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Webinar Unintended Employees

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This document summarizes various tests used to determine employment relationships and discusses potential unintended employment relationships with contractors and franchisees. It describes how the common law test, economic realities test, IRS factors test, and ABC test are used to determine whether a worker is an employee or independent contractor. It also discusses how franchisors can potentially be considered joint or single employers of franchisees or their employees under certain circumstances based on the level of control and integration of operations.

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Unintended Employees Avoiding Unintended Employment Relationships with Contractors and Franchisees Presented by: Joshua A. Hawks-Ladds, Esquire November 19, 2009 www.pullcom.com
Who is an Employee? A Worker Can Only Receive Employment Protections if an Employment Relationship is Established Unintended Employees Include: Temporary or Contract Workers, Independent Contractors; Franchisees (Single Person Operator), Franchisees Employees
Who is an Employer? Unintended Employers Include: Any Company that Hires Independent Workers/Contractors; Temporary Placement Agencies, Professional Employment Organizations and Franchisors
Statutory Definitions Employer Defined. . . FLSA - Enterprise Engaged in Commerce or Production of Goods for Commerce Title VII - A Person Engaged in an Industry Affecting Commerce. . . Translation. . . FLSA Almost All Workers are Presumed to be Employees Title VII Continual Increase in Workers who are Deemed Employees
Is Your Worker An Employee? The Common Law Test (Agency) Reid Factors - Community for Creative Non-Violence v. Reid Control Factor Degree of Control Exercised by the Employer Over a Worker Independent Contractor Relationship Scrutinized Burden on Employer - Baker v. Flint Engineering and Construction Co. Right to Control the Manner and Means by Which the Product is Accomplished
Is Your Worker An Employee? The Economic Realities Test for FLSA Purposes The Extent to Which Typical Employer Prerogatives Govern the Relationship Between the Putative Employer & Employee Degree of Control Exercised Over Workers Workers Opportunity for Profit or Loss Duration of Working Relationship Maintain Employment Records Extent Work is Integral to Employers Business Power to Hire & Fire Degree of Skill & Independent Initiative Required Rate & Method of Payment Supervise & Control Employee Work Schedule Dependence
IRS Factors The Relationship of Employer and Employee Exists When the Person for Whom Services are Performed has the Right to Control and Direct the Individual who Performs the Services, not Only as to the Result to be Accomplished by the Work but Also as to the Details and Means by Which That Result is Accomplished Behavioral Control Type of Relationship Between the Parties Financial Control
ABC Test Free From Control or Direction of the Employing Enterprise Outside the Usual Course of the Business or Outside of all the Places of Business, of the Enterprise and Part of an Independently Established Trade, Occupation, Profession, or Business of the Worker Employer Must Show that the Services at Issue Are Performed
Who is the Employer? Defacto Employer Businesss Relationship to Another Entity Single Employer v. Joint Employer Claims - ERISA, NLRB, Title VII
Single Employer Analysis A Single Employer Relationship Exists When Two Nominally Separate Entities are Actually Part of a Single Integrated Enterprise so That, for all Purposes, There is in Fact Only a Single Employer The Single Employer Standard is Applicable if the Separate Corporations are not What They Appear to be, That They are but Divisions or Departments of a Single Enterprise. Single Employer Analysis Interrelated Operations Common Management Centralized Control of Labor Relations Common Ownership
Single Employer Analysis 4 Factors (1) Interrelation of Operations Share Governing Board Members & Bylaws, as well as control of Day-to-Day Operations (4) Common Ownership Finding of Absolute Authority Over Financial Matters (3) Centralized Control of Labor Relations Entities Share Policies Concerning Hiring, Firing, and Training of Employees, and in Developing and Implementing Personnel Policies and Procedures (2) Common Management Overlap of Officers or Members who Sit on the Board of Directors Common Ownership Common Management Interrelation of Operations Control
Joint Employer Analysis Hallmark of Joint Employer Status: Immediate Control over Employees Two Separate Business Entities Can Be Held Liable for Workplace Discrimination If Both Simultaneously Exercise Control Over the Same Workforce or Employee. Hiring & Firing Participated in Collective Bargaining Process Maintain Records; Handle Pay Roll; Provide Insurance Directly Supervised Employees Directly Administered Discipline Employees Burden to Show Both Companies
Joint Enterprise Analysis (a.k.a. Joint Venture) A Joint Venture Exists Where Two or More Parties Combine Their Property, Money, Effort, Skill or Knowledge in Some Common Undertaking Intent Single Transaction
Can a Franchisor be a Franchisees Employer? Situations Where a Franchisor can be Sued An Employee of the Franchisee Suing Both the Franchisee and the Franchisor as Its Employer The Franchisee Itself Suing Franchisor as Its Employer Governmental Agency Alleging Franchisor is Franchisees Employees Employer
Single Employer (a.k.a. Integrated Enterprise) (2) Common Management & (4) Common Ownership Typically Not Applicable (1) Interrelation of Operations Franchisors Will Not be Held Liable for Exercising Control Over Conformity to Standard Operational Details (3) Centralized Control Actions Speak Louder Than Words Franchishors Actions Trump Franchise Agreement Circuit Split on Amount of Control Necessary Title VII
ABC Test Massachusetts Trilogy Unemployment Compensation Boston Bicycle Couriers, Inc. v. Deputy Director of the Division of Employment and Training 2002 Athol Daily News v. Board of Review of the Division of Unemployment Assistance 2003 Coverall North America, Inc. v. Commissioner of the Division of Unemployment Assistance 2006
Common Law Agency Did the Franchisor Exercise Control Over the Results Produced or the Means to Achieve the Results Although the Franchise Agreement Attempts to Claim Worker as an Independent Contractor, the Contract Terms are not Dispositive on the Issue Title VII & Unemployment Compensation
Economic Realities Test [See Earlier Definition] Franchisors Will not be Held Liable for Exercising Control Over Conformity to Standard Operational Details Franchisors Performing Ministerial Financial Functions for Franchisee Will not be Held Liable FLSA
Hybrid Test Combination of Common Law Agency & Economic Realities Test A Court Examines the Economic Realities Relationship, but Also Considers the Extent of the Employers Right to Control the Means and Manner of the Workers Performance as the Most Important Factor Spirides 11 Factors Title VII
Pendulum Swinging in 2009 EEOC v. Papin Enterprises Title VII Employee Succeeds with Joint Employer Analysis Franchise Agreement Unpersuasive Franchisee Could not Unilaterally Waive Policy Franchisor Involved in Specific Dispute Regarding Employment Roberts v. Administrator Unemployment Compensation Unemployment Compensation Employee Succeeds with ABC Test Conduct Trumps Franchise Agreement Franchisor Failed All 3 Parts Appeal Pending
Joshua A. Hawks-Ladds Pullman & Comley, LLC 90 State House Square Hartford CT 06103 (860) 541-3306 [email_address] Bridgeport Hartford Stamford White Plains www.pullcom.com

More Related Content

Webinar Unintended Employees

  • 1. Unintended Employees Avoiding Unintended Employment Relationships with Contractors and Franchisees Presented by: Joshua A. Hawks-Ladds, Esquire November 19, 2009 www.pullcom.com
  • 2. Who is an Employee? A Worker Can Only Receive Employment Protections if an Employment Relationship is Established Unintended Employees Include: Temporary or Contract Workers, Independent Contractors; Franchisees (Single Person Operator), Franchisees Employees
  • 3. Who is an Employer? Unintended Employers Include: Any Company that Hires Independent Workers/Contractors; Temporary Placement Agencies, Professional Employment Organizations and Franchisors
  • 4. Statutory Definitions Employer Defined. . . FLSA - Enterprise Engaged in Commerce or Production of Goods for Commerce Title VII - A Person Engaged in an Industry Affecting Commerce. . . Translation. . . FLSA Almost All Workers are Presumed to be Employees Title VII Continual Increase in Workers who are Deemed Employees
  • 5. Is Your Worker An Employee? The Common Law Test (Agency) Reid Factors - Community for Creative Non-Violence v. Reid Control Factor Degree of Control Exercised by the Employer Over a Worker Independent Contractor Relationship Scrutinized Burden on Employer - Baker v. Flint Engineering and Construction Co. Right to Control the Manner and Means by Which the Product is Accomplished
  • 6. Is Your Worker An Employee? The Economic Realities Test for FLSA Purposes The Extent to Which Typical Employer Prerogatives Govern the Relationship Between the Putative Employer & Employee Degree of Control Exercised Over Workers Workers Opportunity for Profit or Loss Duration of Working Relationship Maintain Employment Records Extent Work is Integral to Employers Business Power to Hire & Fire Degree of Skill & Independent Initiative Required Rate & Method of Payment Supervise & Control Employee Work Schedule Dependence
  • 7. IRS Factors The Relationship of Employer and Employee Exists When the Person for Whom Services are Performed has the Right to Control and Direct the Individual who Performs the Services, not Only as to the Result to be Accomplished by the Work but Also as to the Details and Means by Which That Result is Accomplished Behavioral Control Type of Relationship Between the Parties Financial Control
  • 8. ABC Test Free From Control or Direction of the Employing Enterprise Outside the Usual Course of the Business or Outside of all the Places of Business, of the Enterprise and Part of an Independently Established Trade, Occupation, Profession, or Business of the Worker Employer Must Show that the Services at Issue Are Performed
  • 9. Who is the Employer? Defacto Employer Businesss Relationship to Another Entity Single Employer v. Joint Employer Claims - ERISA, NLRB, Title VII
  • 10. Single Employer Analysis A Single Employer Relationship Exists When Two Nominally Separate Entities are Actually Part of a Single Integrated Enterprise so That, for all Purposes, There is in Fact Only a Single Employer The Single Employer Standard is Applicable if the Separate Corporations are not What They Appear to be, That They are but Divisions or Departments of a Single Enterprise. Single Employer Analysis Interrelated Operations Common Management Centralized Control of Labor Relations Common Ownership
  • 11. Single Employer Analysis 4 Factors (1) Interrelation of Operations Share Governing Board Members & Bylaws, as well as control of Day-to-Day Operations (4) Common Ownership Finding of Absolute Authority Over Financial Matters (3) Centralized Control of Labor Relations Entities Share Policies Concerning Hiring, Firing, and Training of Employees, and in Developing and Implementing Personnel Policies and Procedures (2) Common Management Overlap of Officers or Members who Sit on the Board of Directors Common Ownership Common Management Interrelation of Operations Control
  • 12. Joint Employer Analysis Hallmark of Joint Employer Status: Immediate Control over Employees Two Separate Business Entities Can Be Held Liable for Workplace Discrimination If Both Simultaneously Exercise Control Over the Same Workforce or Employee. Hiring & Firing Participated in Collective Bargaining Process Maintain Records; Handle Pay Roll; Provide Insurance Directly Supervised Employees Directly Administered Discipline Employees Burden to Show Both Companies
  • 13. Joint Enterprise Analysis (a.k.a. Joint Venture) A Joint Venture Exists Where Two or More Parties Combine Their Property, Money, Effort, Skill or Knowledge in Some Common Undertaking Intent Single Transaction
  • 14. Can a Franchisor be a Franchisees Employer? Situations Where a Franchisor can be Sued An Employee of the Franchisee Suing Both the Franchisee and the Franchisor as Its Employer The Franchisee Itself Suing Franchisor as Its Employer Governmental Agency Alleging Franchisor is Franchisees Employees Employer
  • 15. Single Employer (a.k.a. Integrated Enterprise) (2) Common Management & (4) Common Ownership Typically Not Applicable (1) Interrelation of Operations Franchisors Will Not be Held Liable for Exercising Control Over Conformity to Standard Operational Details (3) Centralized Control Actions Speak Louder Than Words Franchishors Actions Trump Franchise Agreement Circuit Split on Amount of Control Necessary Title VII
  • 16. ABC Test Massachusetts Trilogy Unemployment Compensation Boston Bicycle Couriers, Inc. v. Deputy Director of the Division of Employment and Training 2002 Athol Daily News v. Board of Review of the Division of Unemployment Assistance 2003 Coverall North America, Inc. v. Commissioner of the Division of Unemployment Assistance 2006
  • 17. Common Law Agency Did the Franchisor Exercise Control Over the Results Produced or the Means to Achieve the Results Although the Franchise Agreement Attempts to Claim Worker as an Independent Contractor, the Contract Terms are not Dispositive on the Issue Title VII & Unemployment Compensation
  • 18. Economic Realities Test [See Earlier Definition] Franchisors Will not be Held Liable for Exercising Control Over Conformity to Standard Operational Details Franchisors Performing Ministerial Financial Functions for Franchisee Will not be Held Liable FLSA
  • 19. Hybrid Test Combination of Common Law Agency & Economic Realities Test A Court Examines the Economic Realities Relationship, but Also Considers the Extent of the Employers Right to Control the Means and Manner of the Workers Performance as the Most Important Factor Spirides 11 Factors Title VII
  • 20. Pendulum Swinging in 2009 EEOC v. Papin Enterprises Title VII Employee Succeeds with Joint Employer Analysis Franchise Agreement Unpersuasive Franchisee Could not Unilaterally Waive Policy Franchisor Involved in Specific Dispute Regarding Employment Roberts v. Administrator Unemployment Compensation Unemployment Compensation Employee Succeeds with ABC Test Conduct Trumps Franchise Agreement Franchisor Failed All 3 Parts Appeal Pending
  • 21. Joshua A. Hawks-Ladds Pullman & Comley, LLC 90 State House Square Hartford CT 06103 (860) 541-3306 [email_address] Bridgeport Hartford Stamford White Plains www.pullcom.com