, this seems like an ugly outcome for businesses. But also like the blobfish, if you go a little deeper, everything appears somewhat normal. If an individual was truly discriminated against, that person should not be punished for being a victim. That’s the theory anyway. We all know there are lots of meritless discrimination lawsuits. The anti-retaliation protections of Title VII extend to claims brought in good faith, even if the plaintiff doesn’t win.

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01.13.25

by Todd Lebowitz

Did Joni See It Coming? Two Companies Forced to Reclassify All Gig Workers as Employees

They paved paradise and put up a parking lot.

When Joni Mitchell wrote “Big Yellow Taxi,” she had just arrived in Honolulu. She was inspired by the view outside her hotel window, with beautiful green mountains in the distance and, closer to the hotel, a “parking lot as far as the eye could see.” Ugly.

For business owners, the beautiful green mountains are successful business operations, with the business having been built the way you wanted and cultivated over a number of years. Paving over that paradise with a parking lot is the government coming in and forcing you to change how you do business. Ugly.

That’s what is happening to companies that rely on independent contractors but aren’t deliberate enough in how they set up their IC relationships. Looking back at 2024, here’s what I mean, with two specific examples.

Two companies with nationwide operations were forced to convert all independent contractors to employees, at least those working in California.

WorkWhile and Qwick provide gig workers to fill empty shifts. Qwick operates in the hospitality industry, and WorkWhile operates across multiple fields, including manufacturing, hospitality, and general labor.

The companies treat the gig workers as independent contractors. The City of San Francisco sued each company on behalf of the State. The lawsuits alleged that the gig workers were misclassified and should have been treated as employees under California law.

In 2024, both companies settled. Each agreed to pay a seven-figure settlement and to reclassify all gig workers as employees. (Press releases are here and here.)

Before the lawsuits, both companies had operated their businesses this way for years. They didn’t get sued and didn’t have to reclassify the contractors — until they did.

This case is a good reminder of two important rules.

1. Just because you have been doing it this way for years doesn’t mean it’s lawful.

2.The fact that you haven’t been sued means only that you haven’t been sued yet.

Before the lawsuits were filed, the companies had options.

They could have been proactive about changing the facts of the relationships and the contracts. They could have molded the facts the way they wanted without government oversight, in a way that would better insulate them from misclassification claims. This would have been difficult in California, with its strict ABC Test, but not impossible. But it would have taken hard work and a willingness to make changes proactively.

Or they could have converted their contractors to employees, but done it on their own terms, without the government telling them how they have to operate their business.

Now, as part of their settlements, these companies are forced to allow the government to monitor and dictate how they interact with these workers.

Don’t it always seem to go / that you don’t know what you’ve got ‘til it’s gone?

Once the government is monitoring how you do business, you’ve lost the flexibility to adapt and build on your terms. It’s too late. The time to act is before you get audited, investigated, or sued. See Rule #2.

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01.06.25

by Todd Lebowitz

Get Skinny in 2025: Adopt a Handbook Just for Temps

Everyone has New Year’s Resolutions. Except me. My wife asks me every year, and every year I politely decline. She doesn’t like when I do that.

Some people pledge to lose weight, to get skinnier. This post is about getting skinny with your handbook for 2025—just for temps.

Do you provide your employee handbook to staffing agency temps? Should you?

Generally, I would say no, you should not. The handbook is filled with information about benefits that apply only to your direct employees, not temps. The handbook also probably directs and controls what your workers do, in ways that could make you a joint employer.

Instead, consider rolling out a skinny handbook just for temps.

There are a few polices that should apply to staffing agency temps, and it’s to your benefit to make clear—in writing— that these policies apply. It can be about 6-8 pages. That’s all you need.

Outline for Handbook for Temps

1) Equal Employment Opportunity

Anti-Discrimination
Anti-Harassment
Complaint Procedure
No Retaliation

2) Site Safety

Drug and alcohol
Weapons
Workplace Threats and Violence
Accidents, Emergencies, Reporting of Injuries
Searches, Screening

That’s it. You can include a welcome message too if you’d like. Maybe add a call-off procedure. Check whether references to “employees” should be changed to “workers” or something similar that doesn’t sound like you are conceding joint employer status.

Creating a skinny handbook for temps should take no more than 2-3 hours. If you want to start the year with a quick accomplishment that will add value, this is a good one. And you can even claim it as your New Year’s Resolution.

Who Is My Employee?

Exploring Independent Contractor Misclassification & Joint Employment Issues

Tag Archives: Tips

Why Does the Concept of Joint Employment Exist? (There are Good Reasons!)

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“Take This Job and Shove It”? That Still Doesn’t Make You an Independent Contractor

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Dogs, Guns, and Arbitration: How the Flowers Foods Supreme Court Decision Affects Independent Contractor Agreements

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Different Strokes: Be Careful With Choice of Law Clauses in IC Agreements

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Holy Bat Trap: Here’s How to Protect IP Created by Contractors

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Time Travel?! Check Your Contracts for “Services” Definitions.

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Turtle in Your Pants? Here’s a Whole Bunch of Ways Misclassification Can Cost You

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Lessons from a Blobfish: How to Avoid an Unexpected Retaliation Claim When Deciding Who to Engage

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Did Joni See It Coming? Two Companies Forced to Reclassify All Gig Workers as Employees

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Get Skinny in 2025: Adopt a Handbook Just for Temps

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