Employment Law
Chapter 2
A. Employees versus independent contractors
The Secretary of Labor has standing via statutory implementation
Secretary of Labor v. Lauritzen 835 F.2d 1529 (1987)
Facts: defendant would inform the working families orally or in writing of the amount of compensation, provided housing, all matters relating to planting , fertilizing, insecticide spraying, and irrigation of the crop are within the defendants direction. The family determines which family members will pick the pickles. Families use defendants truck and supplies.
Issue: whether the migrant workers who harvest the pickle crop of defendant Lauritzen Farms, in effect defendant Michael Lauritzen, are employees for the purposes of the Fair Labor Standards act of 1938, or are instead independent contractors not subject to the requirements of the act.
Reasoning: Criteria to determine the economic reality of the nature of the working relationship:
1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;
2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill;
3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers;
4) whether the service rendered requires a special skill (low level of skill more likely employees/ high skill can be either);
5) the degree of permanency and duration of the working relationship;
6) the extent to which the service rendered is an integral part of the alleged employer’s business.
Holding: The district court granted the injunction and defendants appealed, alleging that the migrant workers were independent contractors and therefore were not entitled to the protections of the Act. The judgment of the district court was affirmed. The court held that defendants did not effectively relinquish control of the harvesting to the migrants and the migrant workers had invested nothing except the cost of their gloves and therefore had no investment to lose. Therefore, the migrant workers were employees as defined by the Act and were entitled to its protections.
The IRS and Independent Contractors
For employees, the employer must withhold federal and state income taxes, pay the FUTA (unemployment) tax, pay the employer’s portion and withhold the employee’s portion of FICA taxes (SS and medicare), and pay state unemployment taxes and workers’ compensation premiums.
Independent contractors- must file a Form 1099-MISC to report compensation in excess of $600 paid to a nonemployee. The business does not have to pay or withhold any taxes
I.R.C. §3121(d) defines “employee” to mean any individual who, under the usual common law rules applicable in determining the employer/employee relationship, has the status of an employee.
Partners and Employees
Partners are employers rather than employees, and therefore generally unprotected by employement laws.
Multi Factored inquiry of the EEOC Compliance manual:
Whether the organization can fire the individual or set rules and regulations of the individuals work
Whether and if so to what extent the orgainziation supervises the individuals work
Whether the individual reports to someone higher in the organization
Whether and if so, to what extent the individual is able to influence the organization
Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts
Whether the individual shares in the profits, losses, and liabilities of the organization.
Most employment cases take place in tax court
IRS twenty factors:
Instructions, training, integration, services rendered personally, hiring assistants, continuing relationship, set hours of work, full time required, work done on premises, order or sequence set, reports, payment method, expenses, tools and materials, investment, profit or loss, works for more than one person at a time, services available to general public, right to fire, right to quit.
Zheng v. Libert Apparel Co. 335 F.3d 61 (2003)
Facts: Pfs/Appellants are 26 non-english speaking adult garment workers who worked in a factory in NY’s Chinatown. The case asked the court to decide whether garment manufacturers who hired contractors to stitch and finish pieces of clothing were “joint employers” within the meaning of the FLSA. Plaintiffs, who were directly employed by the contractors, claimed that defendants were their joint employers because they worked predominantly on defendants’ garments, they performed a line-job that was integral to the production of defendants’ product, and their work was frequently and directly supervised by defendants’ agents. Defendants responded that the contractors, who, among other things, hired and paid plaintiffs to assemble clothing for numerous manufacturers, were plaintiffs’ sole employers. The district court erred when, based exclusively on the four factors identified in Carter, it concluded, as a matter of law, that defendants were not joint employers within the meaning of the FLSA or under state law. Under the broad language of 29 U.S.C.S. § 203(g), as interpreted in Rutherford, a district court must look beyond traditional agency principles before declaring that the entity is not an employer under the FLSA.
Issue: whether garment manufactures who hired contractors (Liberty) to stitch and finish pieces of clothing were “joint employers” within the meaning of the FLSA of 1938 and NY law.
Reasoning: Economic Reality based on the totality of the circumstances.
Carter Test: 1) employer had the power to hire and fire, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.
Brock Test: (1) the degree of control exercised by the employer over the workers
(2) the workers’ opportunity for profit or loss and their investment in the business,
(3) the degree of skill and independent initiative required to perform the work
(4) the permanence or duration of the working relationship, and
(5) the extent to which the work is an integral part of the employer’s business.
Rutherford test (one applied in this case):
Examine the circumstances of the whole activity
Factors used in this case: (Very Contextual)
(1) whether Liberty’s premises and equipment were used for the plaintiffs’ work;
(2) whether the Contractor Corporations had a business that could or did shift as a unit from one putative joint employer to another;
(3) the extent to which plaintiffs performed a discrete line-job that was integral to Liberty’s process of production; (both industry custom and historical practice considered)
(4) whether responsibility under the contracts could pass from one subcontractor to another without material changes;
(5) the degree to which the Liberty Defendants or their agents supervised plaintiffs’ work;
required.
Holding: On review, the court relied on prior analogous case law in holding that an action for breach of an oral employment contract providing for discharge only for good cause could lie even if the contract was for an indefinite term. The court then held that a reasonable jury could find that the representations made to the employee constituted a promise to discharge only for good cause. Thus, the court held that the trial court erred in granting the employer’s motion for summary judgment on the issue.
Ohanian v. Avis Rent A Car System, Inc. 779 F.2d 101 (1985)
Facts: The court considered whether an oral contract–not to be performed within a year–fell within the strictures of the statute of frauds.
Issue: whether an oral contract–not to be performed within a year–fell within the strictures of the statute of frauds.
Holding: It held that an oral contract could have been terminated for just cause within one year, without any breach by plaintiff. Therefore, it was not barred by the statute of frauds. All of the surrounding circumstances were sufficient for the jury to find that there was a promise of lifetime employment to a star employee who, it was hoped, would revive a dying division of defendant employer. The court concluded that there was no basis for ordering a new trial on damages and affirmed the judgment.
Notes: The court decided under the NY statute of frauds, a verbal contract is not barred if it is capable of being performed within a year and terminable by the employer for just cause for reasons other than an employee’s breach.
The question is was the contract capable of being performed within a year.
SOF and employment contracts
Term of 1 year (including indefinite term) -It depends:
– Terminable by ER only for breach of K by EE -Inside SOF
– Terminable by ER for business downturn -Outside SOF
– Terminable by ER for cause that falls short of breach by EE -Outside SOF
Reliance and Implied-In Fact Contracts
Grouse v. Group Health Plan, Inc. 306 N.W.2d 114 (1981)
Facts: Pf, John Grouse was employed as a retail pharmacist. In summer of 1975 he interviewed by Cyrus Elliot for a job. On Dec 4th, 1975, Elliot telephoned Grouse and offered a position. He accepted and told him he needed to give two weeks notice. Grouse received an offer from another hospital which he declined because of Elliot’s offer. Elliot also called back to confirm that he resigned. Shoberg, manager of Group Health told Elliot that he need to get references and background info on Grouse. He was unable to get the info so he hired someone else.
