Sex, lawyers, and "independent contractor versus employee" -- believe it or not!

This has not been a good week for lawyers. First, we heard about the married Minnesota lawyer who had a sexual relationship with a client (a major ethical violation in itself) and then had the nerve to bill her for his time! Whether a special billing rate applied to criminal conversation is not disclosed. Hey, by the way, which task code would this fall under?  "Appear for/Attend," "Communication (With Client)," or "Review/Analyze"? Do you think he inflated his hours? Hmmmm . . . 

Believe it or not!

Then we get a decision from a federal court in Texas where a lawyer had a relationship with his legal assistant -- and allegedly shoved her around a little bit, too, but that's ok because she probably asked for it (sarcasm) -- and then fired her when she, understandably, broke up with him. She's going to get a trial on claims of sexual harassment, intentional infliction of emotional distress, and violations of the Fair Labor Standards Act.

Fair Labor Standards Act??? HUH???

Yes, the Fair Labor Standards Act. You see, in addition to being pushed around -- literally -- she was also being treated as an "independent contractor." The judge said that there was enough evidence that she was, in fact, an "employee" for her Title VII harassment claims and her FLSA claims to go to trial.

And, believe it or not, the "independent contractor" angle to this case is more interesting than the sexy or girlfriend-beating parts.

At least, it is if you're an upstanding, respectable, non-sleazy lawyer or HR professional, like us.  

Here's what happened. The lawyer (let's call him "O.J.") hired this woman (let's call her "Farrah") to be his assistant when he was in private practice. Their sexual relationship began the same year. Later, he became an employee of a company (let's call it Penetrode) and wanted to get Farrah a job there, too. Penetrode didn't want her as an "employee" but only as an "independent contractor." So, at the direction of Penetrode, she formed her own consulting company (let's call it "Fake Company").

She, like, incorporated, and everything.

Here's Farrah with her awesome Fake Company team.

Meanwhile, all this dysfunctional sexual relationship stuff was going on between Farrah and O.J. Among other things, O.J. required her to attend Penetrode functions and meetings, told her when to be at work and when not to be at work, and otherwise acted as a regular old boss.

A really, really bad boss, but a boss, nonetheless.

Not only did he sexually harass and abuse Farrah (allegedly), but he also allegedly made her work a lot of hours for which she wasn't paid.

Dude, she's an independent contractor. She gets paid by the project, not by the hour!

So, after she broke up with O.J. and sued him and Penetrode, the latter tried to dismiss her Title VII and FLSA claims on the ground that Penetrode wasn't her employer.

Penetrode had several points in its favor:

*Farrah had her own consulting biz that was, like, incorporated, and everything.

*Farrah had other clients. (This point, I thought, was a genuinely good one for Penetrode.)

*Farrah paid taxes and her own Social Security, just like a real independent contractor.

When you have a minute, please pop on over to Blogging4jobs for the January Employment Law Blog Carnival. Many thanks to Jessica Miller-Merrell for hosting us this month, and to Eric Meyer, as always, for running the show!

But, the court said, there was reason to believe that the whole Fake Company concept was just a way to continue Farrah's employment for O.J.:

*Farrah had been O.J.'s employee when he was in private practice, and she formed Fake Company only after being told she had to do it to be able to work for Penetrode.

*The work that Farrah d/b/a Fake Company did for the other clients was a drop in the bucket compared with the work that she did for Penetrode, another indication that this Fake Company might have been, er, "fake."

*As already stated, O.J. told Farrah when she had to be at work, and he required her to attend various Penetrode functions (including office parties) that a true independent contractor would not normally be expected to attend. Or at least not required to attend.

*When he and Farrah were still in their stormy relationship, O.J. allegedly told Farrah that she would have a job at Penetrode as long as he did . . . indicating that she might not really be in an independent contractor relationship, which presumably would end when the "project" was finished.

So, the judge found that there were "genuine issues of material fact" on the "independent contractor versus employee" issue, meaning that Penetrode could not get out of the Title VII or FLSA claims before trial. (It did manage to get out of some vicarious liability claims for assault and battery based on O.J.'s alleged abuse, because of the statute of limitations.)

Not an actual picture of Farrah's boss.

The "independent contractor versus employee" issue is a big one. The U.S. Department of Labor issued a notice last week requesting comment on a proposal to conduct a nationwide survey intended to determine whether workers are being treated as "independent contractors" when they are really employees. (My firm's Wage and Hour Practice Group will soon have a more comprehensive bulletin on this DOL notice, and I'll update this post when it's out.) Commentators say that the DOL notice is a prelude to a requirement, proposed early in President Obama's first term, that employers be required to give written explanations to "independent contractors" of the basis for their being classified as such. The written explanations, of course, could be used against companies by the DOL or plaintiffs.

Why does Robin keep putting "independent contractors" in quotes?

Because many "independent contractors" are really employees. If an employee is misclassified as an "independent contractor," the company can be liable for failure to withhold taxes, the employer's share of FICA, and employee benefits. If you use "independent contractors," you should reevaluate their status as soon as you can and make any necessary corrections. This is especially true if you have a lot of "independent contractors" because the aggregated liability can be substantial, as Microsoft learned several years ago. (The Microsoft case involved "temps" who had been with the company long-term -- aka "permatemps" -- but the same principles apply.)

Believe it or not!

Robin Shea has 30 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act (including the Amendments Act). 
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